Lesson 04Business-to-Business

E-CommerceISM 41113, Electronic Commerce

By: M. Fathima Rashida

Lecturer in MITDepartment of MIT

Faculty of Management and Commerce, SEUSL

Learning Objectives 1. Describe the B2B field.2. Describe the major types of B2B models.3. Discuss the characteristics of the sell-side

marketplace, including auctions.4. Describe the sell-side models.5. Describe the characteristics of the buy-side

marketplace and e-procurement.6. Explain how reverse auctions work in B2B.7. Describe B2B aggregation and group

purchasing models.ISM 41113 5-2

Learning Objectives 8. Describe other procurement methods.9. Define exchanges and describe their major

types.10.Describe partner relationship management

(PRM).11.Describe how B2B can benefit from social

networking and Web 2.0.

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Concepts, Characteristics, and Models of B2B E-Commerce

• business-to-business e-commerce (B2B EC)Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as eB2B (electronic B2B) or just B2B• THE BASIC TYPES OF B2B TRANSACTIONS

AND ACTIVITIES• Sell-side• Buy-side• Exchanges• Supply chain improvements and collaborative

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Concepts, Characteristics, and Models of B2B E-Commerce

• THE BASIC TYPES OF B2B E-MARKETPLACES AND SERVICES• One-to-Many and Many-to-One: Private E-MarketplacesE-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side) company-centric EC• Many-to-Many: Exchanges• exchanges (trading communities or trading exchanges)

Many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other

• public e-marketplacesThird-party exchanges open to all interested parties (sellers and buyers)

• Supply Chain Improvers and Collaborative CommerceBusiness deal with other business for purpose beyond just selling or buying. Eg: Collaborative CommerceISM 41113 5-6

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Concepts, Characteristics, and Models of B2B E-Commerce

• B2B CHARACTERISTICS• Parties to the Transaction: Sellers, Buyers, and

Intermediaries• Types of Transactions• spot buying

The purchase of goods and services as they are needed, usually at prevailing market prices

• strategic (systematic) sourcingPurchases involving long-term contracts that usually are based on private negotiations between sellers and buyers

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Concepts, Characteristics, and Models of B2B E-Commerce• Types of Materials Traded• direct materials

Materials used in the production of a product (e.g., steel in a car or paper in a book)

• indirect materialsMaterials used to support production (e.g., office supplies or light bulbs) MRO (maintenance, repair, and operation) called as nonproduction materials

• The Direction of the Trades• vertical marketplaces

Markets that deal with one industry or industry segment (e.g., steel, chemicals)

• horizontal marketplacesMarkets that concentrate on a service, material, or a product that is used in all types of industries (e.g., office supplies, PCs)

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Concepts, Characteristics, and Models of B2B E-Commerce

• SUPPLY CHAIN RELATIONSHIPS IN B2B• SERVICE INDUSTRIES ONLINE IN B2B• Travel and hospitality services• Real estate• Financial services• Online financing • Other online services

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Concepts, Characteristics, and Models of B2B E-Commerce

• THE BENEFITS OF B2B• Benefits: sellers (S), buyers (B), both (J)

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One-to-Many: Sell-Side E-Marketplaces

• SELL-SIDE E-MARKETPLACEA Web-based marketplace in which one company sells to many business buyers from e-catalogs or auctions, frequently over an extranet• B2B Sellers• Customer Service

• SALES FROM CATALOGS• Configuration and Customization• Benefits and Limitations of Online Sales from

Catalogs

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Selling Via E-Auctions• USING AUCTIONS ON THE SELL SIDE• Forward auctions offer the following benefits to B2B

sellers:• Revenue generation• Cost savings• Increased “stickiness”• Member acquisition and retention

• AUCTIONING FROM THE COMPANY’S OWN SITE• USING INTERMEDIARIES IN AUCTIONS

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One-from-Many: Buy-Side E-Marketplaces and E-

Procurement• buy-side e-marketplace

A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method• PROCUREMENT METHODS• E-Procurement Organizations and Types• E-sourcing• E-tendering• E-reverse auctioning• E-informing• Web-based ERP• E-marketsites• E-MRO

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One-from-Many: Buy-Side E-Marketplaces and E-

Procurement• INEFFICIENCIES IN TRADITIONAL

PROCUREMENT MANAGEMENT• procurement management

The planning, organizing, and coordinating of all the activities relating to purchasing goods and services needed to accomplish the organization’s mission

• maverick buyingUnplanned purchases of items needed quickly, often at non–pre-negotiated higher prices

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One-from-Many: Buy-Side E-Marketplaces and E-Procurement

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One-from-Many: Buy-Side E-Marketplaces and E-

Procurement• THE GOALS AND BENEFITS OF E-

PROCUREMENT• e-procurement

The electronic acquisition of goods and services for organizations

• what are the goals of e-procurement?

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Buy-Side E-Marketplaces: Reverse Auctions

• Reverse auction is a tendering system in which suppliers are invited to bid on the fulfillment of an order and the lowest bid wins• In B2B, a buyer may open an electronic market on its own server

and invite potential suppliers to bid on the items the buyer needs • Request For Quote (RFQ)

The “invitation” to participate in a tendering (bidding) system• CONDUCTING REVERSE AUCTIONS• Online directories that list open RFQs• Use of software agents auctionsniper.com, auctionflex.com• E-Tendering by Governments

• GROUP REVERSE AUCTIONS

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Other E-Procurement Methods• Internal Procurement Marketplace

The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog

• Benefits of Internal Aggregated (Consolidated) Catalogs• Quickly find what desired offering, check availability and delivery times,

and complete electronic requisition forms, using fewer suppliers, lower price, financial control

• desktop purchasingDirect purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department

• group purchasingThe aggregation of orders from several buyers into volume purchases so that better prices can be negotiated

• Internal Aggregation of Purchasing Orders• External Aggregation for Group PurchasingISM 41113 5-24

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Other E-Procurement Methods• BUYING AT SELLERS’ SITES AND

COLLABORATIVE COMMERCE• PURCHASING DIRECT GOODS• bartering exchange

An intermediary that links parties in a barter; a company submits its surplus to the exchange and receives points of credit, which can be used to buy the items that the company needs from other exchange participants

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B2B Electronic Exchanges: Definitions and Concepts

• FUNCTIONS OF EXCHANGES1. Matching buyers and sellers2. Facilitating transactions3. Maintaining exchange policies and

infrastructure

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B2B Electronic Exchanges: Definitions and Concepts

• DYNAMIC PRICINGA rapid movement of prices over time and possibly across customers, as a result of supply and demand matching• Revenue Models• Transaction fees• Service fees• Membership fees• Advertising fees• Other revenue sources

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Partner and Supplier Relationship Management

• Partner Relationship Management (PRM)Business strategy that focuses on providing comprehensive quality service to business partners• E-COMMUNITIES AND PRM

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B2B in the Web 2.0 Environment and Social Networking

• THE OPPORTUNITIES• Discover new business partners• Improve recruitment• Enhance ability to learn about new technologies,

competitors, etc.• Find sales prospects• Improve participation in industry association activities

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B2B in the Web 2.0 Environment

and Social Networking• Corporations are using social networks to:• Create brand awareness• Advertise product and services and promote new ones• Create buzz about upcoming product releases• Drive traffic to their online web properties in hopes of

enticing users to engage with their sites, products, or solutions

• create social communities to encourage discussion among business partners about their products and /or act as a feedback mechanism about their products/ services

• Use social networks, such as Facebook and LinkedIn, to recruit new talent. Some HR departments are using social networks to obtain more insight into potential new hires

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B2B in the Web 2.0 Environment and Social Networking

• STRATEGY FOR B2B SOCIAL NETWORKING• Participate• Monitor• Use existing applications• The Future of Social Networking

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Managerial Issues1. Which B2B model(s) should we use for e-procurement?2. Which B2B model(s) should we use for online B2B

sales?3. Which exchange to join?4. Which solution vendor(s) should we select?5. What is the organizational impact of B2B?6. What are the ethical issues in B2B?7. How shall we manage the suppliers8. Which type of social network? Private (proprietary) or

public?ISM 41113 5-35