B2B eCommerce
Transactions with suppliers, distributors, commerce services
providers, infrastructure providers, and organizational customers that
occur online though the support of the Internet
Jupiter Communications – $11.5 trillion of B2B in 2000 of
which $336 billion in eB2B. By 2005, expect 6.3 trillion
eB2B / 15.1 trillion.
Goldman Sachs --- By 2005, eB2B of 4.5 trillion
Gartner Group – 90 billion eB2B in 1999 vs. $16.7 billion
eB2C.
Six major B2B activities: Six S’s
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Search
Source
Specify
Submit Orders
Settle/Negotiate/Bid
Send/Receive
… goods and services that are needed in
order to operate
Legacy systems
• The term “legacy systems” refers to
systems for automating b2b commerce
pre-Internet.
• These systems facilitate communications
about a firm’s input requirements.
• Useful for companies that do high volume
of business with products that have unique
parts, each with varying lead times (the
duration parts are held in inventory).
MRP: Materials requirements planning
• A legacy system to automatically generate shopping lists
• Software application that enables companies track what
they need to purchase based on production schedules
• Contains BOM (bill of materials)– which and how parts
are needed to make the product
• Integrates BOM with production schedule to generate
shopping list as frequently as needed
• ERP (Enterprise Resource Planning)– the next
generation of MRP which integrates human resource
administration and financial accounting components.
E.g., when a purchase is made by an individual
employee, the finance dept is notified immediately.
• Advantage: Reduced lead time. Parts arrive in sufficient
time to meet production schedules BUT in manner that
minimizes inventory
EDI: Electronic Data Interchange
• Permits buyers to convey input needs
directly to suppliers
• Advantage: Considerable reduction in
transaction costs
• Disadvantage: Private networks are
expensive
The Internet
• Business with differing MRP and ERP systems
can access a universal browser without complex
installations
• Small businesses w/o e-commerce strategy
could leverage a public infrastructure from
someone else to achieve e-commerce goals
• Each transaction can be tracked in great detail.
Participants in a B2B marketplace can know the
identity of buyer and seller, quantity purchased,
date and time, # of times purchaser looked
before making purchase decision
B2B mechanisms for price
• Electronic Catalogs
• Auctions
• Exchanges
• Negotiations
Catalogs
• 1. home page
• 2. product catalog, where buyer may search, for
example, by manufacturer’s name, product
category, or end-use category
• 3. Page showing results of search
• 4. A shopping cart
• 5. A price quote page, including prices and
shipping charges
• 6. Confirmation of order
Auctions
• Reverse English Auction
• Multiple Sellers; Single Buyer
• Buyer does not have to select the Seller
who won!
Exchange
• Two-sided marketplace
• Anonymous real-time matching of orders
and quotes
• Electronic stock exchanges
• Ideal for commodities or standardized
products
• What makes a good exchange?
• What makes a bad exchange?
Negotiations
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1.
2.
3.
4.
5.
Requests for Quotes (RFQ), followed by
negotiations between potential
transaction parties
Seller posts a profile or proposal
Buyer searches and is shown all profiles
meeting search criteria
Buyer chooses seller and makes contact
Seller if interested responds
The two parties negotiate
How to choose Price Mechanism
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Homogeneous vs. differentiated goods
Size and number of suppliers
Size and number of buyers
Flexibility and importance of specs.
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Lots of buyers and sellers and homogenous good – Exchanges
Many buyers; few sellers – Auctions
Many sellers; few buyers – Reverse auctions
Few buyers & sellers; flexible yet important specs – Negotiations
Wide assortment but non-flexible specs; many buyers-- catalogs
E-Sourcing
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E-sourcing encompasses a spectrum of IT resources, from Web, server, and storage
infrastructure services to on-demand E-procurement and help-desk business-process
services.
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Utility-based IT occurs at the business-process level.“ E.g., procurement, help desk,
storage, and server services.
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Example for utility-based IT: With IBM's E-procurement services, customers log on
to a site with catalog information from vendors that IBM has preselected; they pay a
monthly fee based upon the volume of purchases they make and the number of
catalogs they add to IBM's offerings.
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Usage-based pricing: Customers pay for storage and server capacity by the
gigabyte, managed services according to the volume of network traffic being
monitored, and help desk by the number of seats eligible for support. Usage-based
pricing is a key distinction between E-sourcing and conventional outsourcing,
where IBM Global Services takes over all or a portion of IT operations for a flat
monthly fee. Another difference: Rather than customizing for a single customer, the
utility model relies on mass customization to multiple customers on a shared
infrastructure.