1. B2B E-Commerce: Supply Chain Management and Collaborative Commerce
Chapter 12

2. Learning Objectives
Define the term supply chain and describe its components
Describe supply chain management and its goals
Discuss the evolution and growth of B2B e-commerce, as well as its potential benefits and challenges
Understand how procurement and supply chains relate to B2B e-commerce
Understand the different characteristics and types of Net marketplaces
Understand the objectives of private industrial networks, their role in supporting collaborative commerce, and the barriers to their implementation
Identify major trends in supply chain management and collaborative commerce

3. What is a supply chain?
A supply chain refers to the flow of materials, information, payments, and services from raw materials suppliers, through factories and warehouses, to the end customers
There are typically three types of flows in the supply chain:
Materials
Information
Financial
In some supply chains there are fewer types of flows
for example, in service industries there may be no physical flow of materials

4. Problems Along the Supply Chain
The problems along the supply chain stem mainly from two sources:
Uncertainties
Need to coordinate several activities, internal units, and business partners
A major source of uncertainty is the demand forecast that may be influenced by competition, prices, weather conditions, technological development, and customers’ general confidence
Other uncertainties exist in delivery times
Quality problems of materials and parts may also create production delays

5. Solutions to Supply Chain Problems
Over the years, organizations have developed many solutions to the supply chain problems
One of the earliest solutions was vertical integration where one organization owns the firms involved in each step in the supply chain
The most common solution has been building inventories as an “insurance” against supply chain uncertainties
The most recent solution has been increased use of interorganizational information systems for sharing information between supply chain partners and more accurate measuring of supply chain performance. These systems include:
MRP
ERP
supply chain systems
various forms of Internet-based B2B e-commerce

6. B2B E-Commerce and SCM
The total amount of B2B trade in the US in 2015 was about $14.6 trillion
B2B e-commerce contributed about $6.3 trillion of that amount, and by this should grow to $8.6 trillion in the US
The process of conducting trade among business firms is complex and requires significant human intervention, and therefore, consumes significant resources
Some firms estimate that each purchase order for support products costs them at least $100 in administrative overhead

7. B2B E-Commerce and SCM (cont.)
Administrative overhead includes processing paper, approving purchase decisions, spending time using the telephone and fax to search for products, arranging for shipping, and receiving the goods
Across the economy, this adds up to trillions of dollars annually being spent for procurement processes that could potentially be automated
If even just a portion of inter-firm trade were automated, then literally trillions of dollars might be released for more productive uses

8. The Evolution of B2B E-Commerce
B2B commerce has evolved over a 35-year period through several technology- driven stages
These stages include:
Automated order entry systems
Electronic data interchange (EDI)
B2B e-commerce Web sites
Net marketplaces
Private industrial networks
Social networks and mobile apps

9. B2b e-commerce technology platforms (figure 12.1)

10. Growth of b2b commerce (2010-2019) (figure 12.2)

11. Potential Benefits of B2B E-Commerce
Lower administrative costs
Lower search costs for buyers
Reduce inventory costs
Lower transaction costs
Increase production flexibility
Improve quality of products by increasing cooperation among buyers and sellers
Decrease product cycle time
Increase opportunities for collaborating with suppliers and distributors
Create greater price transparency
Increase the visibility and real-time information sharing among all participants in the supply chain network

12. The procurement process (figure 12.3)

13. Types of Procurement
Two distinctions are important for understanding how B2B e-commerce can improve the procurement process
First, firms make purchases of two kinds of goods from suppliers:
Direct goods
Indirect goods
Second, firms use two different methods for purchasing goods:
Contract purchasing
Spot purchasing

14. Main Types of Internet-Based B2B Commerce
There are two generic types of Internet-based B2B commerce systems:
Net marketplaces
Private industrial networks (PINs)
Net marketplaces bring together potentially thousands of sellers and buyers into a single digital marketplace operated over the Internet
Private industrial networks bring together a smaller number of strategic business partner firms that collaborate to develop highly efficient supply chains

15. Net Marketplaces
One of the most compelling visions of B2B e-commerce is that of an electronic marketplace on the Internet that would bring thousands of fragmented suppliers into contact with hundreds of major purchasers of industrial goods
In pursuit of this vision, well over 1500 Net marketplaces sprang up in the early days of e-commerce
Unfortunately, many of them have since disappeared but some still survive

16. Pure types of Net marketplaces (figure 12.9)

17. Private Industrial Networks
Private industrial networks (PINs) today form the largest part of B2B e- commerce
Industry analysts estimate that, in 2015, over 50% of B2B expenditures by large firms were for development of private industrial networks
PINs can be considered the foundation of the “extended enterprise,” allowing firms to extend their boundaries and their business processes to include supply chain and logistics partners
A PIN is a Web-enabled network for the coordination of trans-organizational business processes (sometimes also called collaborative commerce)

18. Private industrial network objectives
The specific objectives of a PIN include:
Developing efficient purchasing and selling processes industry-wide
Developing industry-wide resource planning
Increasing supply chain visibility
Achieving closer buyer-seller relationships
Demand forecasting, communications, conflict resolution
Operating on a global scale
Reducing industry risk by preventing imbalances of supply and demand
Support product design, marketing planning, and demand forecasting

19. Implementation Barriers
There are a number of barriers to successful collaborative commerce implementation
Participating firms are required to share sensitive data with their business partners
Requires a significant investment of time and money
Requires a change in mindset and behavior for employees – they must shift their loyalties from the firm to the wider trans-organizational enterprise and recognize that their fate is intertwined with the fate of their suppliers and distributors
All firms lose some of their independence

20. Trends in SCM and Collaborative Commerce
Just-in-time and lean production
Supply chain simplification
Work closely with a smaller group of strategic supplier firms
Supply chain black swans: adaptive supply chains
Accountable supply chains: labor standards
Sustainable supply chains: lean, mean and green
Supply chain management systems: EDI, mobile B2B, and B2B in the cloud
Continuously link partner information systems
Collaborative commerce
Use of digital technologies to collaboratively design, develop, build, and manage products across their life cycle (support product development and order fulfillment activities)
Social networks and B2B: the extended social enterprise