1. Lesson 04 Business-to-Business E-Commerce ISM 41113, Electronic Commerce By: M. Fathima Rashida Lecturer in MIT Department of MIT Faculty of Management and Commerce, SEUSL

2. Learning Objectives 1. Describe the B2B field. 2. Describe the major types of B2B models. 3. Discuss the characteristics of the sell-side marketplace, including auctions. 4. Describe the sell-side models. 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. ISM 41113 5-1

3. Learning Objectives 8. Describe other procurement methods. 9. Define exchanges and describe their major types. 10. Describe partner relationship management (PRM). 11. Describe how B2B can benefit from social networking and Web 2.0. ISM 41113 5-2

4. Concepts, Characteristics, and Models of B2B E-Commerce 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 THE BASIC TYPES OF B2B TRANSACTIONS AND ACTIVITIES Sell-side Buy-side Exchanges Supply chain improvements and collaborative commerce ISM 41113 5-3

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6. Concepts, Characteristics, and Models of B2B E-Commerce THE BASIC TYPES OF B2B E-MARKETPLACES AND SERVICES One-to-Many and Many-to-One: Private E-Marketplaces 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)  company-centric EC Many-to-Many: Exchanges 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 Business deal with other business for purpose beyond just selling or buying. Eg: Collaborative Commerce ISM 41113 5-5

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8. Concepts, Characteristics, and Models of B2B E-Commerce B2B CHARACTERISTICS Parties to the Transaction: Sellers, Buyers, and Intermediaries 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 ISM 41113 5-7

9. Concepts, Characteristics, and Models of B2B E-Commerce 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 light bulbs)  MRO (maintenance, repair, and operation) called as nonproduction materials The Direction of the Trades vertical marketplaces Markets that deal with one industry or industry segment (e.g., steel, chemicals) 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) ISM 41113 5-8

10. Concepts, Characteristics, and Models of B2B E-Commerce SUPPLY CHAIN RELATIONSHIPS IN B2B SERVICE INDUSTRIES ONLINE IN B2B Travel and hospitality services Real estate Financial services Online financing Other online services ISM 41113 5-9

11. Concepts, Characteristics, and Models of B2B E-Commerce THE BENEFITS OF B2B Benefits: sellers (S), buyers (B), both (J) ISM 41113 10

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13. 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 B2B Sellers Customer Service SALES FROM CATALOGS Configuration and Customization Benefits and Limitations of Online Sales from Catalogs ISM 41113 5-12

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15. Selling Via E-Auctions USING AUCTIONS ON THE SELL SIDE Forward auctions offer the following benefits to B2B sellers: Revenue generation Cost savings Increased “stickiness” Member acquisition and retention AUCTIONING FROM THE COMPANY’S OWN SITE USING INTERMEDIARIES IN AUCTIONS ISM 41113 5-14

16. One-from-Many: Buy-Side E-Marketplaces and E-Procurement buy-side e-marketplace A corporate-based acquisition site that uses reverse auctions, negotiations, group purchasing, or any other e- procurement method PROCUREMENT METHODS E-Procurement Organizations and Types E-sourcing E-tendering E-reverse auctioning E-informing Web-based ERP E-marketsites E-MRO ISM 41113 5-15

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18. One-from-Many: Buy-Side E-Marketplaces and E-Procurement INEFFICIENCIES IN TRADITIONAL PROCUREMENT MANAGEMENT procurement management The planning, organizing, and coordinating of all the activities relating to purchasing goods and services needed to accomplish the organization’s mission maverick buying Unplanned purchases of items needed quickly, often at non–pre- negotiated higher prices ISM 41113 5-17

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21. One-from-Many: Buy-Side E-Marketplaces and E-Procurement THE GOALS AND BENEFITS OF E-PROCUREMENT e-procurement The electronic acquisition of goods and services for organizations what are the goals of e-procurement? ISM 41113 5-20

22. Buy-Side E-Marketplaces: Reverse Auctions Reverse auction is a tendering system in which suppliers are invited to bid on the fulfillment of an order and the lowest bid wins In B2B, a buyer may open an electronic market on its own server and invite potential suppliers to bid on the items the buyer needs Request For Quote (RFQ) The “invitation” to participate in a tendering (bidding) system CONDUCTING REVERSE AUCTIONS Online directories that list open RFQs Use of software agents  auctionsniper.com, auctionflex.com E-Tendering by Governments GROUP REVERSE AUCTIONS ISM 41113 5-21

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24. Other E-Procurement Methods Internal Procurement Marketplace The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog Benefits of Internal Aggregated (Consolidated) Catalogs Quickly find what desired offering, check availability and delivery times, and complete electronic requisition forms, using fewer suppliers, lower price, financial control desktop purchasing Direct purchasing from internal marketplaces without the approval of supervisors and without the intervention of a procurement department group purchasing The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated Internal Aggregation of Purchasing Orders External Aggregation for Group Purchasing ISM 41113 5-23

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26. Other E-Procurement Methods BUYING AT SELLERS’ SITES AND COLLABORATIVE COMMERCE PURCHASING DIRECT GOODS bartering exchange An intermediary that links parties in a barter; a company submits its 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 ISM 41113 5-25

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28. B2B Electronic Exchanges: Definitions and Concepts FUNCTIONS OF EXCHANGES 1. Matching buyers and sellers 2. Facilitating transactions 3. Maintaining exchange policies and infrastructure ISM 41113 27

29. B2B Electronic Exchanges: Definitions and Concepts DYNAMIC PRICING A rapid movement of prices over time and possibly across customers, as a result of supply and demand matching Revenue Models Transaction fees Service fees Membership fees Advertising fees Other revenue sources ISM 41113 5-28

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31. Partner and Supplier Relationship Management Partner Relationship Management (PRM) Business strategy that focuses on providing comprehensive quality service to business partners E-COMMUNITIES AND PRM ISM 41113 5-30

32. B2B in the Web 2.0 Environment and Social Networking THE OPPORTUNITIES Discover new business partners Improve recruitment Enhance ability to learn about new technologies, competitors, etc. Find sales prospects Improve participation in industry association activities ISM 41113 5-31

33. B2B in the Web 2.0 Environment and Social Networking Corporations are using social networks to: Create brand awareness Advertise product and services and promote new ones Create buzz about upcoming product releases Drive traffic to their online web properties in hopes of enticing users to engage with their sites, products, or solutions create social communities to encourage discussion among business partners about their products and /or act as a feedback mechanism about their products/ services Use social networks, such as Facebook and LinkedIn, to recruit new talent. Some HR departments are using social networks to obtain more insight into potential new hires ISM 4111332

34. B2B in the Web 2.0 Environment and Social Networking STRATEGY FOR B2B SOCIAL NETWORKING Participate Monitor Use existing applications The Future of Social Networking ISM 41113 5-33

35. Managerial Issues 1. Which B2B model(s) should we use for e-procurement? 2. Which B2B model(s) should we use for online B2B sales? 3. Which exchange to join? 4. Which solution vendor(s) should we select? 5. What is the organizational impact of B2B? 6. What are the ethical issues in B2B? 7. How shall we manage the suppliers 8. Which type of social network? Private (proprietary) or public? ISM 41113 5-34