Chapter 5 B 2 B ECommerce Selling and

Chapter 5 B 2 B E-Commerce: Selling and Buying in Private EMarkets

Concepts and Characteristics of B 2 B EC l business-to-business e-commerce (B 2 B EC) Transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks; also known as e. B 2 B (electronic B 2 B) or just B 2 B 2

Concepts and Characteristics of B 2 B EC 3

Concepts and Characteristics of B 2 B EC l Types of transactions spot buying-at prevailing market rate l strategic sourcing-based on long term contracts l l Types of materials Direct – used to make product l Indirect – used to support production l 4

Concepts and Characteristics of B 2 B EC l Direction of trade vertical marketplaces Markets that deal with one industry or industry segment (e. g. , steel, chemicals) l horizontal marketplaces Markets that concentrate on a service, materials, or a product that is used in all types of industries (e. g. , office supplies, PCs) l 5

Concepts, Characteristics, and Models of B 2 B EC l The Benefits of B 2 B l l l l Creates new sales (purchase) opportunities Eliminates paper and reduces administrative costs Expedites processing and reduces cycle time Lowers search costs and time for buyers to find products and vendors Increases productivity of employees dealing with buying and/or selling Reduces errors and improves quality of services Makes product configuration easier Reduces marketing and sales costs (for sellers) 6

Concepts, Characteristics, and Models of B 2 B EC 7

Sell-Side Marketplaces (one-to-many) Company A Seller Company B Company C Marketing Characteristics l selling from electronic catalogs (often customized) l selling via forward auction l one-to-one selling (usually under a negotiated long term contract) 8

Sell-Side Marketplaces (one-tomany) l Examples Microsoft’s order entry tool (MOET) l Cisco’s Connection Online (CCO) l l Benefits: lower operating costs l improved quality l better and faster technical service l reduced software packaging costs l 9

Selling via Intermediaries and Distributors l Manufacturers frequently use intermediaries to distribute their products to a large number of buyers, known as distributors l The intermediaries usually buy products from many vendors and aggregate them into one catalog from which they sell l Now, many of these distributors also are selling online 10

Sell-Side Marketplaces (one-to-many) Company A Seller Intermediary Company B Company C Intermediary l Distributor l l l Grainger. com (horizontal markets) Boeing PART (vertical market) Auctioneer l links buyers and sellers l buyers may be less suspicious of products sold by auctioneers l handles billing and collection 11

Selling via Auctions l Auctioning from the Company’s Own Site Why should a company pay a commission to an intermediary if the intermediary cannot provide the company with added value l If a company decides to auction from its own site, it will have to pay for infrastructure and operate and maintain the auction site l 12

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l buy-side e-marketplace A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other eprocurement method 13

Buy Side Marketplaces (one-to-many) Company A Buyer Company B Company C l Six Main Types of E-Procurement l l l e-sourcing e-tendering e-reverse auctioning e-informing Web-based ERP (electronic resource planning) e-MRO (maintenance, repair and operating) 14

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l Inefficiencies in Traditional Procurement Management l l procurement management The planning, organizing, and coordination of all the activities relating to purchasing goods and services needed to accomplish the mission of an organization maverick buying Unplanned purchases of items needed quickly, often at non-prenegotiated higher prices 15

One-from-Many: Buy-Side E-Marketplaces and E-Procurement 16

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l e-procurement The electronic acquisition of goods and services for organizations 17

One-from-Many: Buy-Side E-Marketplaces and E-Procurement 18

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l The Goals and Benefits of E-Procurement l l l l Increasing the productivity of purchasing agents Lowering purchase prices Improving information flow and management Minimizing the purchases made from non-contract vendors Improving the payment process and savings due to expedited payments Establishing efficient, collaborative supplier relations Ensuring delivery on time, every time Slashing order-fulfillment and processing times by leveraging automation 19

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l The Goals and Benefits of E-Procurement l Reducing the skill requirements and training needs of purchasing agents l Reducing the number of suppliers l Streamlining the purchasing process, l Streamlining invoice reconciliation and dispute resolution l Reducing the administrative processing cost per order l Finding new suppliers and vendors that can provide goods and services faster and/or cheaper (improved sourcing) l Integrating budgetary controls into the procurement process l Minimizing human errors in the buying or shipping processes l Monitoring and regulating buying behavior 20

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l Implementing E-Procurement l l l Fitting e-procurement into the company’s EC strategy Reviewing and changing the procurement process itself Providing interfaces between e-procurement and integrated enterprisewide information systems, such as ERP or supply chain management Coordinating the buyer’s information system with that of the sellers Consolidating the number of regular suppliers and integrating with their information systems and, if possible, with their business processes 21

One-from-Many: Buy-Side E-Marketplaces and E-Procurement l e-sourcing l The process and tools that electronically enable any activity in the sourcing process, such as quotation/tender submission and response, e-auctions, online negotiations, and spending analyses 22

Buy-Side E-Marketplaces: Reverse Auctions l request for quote (RFQ) The “invitation” to participate in a tendering (bidding) system 23

Buy-Side E-Marketplaces: Reverse Auctions 24

Other E-Procurement Methods l internal procurement marketplace The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog l desktop purchasing Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department (p-card) 25

Other E-Procurement Methods l group purchasing The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated Internal aggregation l External aggregation l 26

Other E-Procurement Methods 27

Other E-Procurement Methods l Electronic Bartering bartering exchange l An intermediary that links parties in a barter; a company submits 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 l l Buying Malls in Exchanges and Industrial 28

Automating B 2 B Tasks l Contract l Management Contract-management software can: Reduce contract negotiation time and efforts l Facilitate inter- and intracompany contract analysis and development l Provide for proactive contract compliance management l Enable enterprisewide standardization of contracts l Improve understanding of contract-related risks l Provide a more efficient approval process l 29

Automating B 2 B Tasks l Spend Management l Tools and features may be found in spendmanagement software include: l l l A data warehouse repository designed to manage data from multiple data sources Data management of contracts, supplier catalogs, and product content Data management of pricing Detailed standard and ad-hoc purchasing activity analysis and report tools Updates, notifications, and alerts regarding purchasing 30

Managerial Issues 1. 2. 3. 4. 5. 6. 7. 8. Can we justify the cost of B 2 B? Which vendor(s) should we select? Which B 2 B model(s) should we use? Should we restructure our procurement system? What are the ethical issues in B 2 B? Will there be massive disintermediation? How can trust and loyalty be cultivated in B 2 B? How is mobile B 2 B done? 31