1. Chapter 5 B2B E-Commerce

2. 1.Describe the B2B field. 2.Describe the major types of B2B models. 3.Discuss the characteristics and models of the sell-side marketplace, including auctions. 4.Describe the sell-side intermediaries. 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. 5-1 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives

3. 8.Describe other procurement methods. 9.Define exchanges and describe their major types. 10.Describe B2B portals. 11.Describe third-party exchanges. 12.Describe how B2B can benefit from social networking and Web 2.0. 13.Describe Internet marketing in B2B, including organizational buyer behavior. 5-2 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives

4. 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. Market size : (12 trillion by 2012) Leading items: chemicals, computer electronics, food, office products, motor vehicles, …etc 5-3 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

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6. THE BASIC TYPES OF B2B E-MARKETPLACES AND SERVICES –One-to-Many and Many-to-One: Private E- Marketplaces company-centric EC E-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). (IS and participants) are controlled by individual sell- side or buy-side 5-5 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

7. –Many-to-Many: Exchanges (public e-marketplace) 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-marketplaces Third-party exchanges open to all interested parties (sellers and buyers). –Supply Chain Improvers and Collaborative Commerce Hub manager Not just buying and selling. Collaborative Commerce: Communication, design, planning, and information sharing among business partners 5-6 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

8. B2B CHARACTERISTICS (qualities) –Parties to the Transaction: Sellers, Buyers, and Intermediaries Can be conducted directly between a customer and a manufacturer or by an online intermediary An online third party that brokers a transaction online between a buyer and a seller; may be virtual or click-and-mortar. Distributors or wholesalers 5-7 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

9. –Types of Transactions spot buying The purchase of goods and services as they are needed, usually at prevailing market prices. strategic (systematic) sourcing Purchases involving long-term contracts that usually are based on private negotiations between sellers and buyers. 5-8 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

10. 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 materials Materials used to support production (e.g., office supplies or lightbulbs). They are used in activities that support production - maintenance, repair, and operation (MRO) 5-9 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

11. –The Direction of the Trades vertical marketplaces Markets that deal with one industry or industry segment (ex: steel, chemicals, cars, electronics, hospital supplies). 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, travel services). SUPPLY CHAIN RELATIONSHIPS IN B2B The use of business-to-business electronic commerce is generally a part of existing supply chains that are used to make them more efficient. Used in acquisition of material, processing, packaging, moving 5-10 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

12. SERVICE INDUSTRIES ONLINE IN B2B –Travel and hospitality services –Real estate –Financial services – EFT payment –Online financing – online business loans –Other online services – consulting, law firms, health organizations 5-11 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Thu 10-4 Concepts, Characteristics, and Models of B2B E-Commerce

13. THE BENEFITS OF B2B to Buyers (B), Sellers (S), or Both (J) Limitations include channel conflicts and no face-to- face interaction 5-12 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Concepts, Characteristics, and Models of B2B E- Commerce

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15. 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. The major types of B2B sell-side transactions include selling from electronic catalogs, selling through forward auctions and one-to-one selling (Negotiation) –B2B Sellers: click and mortar: Distributors or wholesalers OR pure online –Customer Service: GE used SW agent to respond to million calls. Cost per call dropped to $0.2 instead of $5 5-14 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall One-to-Many: Sell-Side E-Marketplaces

16. SELLING FROM CATALOGS - – The most common sell-side method –Ex: MS sells over $60 billion SW to distributors over extranet. –Benefits: Lower order processing costs, a faster ordering cycle, fewer errors, lower search costs for buyers/sellers, lower logistics costs, and customization options. –Limitations: how to attract buyers, channel conflicts One-to-Many: Sell-Side E-Marketplaces

17. Manufacturers use intermediaries to distribute their products to a large number of smaller buyers. The intermediaries buy products from many manufacturers and aggregate them into one catalog from which they sell to customers or to retailers (Ex: Sam’s club of wallmart) E-distributors sell in horizontal or vertical markets. Now, many of these distributors also are selling online via Webstores. 5-16 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Selling via Distributors and Other Intermediaries

18. Companies use forward auction (on their Web site) to liquidate unneeded capital assets Benefits of USING AUCTIONS ON THE SELL SIDE –Revenue generation –Cost savings –Increased “stickiness” - loyalty –Member acquisition and retention– registered users AUCTIONING FROM THE COMPANY’S OWN SITE – Used by large companies like GM 5-17 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Selling via E-auction

19. USING INTERMEDIARIES IN AUCTIONS –Example: Liquidation.com The benefits of using an intermediary - - lack of new required resources - HW, bandwidth. IT personnel - fast time to market - outsourcing of billing/collections. 5-18 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Selling via E-auction

20. buy-side e-marketplace A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e-procurement method. 5-19 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall One-from-Many: Buy-Side E-Marketplaces and E- Procurement

21. E-procurement The electronic acquisition of goods and services for organizations. PROCUREMENT TYPES –Use Internet technology in: E-Sourcing – identify supplier to a specific product E-Tendering – send requests to suppliers and receive response E-Reverse auctioning E-Informing – gather and distribute purchasing info 5-20 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall One-from-Many: Buy-Side E-Marketplaces and E- Procurement

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23. INEFFICIENCIES IN TRADITIONAL PROCUREMENT MANAGEMENT –procurement management The planning, organizing, and coordinating of all the activities related to purchasing goods and services needed to accomplish the organization’s mission. –maverick buying Unplanned purchases of items needed quickly, often at non-prenegotiated higher prices. 5-22 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Sun 13-4 One-from-Many: Buy-Side E- Marketplaces and E-Procurement

24. E-procurement benefits - Increased productivity, - lower purchase prices, - improved information flow, - minimized maverick purchasing, - improved payment processes, - faster purchasing, - reduced processing costs, and - finding new suppliers/vendors. 5-23 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall One-from-Many: Buy-Side E-Marketplaces and E- Procurement

25. Reverse auction: Companies place their RFQ information online and allow bidders to access that information and place bids. request for quote (RFQ) The “invitation” to participate in a tendering (bidding) system. CONDUCTING REVERSE AUCTIONS –E-Tendering by Governments 5-24 Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall Buy-Side E-Marketplaces: Reverse Auctions

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