B2B E-

COMMERCE
Chapter 4
Last Week Review
 Retailer :
• A sales intermediary; A seller that operates
between manufacturers and customers.
 Electronic retailing (e-tailing)
• Retailing conducted online / over the
internet
 E-tailers
• Retailers who sell over the internet
• Example : Amazon.com, Walmart.com, etc.
Last Week Review
Five Classification of E-tailing Business Model
by Distribution Channel :
I. Direct marketing by mail-order retailers that
go online
II. Direct marketing by manufacturers
III. Pure-play e-tailers
IV. Click-and-mortar retailers
V. Internet (Online) Malls
Last Week Review
Products & services of e-tailers :
 Travel And Tourism (Hospitality) Services
Online
 Employment Placement & The Job Market
Online
 Real Estate, Insurance, and Stock Trading
Online
 Banking & Personal Finance Online
Last Week Review
Online Purchasing-Decision Aids :
 Shopping portals
 Shopping robots
 Business ratings sites
 Escrow services (escrow.com)
 Electronic wallet (“wallet”)
 Yelp.com
 Others…
B2B E-Commerce
Basic B2B Concepts & Process

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
Basic B2B Concepts & Process

Key business drivers for B2B :

 To gain competitive advantage
 The need for collaboration (suppliers & buyers)
 The need to reduce cost
 The ability to reduce delays
 The emergence of effective technologies
 The availability of a secure broadband internet
platform & B2B e-marketplaces
 Four Basic Types of B2B Transaction
4-9

1. Sell-side : one seller to many buyers

2. Buy-side : one buyer from many sellers
3. Exchanges : many sellers to many buyers
4. Supply chain improvements and collaborative
commerce : activities other than buying or
selling among business partners (e.g.
communicating, collaborating, supply chain
improvements, sharing of information for joint
design, planning, and so on)
 Three Basic Types of B2B E-Marketplaces
4-11

1. One-to-many & Many-to-one

 One company does either all the selling (sell-
side market / one-to-many) or all the buying
(buy-side market / many-to-one)
 The company has complete control over who
participates in the selling / buying transaction
 Private e-marketplaces.
 Three Basic Types of B2B E-Marketplaces
4-12

2. Many-to-many
 Owned & run by a third party or a consortium
 Many buyers & sellers meet electronically to
trade with each other
 Open to all interested parties (sellers &
buyers)  Public e-marketplaces
 Three Basic Types of B2B E-Marketplaces
4-13

3. Supply chain improvers and collaborative

commerce
 Businesses deal with other businesses for
purposes beyond just selling / buying.
 One example : collaborative commerce 
communication, joint design, planning, and
information sharing among business partners.
B2B Characteristics

Parties to the Transaction :

 Sellers, buyers, and intermediaries
 B2B commerce can be conducted directly
(manufacturer  customer) or through an
intermediary
 May be virtual / click-and-mortar
B2B Characteristics

Types of B2B Transactions :

1. Spot buying : the purchase of goods &
services as they are needed, usually at
prevailing market prices.
2. Strategic (systematic) sourcing : purchases
involving long-term contracts that usually
are based on private negotiations between
sellers & buyers.
B2B Characteristics
Types of Materials Traded :
1. Direct Materials : Materials used in the
production of a product (e.g. steel, paper). Their
use is scheduled & planned, purchased in large
quantities after extensive negotiation &
contracting.
2. Indirect Materials / Non-Production Materials :
items that support operation & production (e.g.
office supplies, light bulbs). They are usually used
in MRO (maintenance, repair, and operation).
B2B Characteristics

The Direction of the Trades :

1. Vertical Marketplaces : markets that deal
with one industry / industry segment (e.g.
steel industry, chemical industry)
2. Horizontal Marketplaces : markets that
concentrate on a service, material, or a
product that is used in all types of industries
(e.g. office supplies, PCs, or travel services)
The Major B2B Services
 Travel & hospitality services
 Real estate
 Financial services & insurance
 Banking & online financing
 Other online services : consulting services, law
firms, health organizations, recruiting & staffing
services
Partner & Supplier Relationship Management

 Partner Relationship Management (PRM)

Business strategy that focuses on providing
comprehensive quality service to business
partners. Important to companies that conduct
outsourcing.
 Supplier Relationship Management (SRM)
A comprehensive approach to managing an
enterprise’s interactions with the organizations
that supply the goods and services it uses.
One-to-Many : Sell-Side E-Marketplaces

Sell-side e-marketplace
A Web-based marketplace in which one company
sells to many business buyers from e-catalogs or
auctions, frequently over an extranet
This model has three major marketing methods :
1. Selling from electronic catalogs (most common)
2. Selling via forward auctions
3. One-to-one selling (usually under a negotiated long
term contract)
Selling Via E-Auctions
Many companies use Forward Auctions to
liquidate their unneeded products/capital assets.
Benefits to B2B sellers :
1. Revenue generation

2. Cost savings

3. Increased “stickiness”

4. Member acquisition & retention

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

Buy-side e-marketplaces
A corporate-based acquisition site that uses reverse
auctions, negotiations, group purchasing, or any other
e-procurement method.
 Procurement : the purchase of goods & services by
organizations
 Procurement management : the planning, organizing,
and coordinating of all the activities relating to
purchasing goods & services needed to accomplish
the organization’s mission.
One-from-Many : E-Procurement at Buy-Side E-
Marketplaces

 Electronic Procurement (e-procurement) :

 The electronic acquisition of goods & services for
organizations via the internet, EDI, etc.
 The business-to-business purchase of supplies, work,
and services through the internet / private network.
 Objective : to minimize the inefficiencies in
traditional procurement by automate the buying
and selling activities. Transactions can be initiated
and completed electronically.
Seven Types of E-procurement
1) E-sourcing : identifying new suppliers for a
specific category of purchasing requirements using
internet technology.
2) E-tendering : sending requests for information &
prices to known suppliers and receiving the
suppliers’ responses and bids using internet
technology.
3) E-reverse auctioning : using internet technology to
buy goods & services from a number of known or
unknown suppliers.
Seven Types of E-procurement
4) E-informing : gathering & distributing
purchasing information both from and to
internal & external parties using internet
technology.
5) Web-based ERP (Electronic Resource Planning) :
creating & approving purchasing requisitions,
placing purchase orders, and receiving goods &
services by using a software system based on
internet technology.
Seven Types of E-procurement
6) E-MRO (Maintenance, Repair, and Operating) : the
same as web-based ERP except that the goods and
services ordered are non-product-related MRO
supplies.
7) E-market sites : buying communities access
favored suppliers’ products & services, add
products to shopping carts, create requisitions, seek
approval, receive purchase order, and process
electronic invoices, integrating them into suppliers’
supply chains and buyers’ financial systems.
The Benefits of E-procurement
 Increasing the productivity of purchasing agents
 Lowering purchase price (volume discount, reverse
auctions)
 Improving information flow & management
 Ensuring delivery on time, every time
 Reducing the administrative processing cost per
order, etc.
The Limitations & Challenges of E-procurement

 The cost may be too high

 It may be difficult to get suppliers to cooperate
electronically
 The system may be too complex
 It may be difficult to have internal & external
integration
 The technology needs to be updated frequently
Reverse Auctions at Buy-Side E-Marketplace

 Reverse Auctions
A tendering system in which suppliers are
invited to bid on the fulfillment of an order
and the lowest bid wins.
 Request for Quote (RFQ)

The “invitation” to participate in a tendering

(bidding) system.
 Other E-Procurement Methods
Many corporate
buyers
Purchasing agents
(purchasing
buy from large
agents) located in
number of
different
suppliers
departments &
locations
Internal
Procureme
nt
Marketplac To control the
e purchasing (budget)
Other E-Procurement Methods
I. Internal Procurement Marketplace /
Internal Aggregated Catalogs
The aggregated catalogs of all approved
suppliers combined into a single internal
electronic catalog.
Benefits of Internal Aggregated Catalogs

1. Corporate buyers can quickly find what they

want, check prices, availability & delivery
times, and then complete electronic
requisition forms.
2. A company can reduce the number of
suppliers it uses (e.g. Caltex from 3.000 to
800 suppliers)
Benefits of Internal Aggregated Catalogs

3. Prices are negotiated in advance or

determined by a tendering, so that the buyers
do not have to negotiate each time they place
an order.
4. Easier to centralize & control all procurement
and also financial controls.
Other E-Procurement Methods
II. Desktop Purchasing
Direct purchasing from internal marketplaces
without the approval of supervisors and without
the intervention of a procurement department.
 Reduces the administrative cost & the cycle time
involved in purchasing urgently needed or
frequently purchased items of small dollar
value. Effective for MRO (maintenance, repair,
operating) purchases.
Other E-Procurement Methods
III. Group Purchasing
The aggregation of orders from several buyers
into volume purchases so that better prices can be
negotiated.
Two Models of Group Purchasing

a. Internal Aggregation of Purchasing Orders

 Orders collected from internal companies and its

subsidiaries.
 Benefits : economies of scale, lower

administrative cost & transaction cost.

b. External Aggregation for Group Purchasing
 Orders collected from our company and other

companies.
 Finding partners can be accomplished by an

external third party (e.g. BuyerZone.com)

B2B Exchanges:
Definitions and Concepts

Exchanges
 Electronic trading-community meeting
places (many sellers & many buyers, and
possibly for other business partners).
Exchanges can be horizontal (serving many
industries) or vertical (serving one/few
connected industries)
Exchanges Three Major Functions
1) Matching buyers & sellers
 Product information, providing price, product offerings,
product comparisons, etc.
2) Facilitating transactions
 Providing catalogs, trading platform & mechanisms,
registering & qualifying buyers & sellers, etc.
3) Maintaining exchange policies &
infrastructure
 Commercial code, contract law, export & import laws,
providing auction management, etc.
Benefits of Exchanges
 Making markets more efficient
 Providing opportunities for sellers & buyers to find
new business partners
 Cutting the administrative costs of ordering
 Expediting trading processes
 Facilitate global trade
 Create communities of informed buyers & sellers
Sources of Revenue for Exchanges
 Transaction fees
 Membership fees
 Service fees
 Advertising fees
 Auction fees
 In addition, exchanges offer software, computer
services, management consultation, etc.
B2B Portals & Directories
 Portals : gateways to information
 B2B portals : information portals for

businesses.
 They usually include directories of products
offered by each seller, list of potential buyers &
what they want, and other industry / general
information.
 Information portals maybe horizontal (offering a
wide range of information about different
industries; e.g. Alibaba.com) or they may be
vertical (focusing on a single industry / industry
B2B Portals & Directories
 Corporate portals
 A major gateway through which
employees, business partners, and the
public can enter a corporate website and
other information sources that enables
communication, collaboration, and access
to company information.
 Facilitate collaboration with suppliers,
customers, employees, and others.
B2B Portals & Directories
In general, Corporate Portals divided into two :
A. General Portals
Defined by their audience (e.g. suppliers,
employees)
B. Functional Portals
Defined by the functionalities they offer. Range
from simple information portals (portals that
store data and enable users to access these data)
to sophisticated collaborative portals (portals
that allow collaboration).
Five Types of Generic Portals

A. Portals for Suppliers & Other Partners

 Suppliers can see & manage the
inventories of the products that they sell
 They can view what they sold to the portal
owner & for how much
 Reorder material & supplies
 Collaborate with corporate buyers & other
staff
Five Types of Generic Portals

B. Customer Portals
 Customer can view products & services
 Customer can place orders which they can
later track
 Customer can pay for products & services,
arrange for warranties & deliveries, etc
Five Types of Generic Portals

C. Employee Portals
 Use for training, dissemination of company
news & information, discussion group, and
more.
 Also use for self service activities mainly
in the human resources area (e.g. reporting
change of address, registering for classes,
requesting reimbursement)
Five Types of Generic Portals

D. Executive & Supervisor Portals

 Portalsthat enable managers & supervisors
to control the entire work force
management process (from budgeting to
workforce scheduling)
E. Mobile Portals
 Portals
accessible via mobile devices,
especially cell phones & PDAs.
Three Types of Functional Portals

A. Business Intelligence Portals

 Used mostly by middle & top level
executives & analysts to conduct business
analyses & decision support activities.
B. Intranet Portals
 Used mostly by employees for managing
fringe benefits & for self-training
Three Types of Functional Portals

C. Knowledge Portals
 Usedfor collecting knowledge from
employees and for disseminating collected
knowledge.