Chapter 6

Company-Centric B2B and E-Procurement
   Public B2B Exchanges and Portals
Learning Objectives
1. Describe the B2B field.
2. Describe the major types of B2B models.
3. Discuss the characteristics o...
Learning Objectives (cont.)
6. Explain how reverse auctions work in
   B2B.
7. Describe B2B aggregation and group
   purch...
General Motors’ B2B Initiatives
• The Problem
  – Because the automotive industry is very
    competitive, GM is always lo...
General Motors’ B2B Initiatives (cont.)

– GM sells custom-designed cars online
  through its dealers’ sites avoiding chan...
General Motors’ B2B Initiatives (cont.)

• The Solution
  – GM established an extranet infrastructure
    called ANX (Auto...
General Motors’ B2B Initiatives (cont.)

– Capital assets problem
    GM implemented its own electronic market from
    wh...
General Motors’ B2B Initiatives (cont.)

• The Results
  – Within just 89 minutes after the first forward
    auction open...
General Motors’ B2B Initiatives (cont.)

– Online reverse auction prices are significantly
  lower than the prices the com...
General Motors’ B2B Initiatives (cont.)

•    What can we learn…
    – Involvement of a large company in three EC
      ac...
General Motors’ B2B Initiatives (cont.)

– B2B transactions
   • Company can be a seller, offering goods or
     services ...
Concepts, Characteristics, and Models of B2B EC

• Basic B2B concepts
   Business-to-business e-commerce (B2B EC):
   Tran...
Concepts, Characteristics, and Models of B2B EC (cont.)




                      www.AuiSuKe.com                13
Concepts, Characteristics, and Models of B2B EC (cont.)


• B2B characteristics
  – Parties to the transaction
       Onli...
Concepts, Characteristics, and Models of B2B EC (cont.)


  – Types of transactions
      • Spot buying: The purchase of g...
B2B Characteristics (cont.)
• Types of materials
  – Direct materials: Materials used in the production
    of a product (...
Concepts, Characteristics, and Models of B2B EC (cont.)


  – Direction of trade
      • Vertical marketplaces: Markets th...
Concepts, Characteristics, and Models of B2B EC (cont.)



    • Basic B2B transaction types
       – Sell-side
          ...
www.AuiSuKe.com   19
Concepts, Characteristics, and Models of B2B EC (cont.)


  – One-to-many and many-to-one: company-centric
    transaction...
Concepts, Characteristics, and Models of B2B EC (cont.)


  – Many-to-many: exchanges
      • Exchanges (trading communiti...
Concepts, Characteristics, and Models of B2B EC (cont.)


  – Collaborative commerce
      • Communication, design, planni...
Concepts, Characteristics, and Models of B2B EC (cont.)


• Supply chain relationships in B2B
  – Supply chain process con...
Concepts, Characteristics, and Models of B2B EC (cont.)

  – B2B private e-marketplace provides a company
    with high su...
Concepts, Characteristics, and Models of B2B EC (cont.)


• Virtual services industries in B2B
  – Travel services
  – Rea...
Concepts, Characteristics, and Models of B2B EC (cont.)

• Benefits of B2B
  –   Eliminates paper and reduces administrati...
One-to-Many: Sell-Side Marketplaces

•    Sell-side e-marketplace: A Web-based
     marketplace in which one company sells...
One-to-Many: Sell-Side Marketplaces (cont.)




                  www.AuiSuKe.com         28
One-to-Many: Sell-Side Marketplaces (cont.)

• B2B sellers
    click-and-mortar manufacturers or
    intermediaries, usual...
Example: BigBoxx

• Direct sales from catalogs
  – Bigboxx.com (bigboxx.com), based in Hong
    Kong, is a B2B retailer of...
Example: BigBoxx (cont.)
– The company’s portal is attractive and easy to use
– Has a tutorial that instructs users on how...
Example: BigBoxx (cont.)
– Users can pay by cash or by check (upon
  delivery), via automatic bank drafts, by credit
  car...
Example: BigBoxx (cont.)

– Using its own trucks
  and
  warehouses, Bigboxx.
  com makes deliveries
  within 24 hours or
...
Example: BigBoxx (cont.)
– Value-added services for customers
  • check item availability in real time
  • track the statu...
www.alibaba.com




    www.AuiSuKe.com   35
One-to-Many: Sell-Side Marketplaces (cont.)

• Configuration and customization
  – customize products
  – get price quotes...
One-to-Many: Sell-Side Marketplaces (cont.)

• Major benefits of direct sales are:
   –   Lower order-processing costs and...
Selling via Auctions

              • Using auctions on the
                sell side
                   –    Revenue gene...
Selling via Auctions (cont.)
• Selling from the company’s own site
  – The company will have to pay for
    infrastructure...
Selling via Auctions (cont.)
• Using intermediaries
  – An intermediary may conduct private auctions
    for a seller, eit...
Using Intermediaries in Auctions (cont.)


   – Benefits of using intermediaries
     • no additional resources are requir...
Sell-Side Cases
• Direct sales: Cisco Systems
  – World’s leading producer of
    routers, switches, and network
    inter...
Sell-Side Cases (cont.)
– Customer service
   • Applications offered:
       – software downloads
       – defect tracking...
Sell-Side Cases (cont.)
• Benefits
  – Reduced operating costs for order taking
  – Enhanced technical support and custome...
Sell-Side Cases (cont.)
• Sales through an intermediary: Marshall
  Industries (now Avnet.com)
  – large distributor of el...
Sell-Side Cases (cont.)
• Marshall Industries EC initiatives
  – MarshallNet
      intranet that supports salespeople in t...
Sell-Side Cases (cont.)
• Marshal Industries
  – Electronic Design Center
       online configuration tool; provides techn...
Sell-Side Cases (cont.)
• B2B intermediary: Boeing’s parts
  marketplace
  – World’s largest maker of airplanes for
    co...
Sell-Side Cases (cont.)
– Online strategy is to provide a single point of
  online access through which airlines (buyers)
...
Sell-Side Cases (cont.)
– 1996, Boeing introduced its PART page on the
  Internet
– Customers around the world could
   • ...
Sell-Side Cases (cont.)
– Boeing OnLine Data (BOLD) enables
  mechanics and technicians at the airport to
  access the tec...
One-from-Many: Buy-Side Marketplaces and E-Procurement


• Buy-side e-marketplace: A corporate-
  based acquisition site t...
One-from-Many: Buy-Side Marketplaces and E-Procurement
                        (cont.)

 • Procurement methods
    – Buy f...
One-from-Many: Buy-Side Marketplaces and E-Procurement
                        (cont.)
    – Conduct bidding or tendering ...
One-from-Many: Buy-Side Marketplaces and E-Procurement
                        (cont.)

 • Inefficiencies in traditional p...
One-from-Many: Buy-Side Marketplaces and E-Procurement
                        (cont.)

 • e-procurement: The electronic a...
Benefits of E-Procurement
• Benefits of e-procurement
  – Increasing the productivity of purchasing
    agents
  – Lowerin...
Benefits of E-Procurement (cont.)
– Minimizing the purchases made from noncontract
  vendors. Improving the payment proces...
Benefits of E-Procurement (cont.)
– Reducing the administrative processing cost per
  order
– Improved sourcing
– Integrat...
One-from-Many: Buy-Side Marketplaces and E-Procurement
                        (cont.)




                      www.AuiSu...
www.AuiSuKe.com   61
Implementing E-Procurement
• Implementing e-procurement—major e-
  procurement implementation issues
  – Fitting e-procure...
Implementing E-Procurement (cont.)
– Coordinating the buyer’s information system with
  that of the sellers; sellers have ...
Buy-Side E-Marketplaces: Reverse Auctions
• One of the major methods of e-procurement is
  through reverse auctions (tende...
Reverse Auctions (cont.)
• Conducting reverse auctions
  – Thousands of companies use the reverse auction
    model
  – Th...
Reverse Auctions
    A Pioneer: General Electric’s TPN
• Procurement revolution at GE—Trading Process
  Network (TPN) Post...
Reverse Auctions
A Pioneer: General Electric’s TPN (cont.)

Benefits of TPN
   • labor involved in the procurement process...
www.AuiSuKe.com   68
Reverse Auctions
A Pioneer: General Electric’s TPN (cont.)

     – GXS Express Marketplaces is an expanded
       system t...
Other E-Procurement Methods


• Internal marketplace: The aggregated
  catalogs of all approved suppliers
  combined into ...
Internal Marketplace (cont.)
– Benefits of internal marketplaces
  • corporate buyers quickly find what they
    want, che...
Internal Marketplace: Desktop Purchasing

 • Desktop purchasing: Direct purchasing from
   internal marketplaces without t...
www.AuiSuKe.com   73
Other E-Procurement Methods (cont.)
• Industrial malls
  – Distributors that aggregate products from
    hundreds or thous...
Other E-Procurement Methods (cont.)
• E-auctions
  – sellers are increasingly motivated to sell
    surpluses and even reg...
Other E-Procurement Methods (cont.)
• Group purchasing: The aggregation of
  orders from several buyers into volume
  purc...
Other E-Procurement Methods (cont.)
  – Internal aggregation—companywide orders
    are aggregated using the Web and
    r...
Other E-Procurement Methods (cont.)




           www.AuiSuKe.com            78
Other E-Procurement Methods (cont.)

• Purchasing direct goods
   E-purchasing direct goods allows buyers to:
    •   get ...
Other E-Procurement Methods (cont.)

• Electronic bartering
    Bartering exchange: An intermediary that links
    parties...
Infrastructure for B2B
• Major infrastructures needed for B2B
  marketplaces
  – Telecommunications networks and protocols...
Other E-Procurement Methods (cont.)

• Electronic data interchange (EDI): The
  electronic transfer of specially formatted...
Other E-Procurement Methods (cont.)

• Value-added networks (VANs):
  Private, third-party managed networks that
  add com...
Other E-Procurement Methods (cont.)




• Internet-based (Web) EDI: EDI that runs on the
  Internet and is widely accessib...
Other E-Procurement Methods (cont.)

• Integration
  – Integration with existing internal infrastructure
    and applicati...
Other E-Procurement Methods (cont.)

• The role of standards and XML in B2B
  integration
   XML (eXtensible Markup Langua...
Other E-Procurement Methods (cont.)

 – XML can overcome EDI barriers for three
   reasons:
   1. XML is a flexible langua...
Other E-Procurement
           Methods (cont.)
• Web services: An architecture enabling
  assembly of distributed applicat...
Managerial Issues
1. Can we justify the cost of B2B
   applications?
2. Which vendor(s) should we select?
3. Which B2B mod...
Managerial Issues (cont.)
5. What restructuring will be required for the
   shift to e-procurement?
6. What integration wo...
Summary
1. The B2B field: EC activities between
   businesses
2. The major B2B models: sell-side; buy-
   side; trade exch...
Summary (cont.)
4. Sell-side intermediaries: provide value-added
   services to manufacturers and business
   customers
5....
Summary (cont.)
6. B2B reverse auctions: tendering system used
   by buyers to collect bids electronically from
   supplie...
Summary (cont.)
8. Infrastructure and standards in B2B:
   networks and protocols, multiple
   servers, application softwa...
Public B2B Exchanges and Portals
Learning Objectives
1. Define e-marketplaces and exchanges
   and describe their major types.
2. Describe the various owne...
Learning Objectives (cont.)

5. Distinguish between purchasing
   (procurement) and selling consortia.
6. Define dynamic t...
Learning Objectives (cont.)
9. Describe the critical success factors of
    exchanges.
10. Discuss implementation issues o...
B2B Electronic Exchanges
• Public e-marketplaces (public exchanges):
  Trading venues open to all interested parties
  (se...
B2B Electronic Exchanges (cont.)
• Market maker: The third-party that
  operates an exchange (and in many
  cases, also ow...
www.AuiSuKe.com   101
www.AuiSuKe.com   102
B2B Electronic Exchanges (cont.)
• Vertical exchange: An exchange whose
  members are in one industry or industry
  segmen...
B2B Electronic Exchanges (cont.)
• Dynamic pricing: A rapid movement of
  prices over time, and possibly across
  customer...
B2B Electronic Exchanges (cont.)
•    Process that results in dynamic pricing in most
     exchanges includes
    1.   A c...
B2B Electronic Exchanges (cont.)
• Functions of exchanges
  – Matching buyers and sellers
  – Facilitating transactions
  ...
www.AuiSuKe.com   107
B2B Electronic Exchanges (cont.)
• Ownership of exchanges
  – An industry giant
  – A neutral entrepreneur
  – The consort...
B2B Electronic Exchanges (cont.)


• Revenue models
  –   Transaction fees
  –   Fee for service
  –   Membership fees
  –...
B2B Electronic Exchanges (cont.)
• Governance and organization
  – Membership
      the community in the exchange
  – Site...
www.AuiSuKe.com   111
www.AuiSuKe.com   112
B2B Portals
• B2B portals: Information portals for
  businesses
• Pure information portals include:
  – directories of pro...
B2B Portals (cont.)
• Vortals: B2B portals that focus on a single
  industry or industry segment; ―vertical
  portals‖



...
B2B Portal Examples
• Thomas Register—information portal
  – Sellers distribute information on what they
    have to sell
...
B2B Portal Examples (cont.)
• Alibaba.com—started as a pure information
  portal and is moving toward becoming a trading
 ...
www.alibaba.com




    www.AuiSuKe.com   117
Sanook.com




  www.AuiSuKe.com   118
www.bangkok.com




     www.AuiSuKe.com   119
Third Party (Trading) Exchanges

• Third-party exchanges are characterized
  by two contradicting properties
  – they are ...
Third Party (Trading) Exchanges (cont.)

• A major problem is:
    Market liquidity: The degree to which
    something can...
Third Party (Trading) Exchanges (cont.)




               www.AuiSuKe.com       122
Third Party (Trading) Exchanges (cont.)
• Buyer aggregation model
    buyers’ RFQs are aggregated and then linked
    to a...
Third Party (Trading) Exchanges (cont.)




               www.AuiSuKe.com       124
Consortium Trading Exchanges
•    Consortium trading exchange (CTE): An
     exchange formed and operated by a group of
  ...
Consortium Trading Exchanges (cont.)

•    CTEs, defined by two main criteria:
    – whether they focus on buying or selli...
Consortium Trading Exchanges (cont.)

• Purchasing-oriented consortia
  – Vertical Purchasing-Oriented CTEs
      all the ...
Consortium Trading Exchanges (cont.)

• Selling-oriented consortia
  – Most selling-oriented consortia are vertical
  – Pa...
Consortium Trading Exchanges (cont.)

• Other issues for consortia
  – Legal challenges for B2B consortia
     • level of ...
Consortium Trading Exchanges (cont.)

 – Critical success factors for consortia
    •   Appropriate business and revenue m...
Consortium Trading Exchanges (cont.)
   • Management of intensive information flow
   • Smoothing of supply chain ineffici...
Dynamic Trading:
          Matching and Auctions
• Dynamic trading: Exchange trading that
  occurs in situations when pric...
Dynamic Trading:
     Matching and Auctions (cont.)
• Auctions
  – Exchanges offer members the ability to
    conduct auct...
Building E-Marketplaces
• Building e-marketplaces is a complex
  process
  – usually performed by a major B2B software
   ...
Building E-Marketplaces (cont.)
• Integration issue
  – Seamless integration is needed between the
    third-party exchang...
Building E-Marketplaces (cont.)
– External communications
  •   Web/client access
  •   Data exchange
  •   Direct applica...
Building E-Marketplaces (cont.)

  – Use of Web services in integration
      Web Services enable different Web-based
    ...
Support Services for Public
      and Private Marketplaces
• Directory services and search engines
  – Directory services ...
Support Services for Public
  and Private Marketplaces (cont.)
• Partner relationship management (PRM):
  Business strateg...
Support Services for Public
  and Private Marketplaces (cont.)
• Integration (as per Keenan Report)
  – Business-to-exchan...
Implementation Issues
• Private vs. public exchanges
    Private exchanges: E-marketplaces that are
    owned and operated...
Implementation Issues (cont.)
• Problems with private exchanges
  – Transaction fees—required to pay transaction fees
    ...
Implementation Issues (cont.)
• Supply chain improvers
  – Companies want to streamline their internal
    supply chains, ...
Implementation Issues (cont.)
• Software agents in B2B enable customized
  syndication of content and services from multip...
Example: Asite
• Asite’s B2B marketplace for the
  construction industry
  – B2B e-marketplace for the construction
    in...
Asite (cont.)
– Two of the major advantages of the Internet:
  • ability it provides to communicate more
    effectively
 ...
Asite (cont.)
  • Commerce One provides the business solution
    for the portal
  • Microsoft provides the technology pla...
Asite (cont.)
  – Internet browser is all that is needed to
    connect to Asite’s portal
  – Ease of access makes it part...
Asite (cont.)




  www.AuiSuKe.com   149
Managing Exchanges
• Open standards mean that the technology
  can be incorporated easily with
  participating firms’ back...
Managing Exchanges (cont.)
• Networks of exchanges (E2E)
  – Large corporations may work with several
    exchanges, and t...
Managing Exchanges (cont.)




          www.AuiSuKe.com    152
Managing Exchanges (cont.)
• Centralized management
  – Managing exchanges and providing services
    to participants on a...
Managing Exchanges (cont.)
– Manages all of the exchanges’:
  • Catalogs
  • Auction places
  • Discussion forums
– Managi...
Managing Exchanges (cont.)
•    Critical success factors for exchanges
     according to Ramsdell:
    1.   Early liquidit...
Managing Exchanges (cont.)
• Other CSF:
  –   Importance of domain expertise
  –   Targeting inefficient industry processe...
Managing Exchanges (cont.)
• New directions in B2B marketplaces
  – Early failures of exchanges were due mainly
    to the...
Managing Exchanges (cont.)
– e-distributors
   • Take title to the goods they sell
   • Aggregate those goods for the conv...
Managerial Issues
1. Have we ―done our homework‖?
2. Can we use the Internet?
3. Which exchange to join?
4. Will joining a...
Summary
1. E-marketplaces and exchanges defined
   and the major types of exchanges.
2. Ownership and revenue models.
3. B...
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Ec2009 ch06 company centric b2-b and e-procurement public b2b exchanges and portals public b2b exchanges and portals

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Chapter 6
Company centric b2-b and e-procurement public b2b exchanges and portals public b2b exchanges and portals

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Transcript of "Ec2009 ch06 company centric b2-b and e-procurement public b2b exchanges and portals public b2b exchanges and portals"

  1. 1. Chapter 6 Company-Centric B2B and E-Procurement Public B2B Exchanges and Portals
  2. 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 intermediary models. 5. Describe the characteristics of the buy-side marketplace and e-procurement. www.AuiSuKe.com 2
  3. 3. Learning Objectives (cont.) 6. Explain how reverse auctions work in B2B. 7. Describe B2B aggregation and group purchasing models. 8. Describe infrastructure and standards requirements for B2B. 9. Describe Web EDI, XML, and Web services. www.AuiSuKe.com 3
  4. 4. General Motors’ B2B Initiatives • The Problem – Because the automotive industry is very competitive, GM is always looking for ways to improve its effectiveness – GM expects to custom-build the majority of its cars by 2005 – The company hopes to use the system to save billions of dollars by reducing its inventory of finished cars www.AuiSuKe.com 4
  5. 5. General Motors’ B2B Initiatives (cont.) – GM sells custom-designed cars online through its dealers’ sites avoiding channel conflict – This collaboration requires sharing information with dealers and suppliers – Operational problems • disposing of manufacturing machines that are no longer sufficiently productive • procurement of commodity products www.AuiSuKe.com 5
  6. 6. General Motors’ B2B Initiatives (cont.) • The Solution – GM established an extranet infrastructure called ANX (Automotive Network eXchange) – ANX has evolved into the consortium exchange covisint.com supported by other automakers www.AuiSuKe.com 6
  7. 7. General Motors’ B2B Initiatives (cont.) – Capital assets problem GM implemented its own electronic market from which forward auctions are conducted – Resource procurement problem GM automated the bidding process using reverse auctions on its e-procurement site www.AuiSuKe.com 7
  8. 8. General Motors’ B2B Initiatives (cont.) • The Results – Within just 89 minutes after the first forward auction opened, eight stamping presses were sold for $1.8 million – Off-line method, a similar item would have sold for less than half of its online price, and the process would have taken 4 to 6 weeks www.AuiSuKe.com 8
  9. 9. General Motors’ B2B Initiatives (cont.) – Online reverse auction prices are significantly lower than the prices the company had been paying for the same items previously negotiated by manual tendering – Administrative costs per order have been reduced by 40% – Most GM dealers and thousands of GM’s suppliers are connected on a common extranet platform www.AuiSuKe.com 9
  10. 10. General Motors’ B2B Initiatives (cont.) • What can we learn… – Involvement of a large company in three EC activities: 1. connecting with dealers and suppliers through an extranet 2. electronically auctioning used equipment to customers 3. conducting purchasing via electronic bidding www.AuiSuKe.com 10
  11. 11. General Motors’ B2B Initiatives (cont.) – B2B transactions • Company can be a seller, offering goods or services to many corporate buyers • Company can be a buyer, seeking goods or services from many corporate sellers (suppliers) – A company can • employ auctions • use electronic catalogs • use other market mechanisms www.AuiSuKe.com 11
  12. 12. Concepts, Characteristics, and Models of B2B EC • Basic B2B concepts 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 www.AuiSuKe.com 12
  13. 13. Concepts, Characteristics, and Models of B2B EC (cont.) www.AuiSuKe.com 13
  14. 14. Concepts, Characteristics, and Models of B2B EC (cont.) • B2B characteristics – Parties to the transaction Online intermediary: An online third party that brokers a transaction online between a buyer and a seller; can be virtual or click-and-mortar www.AuiSuKe.com 14
  15. 15. Concepts, Characteristics, and Models of B2B EC (cont.) – Types of transactions • Spot buying: The purchase of goods and services as they are needed, usually at prevailing market prices • Strategic sourcing: Purchases involving long-term contracts that are usually based on private negotiations between sellers and buyers www.AuiSuKe.com 15
  16. 16. B2B Characteristics (cont.) • Types of materials – 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) – MROs (maintenance, repairs, and operations): Indirect materials used in activities that support production www.AuiSuKe.com 16
  17. 17. Concepts, Characteristics, and Models of B2B EC (cont.) – Direction of trade • 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) www.AuiSuKe.com 17
  18. 18. Concepts, Characteristics, and Models of B2B EC (cont.) • Basic B2B transaction types – Sell-side One seller to many buyers – Buy-side One buyer from many sellers – Exchanges Many sellers to many buyers – Collaborative commerce Communication and sharing of information, design, and planning among business partners www.AuiSuKe.com 18
  19. 19. www.AuiSuKe.com 19
  20. 20. Concepts, Characteristics, and Models of B2B EC (cont.) – One-to-many and many-to-one: company-centric transactions • 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) • Private e-marketplaces: Markets in which the individual sell- side or buy side company has complete control over participation in the selling or buying transaction www.AuiSuKe.com 20
  21. 21. Concepts, Characteristics, and Models of B2B EC (cont.) – 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; also called trading communities or trading exchanges • Public e-marketplaces: Third-party exchanges that are open to all interested parties (sellers and buyers) www.AuiSuKe.com 21
  22. 22. Concepts, Characteristics, and Models of B2B EC (cont.) – Collaborative commerce • Communication, design, planning, and information sharing among business partners www.AuiSuKe.com 22
  23. 23. Concepts, Characteristics, and Models of B2B EC (cont.) • Supply chain relationships in B2B – Supply chain process consists of a number of interrelated subprocesses and roles • acquisition of materials from suppliers • processing of a product or service • packaging it and moving it to distributors and retailers • purchase of a product by the end consumer www.AuiSuKe.com 23
  24. 24. Concepts, Characteristics, and Models of B2B EC (cont.) – B2B private e-marketplace provides a company with high supply chain power and high capabilities for online interactions – Joining a public e-marketplace provides a business with high buying and selling capabilities, but will result in low supply chain power – Companies that choose an intermediary to do their buying and selling will be low on both supply chain power and buying/selling capabilities www.AuiSuKe.com 24
  25. 25. Concepts, Characteristics, and Models of B2B EC (cont.) • Virtual services industries in B2B – Travel services – Real estate – Financial services – Online stock trading – Online financing – Other online services www.AuiSuKe.com 25
  26. 26. Concepts, Characteristics, and Models of B2B EC (cont.) • Benefits of B2B – Eliminates paper and reduces administrative costs. – Expedites cycle time – Lowers search costs and time for buyers – Increases productivity of employees dealing with buying and/or selling – Reduces errors and improves quality of services. – Reduces inventory levels and costs – Increases production flexibility, permitting just-in-time delivery – Facilitates mass customization – Increases opportunities for collaboration www.AuiSuKe.com 26
  27. 27. One-to-Many: Sell-Side 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 • Three major direct sales methods: 1. selling from electronic catalogs 2. selling via forward auctions 3. one-to-one selling www.AuiSuKe.com 27
  28. 28. One-to-Many: Sell-Side Marketplaces (cont.) www.AuiSuKe.com 28
  29. 29. One-to-Many: Sell-Side Marketplaces (cont.) • B2B sellers click-and-mortar manufacturers or intermediaries, usually distributors or wholesalers • Customer service online sellers can provide sophisticated customer services www.AuiSuKe.com 29
  30. 30. Example: BigBoxx • Direct sales from catalogs – Bigboxx.com (bigboxx.com), based in Hong Kong, is a B2B retailer of office supplies • no physical stores and sells products through its online catalog • three types of customers: – large corporate clients – medium-sized corporate clients – small office/home offices (SOHO) • offers more than 10,000 items from 300 suppliers www.AuiSuKe.com 30
  31. 31. Example: BigBoxx (cont.) – The company’s portal is attractive and easy to use – Has a tutorial that instructs users on how to use the Web site – Once registered, the user can start shopping using the online shopping cart – Users can look for items by browsing through the online catalog or by searching the site with a search engine www.AuiSuKe.com 31
  32. 32. Example: BigBoxx (cont.) – Users can pay by cash or by check (upon delivery), via automatic bank drafts, by credit card, or by purchasing card. – Users will soon be able to pay through Internet-based direct debit, by electronic bill presentation and payment, or by Internet banking www.AuiSuKe.com 32
  33. 33. Example: BigBoxx (cont.) – Using its own trucks and warehouses, Bigboxx. com makes deliveries within 24 hours or even on the same day – Delivery is scheduled online www.AuiSuKe.com 33
  34. 34. Example: BigBoxx (cont.) – Value-added services for customers • check item availability in real time • track the status of each item in an order • promotions and suggested items based on customers’ user profiles • customized prices • control and central-approval features • automatic activation at desired time intervals of standing orders for repeat purchasing • a large number of Excel reports and data www.AuiSuKe.com 34
  35. 35. www.alibaba.com www.AuiSuKe.com 35
  36. 36. One-to-Many: Sell-Side Marketplaces (cont.) • Configuration and customization – customize products – get price quotes – submit orders www.AuiSuKe.com 36
  37. 37. One-to-Many: Sell-Side Marketplaces (cont.) • Major benefits of direct sales are: – Lower order-processing costs and less paperwork – A faster ordering cycle – Fewer errors in ordering and product configuration – Lower search costs of products for buyers – Lower search costs of finding buyers for sellers – Sellers can advertise and communicate online – Lower logistics costs – Ability to offer different catalogs and prices to different customers www.AuiSuKe.com 37
  38. 38. Selling via Auctions • Using auctions on the sell side – Revenue generation – Cost savings – Increased page views – Member acquisition and retention www.AuiSuKe.com 38
  39. 39. Selling via Auctions (cont.) • Selling from the company’s own site – The company will have to pay for infrastructure and operate and maintain the auction site – If then company already has an electronic marketplace for selling from e-catalogs, the additional cost may not be too high www.AuiSuKe.com 39
  40. 40. Selling via Auctions (cont.) • Using intermediaries – An intermediary may conduct private auctions for a seller, either from the intermediary’s or the seller’s site – A company may choose to conduct auctions in a public marketplace, using a third-party hosting company www.AuiSuKe.com 40
  41. 41. Using Intermediaries in Auctions (cont.) – Benefits of using intermediaries • no additional resources are required • auction set up to show the branding (company name) of the merchant rather than the intermediary’s name • intermediary does the work of: – controlling data on Web traffic, page views, and member registration – setting all the auction parameters (transaction fee structure, user interface, and reports) – integrating the information flow and logistics www.AuiSuKe.com 41
  42. 42. Sell-Side Cases • Direct sales: Cisco Systems – World’s leading producer of routers, switches, and network interconnection services – Cisco’s portal began with technical support for customers and developed into one of the world’s largest direct sales EC sites www.AuiSuKe.com 42
  43. 43. Sell-Side Cases (cont.) – Customer service • Applications offered: – software downloads – defect tracking – technical advice • 85% of customer service inquiries and 95% of software updates are delivered online – Online ordering by customers • Provides online pricing and configuration tools to customers • 98% are now placed through Cisco Connection Online (CCO) – Order status www.AuiSuKe.com 43
  44. 44. Sell-Side Cases (cont.) • Benefits – Reduced operating costs for order taking – Enhanced technical support and customer service – Reduced technical support staff cost – Reduced software distribution costs – Faster service www.AuiSuKe.com 44
  45. 45. Sell-Side Cases (cont.) • Sales through an intermediary: Marshall Industries (now Avnet.com) – large distributor of electronics components – known for its innovative use of information technologies and the Web www.AuiSuKe.com 45
  46. 46. Sell-Side Cases (cont.) • Marshall Industries EC initiatives – MarshallNet intranet that supports salespeople in the field via wireless devices and portable PCs – Marshall on the Internet (portal) B2B portal for customers that offers information, ordering, and tracking capabilities – Strategic European Internet strategic partner in Europe that offers MarshallNet in 17 languages www.AuiSuKe.com 46
  47. 47. Sell-Side Cases (cont.) • Marshal Industries – Electronic Design Center online configuration tool; provides technical specifications; offers simulation capabilities for making virtual components – PartnerNet customized Web pages for major customers and suppliers – NetSeminar Education and News Portal online training tool; brings suppliers and customers together for live interactions www.AuiSuKe.com 47
  48. 48. Sell-Side Cases (cont.) • B2B intermediary: Boeing’s parts marketplace – World’s largest maker of airplanes for commercial and military customers – Major goal of Boeing’s intermediary parts market, called PART is supporting customers’ maintenance needs as a customer service www.AuiSuKe.com 48
  49. 49. Sell-Side Cases (cont.) – Online strategy is to provide a single point of online access through which airlines (buyers) and the maintenance and parts providers (suppliers) can access data about the parts they need – Began using traditional EDI www.AuiSuKe.com 49
  50. 50. Sell-Side Cases (cont.) – 1996, Boeing introduced its PART page on the Internet – Customers around the world could • check parts availability and pricing • order parts • track order status – Less than a year later, about 50 percent of Boeing’s customers used PART for parts orders and customer service inquiries www.AuiSuKe.com 50
  51. 51. Sell-Side Cases (cont.) – Boeing OnLine Data (BOLD) enables mechanics and technicians at the airport to access the technical manuals they need for repairs – These manuals are now available in digital form, and mechanics and technicians can access them via wireline or wireless devices www.AuiSuKe.com 51
  52. 52. One-from-Many: Buy-Side 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 www.AuiSuKe.com 52
  53. 53. One-from-Many: Buy-Side Marketplaces and E-Procurement (cont.) • Procurement methods – Buy from manufacturers, wholesalers, or retailers from their catalogs, and possibly by negotiation – Buy from the catalog of an intermediary that aggregates sellers’ catalogs or buy at industrial malls – Buy from an internal buyer’s catalog in which company-approved vendors’ catalogs, including agreed upon prices, are aggregated www.AuiSuKe.com 53
  54. 54. One-from-Many: Buy-Side Marketplaces and E-Procurement (cont.) – Conduct bidding or tendering (a reverse auction) in a system where suppliers compete against each other – Buy at private or public auction sites in which the organization participates as one of the buyers – Join a group-purchasing system that aggregates participants’ demand, creating a large volume – Collaborate with suppliers to share information about sales and inventory, so as to reduce inventory and stock-outs and enhance just-in-time delivery www.AuiSuKe.com 54
  55. 55. One-from-Many: Buy-Side Marketplaces and E-Procurement (cont.) • Inefficiencies in traditional procurement management – Procurement management: The coordination of all the activities relating to purchasing goods and services needed to accomplish the mission of an organization – Maverick buying: Unplanned purchases of items needed quickly, often at non-pre- negotiated, higher prices www.AuiSuKe.com 55
  56. 56. One-from-Many: Buy-Side Marketplaces and E-Procurement (cont.) • e-procurement: The electronic acquisition of goods and services for organizations www.AuiSuKe.com 56
  57. 57. Benefits of E-Procurement • Benefits of e-procurement – Increasing the productivity of purchasing agents – Lowering purchase prices through product standardization and consolidation of purchases – Improving information flow and management www.AuiSuKe.com 57
  58. 58. Benefits of E-Procurement (cont.) – Minimizing the purchases made from noncontract vendors. Improving the payment process – Establishing efficient, collaborative supplier relations – Ensuring delivery on time, every time – Reducing the skill requirements and training needs of purchasing agents – Reducing the number of suppliers – Streamlining the purchasing process, making it simple and fast www.AuiSuKe.com 58
  59. 59. Benefits of E-Procurement (cont.) – Reducing the administrative processing cost per order – Improved sourcing – Integrating the procurement process with budgetary control in an efficient and effective way – Minimizing human errors in the buying or shipping process – Monitoring and regulating buying behavior www.AuiSuKe.com 59
  60. 60. One-from-Many: Buy-Side Marketplaces and E-Procurement (cont.) www.AuiSuKe.com 60
  61. 61. www.AuiSuKe.com 61
  62. 62. Implementing E-Procurement • Implementing e-procurement—major e- procurement implementation issues – Fitting e-procurement into the company EC strategy – Reviewing and changing the procurement process itself – Providing interfaces between e-procurement with integrated enterprisewide information systems such as ERP or supply chain management (SCM) www.AuiSuKe.com 62
  63. 63. Implementing E-Procurement (cont.) – Coordinating the buyer’s information system with that of the sellers; sellers have many potential buyers – Consolidating the number of regular suppliers to a minimum and assuring integration with their information systems, and if possible with their business processes www.AuiSuKe.com 63
  64. 64. Buy-Side E-Marketplaces: Reverse Auctions • One of the major methods of e-procurement is through reverse auctions (tendering or bidding model) request for quote (RFQ): The “invitation” to participate in a tendering (bidding) system • The reverse auction method is the most common model for large MRO purchases as it provides considerable savings www.AuiSuKe.com 64
  65. 65. Reverse Auctions (cont.) • Conducting reverse auctions – Thousands of companies use the reverse auction model – They may be administered from a company’s Web site or from an intermediary’s site – The bidding process may last a day or more – Bidders may bid only once, but bidders can usually view the lowest bid and rebid several times www.AuiSuKe.com 65
  66. 66. Reverse Auctions A Pioneer: General Electric’s TPN • Procurement revolution at GE—Trading Process Network (TPN) Post – With this online system, the sourcing department received the requisitions electronically from its internal customers and sent off a bid package to suppliers around the world via the Internet – The system automatically pulled the correct drawings and attached them to the electronic requisition forms www.AuiSuKe.com 66
  67. 67. Reverse Auctions A Pioneer: General Electric’s TPN (cont.) Benefits of TPN • labor involved in the procurement process declined by 30% • cut by 50% staff involved in the procurement process and redeployed those workers into other jobs • reduced the number of days to complete a contract by half • invoices were automatically reconciled with purchase orders • procurement departments around the world were able to share information about their best suppliers www.AuiSuKe.com 67
  68. 68. www.AuiSuKe.com 68
  69. 69. Reverse Auctions A Pioneer: General Electric’s TPN (cont.) – GXS Express Marketplaces is an expanded system that makes it a public posting place for other buyers • Suppliers gain instant access to global buyers • Dramatically improve the productivity of their bidding and sales activities • Increased sales volume • Expanded market reach and ability to find new buyers • Lower administration costs • Shorter requisition cycle time • Improved sales staff productivity • Streamlined bidding process www.AuiSuKe.com 69
  70. 70. Other E-Procurement Methods • Internal marketplace: The aggregated catalogs of all approved suppliers combined into a single internal electronic catalog www.AuiSuKe.com 70
  71. 71. Internal Marketplace (cont.) – Benefits of internal marketplaces • corporate buyers quickly find what they want, check availability and delivery times, and complete an electronic requisition form • reduce number of regular suppliers • easy financial controls www.AuiSuKe.com 71
  72. 72. Internal Marketplace: Desktop Purchasing • Desktop purchasing: Direct purchasing from internal marketplaces without the approval of supervisors and without intervention of a procurement department • Desktop purchasing systems: Software that automates and supports purchasing operations for nonpurchasing professionals and casual end users www.AuiSuKe.com 72
  73. 73. www.AuiSuKe.com 73
  74. 74. Other E-Procurement Methods (cont.) • Industrial malls – Distributors that aggregate products from hundreds or thousands of suppliers in one place • Horizontal—carrying MRO (nonproduction) materials for use in a variety of industries • Vertical—carrying products used by one industry but at various segments of the supply chain www.AuiSuKe.com 74
  75. 75. Other E-Procurement Methods (cont.) • E-auctions – sellers are increasingly motivated to sell surpluses and even regular products via auctions – e-auctions provide an opportunity to buyers to find inexpensive or unique items fairly quickly www.AuiSuKe.com 75
  76. 76. Other E-Procurement Methods (cont.) • Group purchasing: The aggregation of orders from several buyers into volume purchases so that better prices can be negotiated www.AuiSuKe.com 76
  77. 77. Other E-Procurement Methods (cont.) – Internal aggregation—companywide orders are aggregated using the Web and replenished automatically – External aggregation—provide SMEs with better prices, selection, and services by aggregating demand online and then either negotiating with suppliers or conducting reverse auctions www.AuiSuKe.com 77
  78. 78. Other E-Procurement Methods (cont.) www.AuiSuKe.com 78
  79. 79. Other E-Procurement Methods (cont.) • Purchasing direct goods E-purchasing direct goods allows buyers to: • get them faster • reduce the unit cost • reduce inventories • avoid shortages of materials • expedite their own production processes www.AuiSuKe.com 79
  80. 80. Other E-Procurement Methods (cont.) • Electronic bartering 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 www.AuiSuKe.com 80
  81. 81. Infrastructure for B2B • Major infrastructures needed for B2B marketplaces – Telecommunications networks and protocols – Server(s) for hosting the databases and the applications – Software for various activities for executing the sell-side activities, buy-side activities, PRM, and building a storefront – Security for hardware and software www.AuiSuKe.com 81
  82. 82. Other E-Procurement Methods (cont.) • Electronic data interchange (EDI): The electronic transfer of specially formatted standard business documents, such as bills, orders, and confirmations sent between business partners www.AuiSuKe.com 82
  83. 83. Other E-Procurement Methods (cont.) • Value-added networks (VANs): Private, third-party managed networks that add communications services and security to existing common carriers; used to implement traditional EDI systems www.AuiSuKe.com 83
  84. 84. Other E-Procurement Methods (cont.) • Internet-based (Web) EDI: EDI that runs on the Internet and is widely accessible to most companies, including SMEs www.AuiSuKe.com 84
  85. 85. Other E-Procurement Methods (cont.) • Integration – Integration with existing internal infrastructure and applications • EC applications of any kind need to be connected to the existing internal information systems – Integration with business partners • EC can be integrated more easily with internal systems than with external ones www.AuiSuKe.com 85
  86. 86. Other E-Procurement Methods (cont.) • The role of standards and XML in B2B integration XML (eXtensible Markup Language): Standard (and its variants) used to improve compatibility between the disparate systems of business partners by defining the meaning of data in business documents www.AuiSuKe.com 86
  87. 87. Other E-Procurement Methods (cont.) – XML can overcome EDI barriers for three reasons: 1. XML is a flexible language, therefore it expands the rigid ranges of EDI 2. Message content can be easily read and understood by people using standard browsers 3. XML-based technologies require less-specialized skills www.AuiSuKe.com 87
  88. 88. Other E-Procurement Methods (cont.) • Web services: An architecture enabling assembly of distributed applications from software services and tying them together www.AuiSuKe.com 88
  89. 89. Managerial Issues 1. Can we justify the cost of B2B applications? 2. Which vendor(s) should we select? 3. Which B2B model(s) should we use? 4. Should we restructure our procurement system? www.AuiSuKe.com 89
  90. 90. Managerial Issues (cont.) 5. What restructuring will be required for the shift to e-procurement? 6. What integration would be useful? 7. What are the ethical issues in B2B? 8. Will there be massive disintermediation? www.AuiSuKe.com 90
  91. 91. Summary 1. The B2B field: EC activities between businesses 2. The major B2B models: sell-side; buy- side; trade exchanges; collaborative commerce 3. The characteristics of sell-side marketplaces: online direct sale by one seller to many buyers www.AuiSuKe.com 91
  92. 92. Summary (cont.) 4. Sell-side intermediaries: provide value-added services to manufacturers and business customers 5. The characteristics of buy-side marketplaces and e-procurement: expedite purchasing, save on item and administrative costs, and gain better control over the purchasing process. www.AuiSuKe.com 92
  93. 93. Summary (cont.) 6. B2B reverse auctions: tendering system used by buyers to collect bids electronically from suppliers 7. B2B aggregation and group purchasing: increasing the exposure and the bargaining power of companies can be done by aggregating either the buyers or the sellers. www.AuiSuKe.com 93
  94. 94. Summary (cont.) 8. Infrastructure and standards in B2B: networks and protocols, multiple servers, application software, and security. 9. Web-based EDI, XML, and Web services: connectivity of B2B is facilitated by Web services. www.AuiSuKe.com 94
  95. 95. Public B2B Exchanges and Portals
  96. 96. Learning Objectives 1. Define e-marketplaces and exchanges and describe their major types. 2. Describe the various ownership and revenue models of exchanges. 3. Describe B2B portals. 4. Describe third-party exchanges. www.AuiSuKe.com 96
  97. 97. Learning Objectives (cont.) 5. Distinguish between purchasing (procurement) and selling consortia. 6. Define dynamic trading and describe B2B auctions. 7. Describe the operation and benefits of networks of exchanges. 8. Discuss exchange management. www.AuiSuKe.com 97
  98. 98. Learning Objectives (cont.) 9. Describe the critical success factors of exchanges. 10. Discuss implementation issues of e-marketplaces and exchanges. 9. Describe the major support services of B2B. 10. Describe the role of extranets in supporting marketplaces and exchanges. www.AuiSuKe.com 98
  99. 99. B2B Electronic Exchanges • Public e-marketplaces (public exchanges): Trading venues open to all interested parties (sellers and buyers) and usually run by third parties • Exchange: A many-to-many e-marketplace. Also known as e-marketplaces, e-markets, and trading exchanges www.AuiSuKe.com 99
  100. 100. B2B Electronic Exchanges (cont.) • Market maker: The third-party that operates an exchange (and in many cases, also owns the exchange) • Systematic sourcing: Purchasing done in long-term supplier–buyer relationships • Spot sourcing: Unplanned purchases made as the need arises www.AuiSuKe.com 100
  101. 101. www.AuiSuKe.com 101
  102. 102. www.AuiSuKe.com 102
  103. 103. B2B Electronic Exchanges (cont.) • Vertical exchange: An exchange whose members are in one industry or industry segment • Horizontal exchanges: Exchanges that handle materials used by companies in different industries www.AuiSuKe.com 103
  104. 104. B2B Electronic Exchanges (cont.) • Dynamic pricing: A rapid movement of prices over time, and possibly across customers, as a result of supply and demand www.AuiSuKe.com 104
  105. 105. B2B Electronic Exchanges (cont.) • Process that results in dynamic pricing in most exchanges includes 1. A company posts a bid to buy a product or an offer to sell one 2. Anonymity is often a key ingredient of dynamic pricing 3. Buyers and sellers interact with bids and offers in real time 4. A deal is struck when there is an exact match between a buyer and a seller on price, volume, and other variables such as location or quality 5. The deal is consummated, and payment and delivery are arranged www.AuiSuKe.com 105
  106. 106. B2B Electronic Exchanges (cont.) • Functions of exchanges – Matching buyers and sellers – Facilitating transactions – Maintaining exchange policies and infrastructure www.AuiSuKe.com 106
  107. 107. www.AuiSuKe.com 107
  108. 108. B2B Electronic Exchanges (cont.) • Ownership of exchanges – An industry giant – A neutral entrepreneur – The consortia (or ―third-party‖ co-op) www.AuiSuKe.com 108
  109. 109. B2B Electronic Exchanges (cont.) • Revenue models – Transaction fees – Fee for service – Membership fees – Advertising fees – Other revenue sources www.AuiSuKe.com 109
  110. 110. B2B Electronic Exchanges (cont.) • Governance and organization – Membership the community in the exchange – Site access and security information should be carefully protected – Services provided by exchanges provide many services to buyers and sellers www.AuiSuKe.com 110
  111. 111. www.AuiSuKe.com 111
  112. 112. www.AuiSuKe.com 112
  113. 113. B2B Portals • B2B portals: Information portals for businesses • Pure information portals include: – directories of products offered by each seller – lists of buyers and what they want – other industry or general information www.AuiSuKe.com 113
  114. 114. B2B Portals (cont.) • Vortals: B2B portals that focus on a single industry or industry segment; ―vertical portals‖ www.AuiSuKe.com 114
  115. 115. B2B Portal Examples • Thomas Register—information portal – Sellers distribute information on what they have to sell – Buyers can find what they need and purchase over a comprehensive and secure procurement channel • reduce costs • shrink cycle times • improve productivity www.AuiSuKe.com 115
  116. 116. B2B Portal Examples (cont.) • Alibaba.com—started as a pure information portal and is moving toward becoming a trading exchange – Huge database is a horizontal information portal with offerings in a wide variety of product categories – Reverse auctions – Features–free email, email alerts, etc – Revenue model—advertisement and fees for special www.AuiSuKe.com 116
  117. 117. www.alibaba.com www.AuiSuKe.com 117
  118. 118. Sanook.com www.AuiSuKe.com 118
  119. 119. www.bangkok.com www.AuiSuKe.com 119
  120. 120. Third Party (Trading) Exchanges • Third-party exchanges are characterized by two contradicting properties – they are neutral, not favoring either sellers or buyers – they do not have a built-in constituency of sellers or buyers and sometimes have a problem attracting enough buyers and sellers to attain financial viability www.AuiSuKe.com 120
  121. 121. Third Party (Trading) Exchanges (cont.) • A major problem is: Market liquidity: The degree to which something can be bought or sold in a marketplace without affecting its price www.AuiSuKe.com 121
  122. 122. Third Party (Trading) Exchanges (cont.) www.AuiSuKe.com 122
  123. 123. Third Party (Trading) Exchanges (cont.) • Buyer aggregation model buyers’ RFQs are aggregated and then linked to a pool of suppliers that are automatically notified of the RFQs • Suitability – aggregation models work best with MROs and services that are well defined, that have stable prices, and where the supplier or buyer base is fragmented www.AuiSuKe.com 123
  124. 124. Third Party (Trading) Exchanges (cont.) www.AuiSuKe.com 124
  125. 125. Consortium Trading Exchanges • Consortium trading exchange (CTE): An exchange formed and operated by a group of major companies to provide industrywide transaction services • Three basic types of environments: 1. Fragmented markets 2. Seller-concentrated markets 3. Buyer-concentrated markets www.AuiSuKe.com 125
  126. 126. Consortium Trading Exchanges (cont.) • CTEs, defined by two main criteria: – whether they focus on buying or selling – whether they are vertical or horizontal • 4 types of CTEs 1. Purchasing oriented, vertical 2. Purchasing oriented, horizontal 3. Selling oriented, vertical 4. Selling oriented, horizontal www.AuiSuKe.com 126
  127. 127. Consortium Trading Exchanges (cont.) • Purchasing-oriented consortia – Vertical Purchasing-Oriented CTEs all the players are in the same industry – Horizontal Purchasing-Oriented CTEs owner-operators are large companies from different industries that unite for the purpose of improving the supply chain of MROs used by most industries www.AuiSuKe.com 127
  128. 128. Consortium Trading Exchanges (cont.) • Selling-oriented consortia – Most selling-oriented consortia are vertical – Participating sellers have thousands of potential buyers within a particular industry www.AuiSuKe.com 128
  129. 129. Consortium Trading Exchanges (cont.) • Other issues for consortia – Legal challenges for B2B consortia • level of collaboration among both competitors and business partners • antitrust and other competition laws must be considered www.AuiSuKe.com 129
  130. 130. Consortium Trading Exchanges (cont.) – Critical success factors for consortia • Appropriate business and revenue models • Size of the industry • Ability to drive user adoption • Elasticity Elasticity: The measure of the incremental spending by buyers as a result of the savings generated www.AuiSuKe.com 130
  131. 131. Consortium Trading Exchanges (cont.) • Management of intensive information flow • Smoothing of supply chain inefficiencies • Harmonized shared objectives – Combining consortia and third-party exchanges • dot-consortia—large consortia + third-party owner • combination may bring about the advantage of both ownership and minimizing third-party limitations such as low liquidity www.AuiSuKe.com 131
  132. 132. Dynamic Trading: Matching and Auctions • Dynamic trading: Exchange trading that occurs in situations when prices are being determined by supply and demand (e.g., in auctions) • Matching – supply and demand – quantity, delivery times, and locations www.AuiSuKe.com 132
  133. 133. Dynamic Trading: Matching and Auctions (cont.) • Auctions – Exchanges offer members the ability to conduct auctions or reverse auctions in private trading rooms • auction services as one of its many activities • fully dedicated to auctions – Many-to-many public auctions— vertical, horizontal, run on the Internet or over private lines www.AuiSuKe.com 133
  134. 134. Building E-Marketplaces • Building e-marketplaces is a complex process – usually performed by a major B2B software company • Commerce One • Ariba • Oracle • IBM www.AuiSuKe.com 134
  135. 135. Building E-Marketplaces (cont.) • Integration issue – Seamless integration is needed between the third-party exchange and the participants’ front and back-office systems – In private exchanges the seller’s computing system must be integrated with the customers systems www.AuiSuKe.com 135
  136. 136. Building E-Marketplaces (cont.) – External communications • Web/client access • Data exchange • Direct application integration • Shared procedures – Process and information coordination in integration how to coordinate external communications with internal information systems www.AuiSuKe.com 136
  137. 137. Building E-Marketplaces (cont.) – Use of Web services in integration Web Services enable different Web-based systems to communicate with each other using Internet-based protocols such as XML – System and information management in integration management of software, hardware, and several information components, including partner-profile information, data and process definitions, communications and security settings, and users’ information www.AuiSuKe.com 137
  138. 138. Support Services for Public and Private Marketplaces • Directory services and search engines – Directory services help buyers and sellers manage the task of finding potential partners www.AuiSuKe.com 138
  139. 139. Support Services for Public and Private Marketplaces (cont.) • Partner relationship management (PRM): Business strategy that focuses on providing comprehensive quality service to business partners • E-communities and PRM B2B application needs to provide community services such as chat rooms, bulletin boards, and possibly personalized Web pages www.AuiSuKe.com 139
  140. 140. Support Services for Public and Private Marketplaces (cont.) • Integration (as per Keenan Report) – Business-to-exchange (B2X) hubs connect all of the Internet business services • e-merchant services • exchange infrastructure • buying and selling • member enterprises • other B2X exchanges www.AuiSuKe.com 140
  141. 141. Implementation Issues • Private vs. public exchanges Private exchanges: E-marketplaces that are owned and operated by one company. Also known as company-centric marketplaces www.AuiSuKe.com 141
  142. 142. Implementation Issues (cont.) • Problems with private exchanges – Transaction fees—required to pay transaction fees with existing customers – Sharing information—do not want to share business data with competitors – Cost savings—not great enough to attract buyers – Recruiting suppliers—lose direct contact with customers – Too many exchanges www.AuiSuKe.com 142
  143. 143. Implementation Issues (cont.) • Supply chain improvers – Companies want to streamline their internal supply chains, which requires integration with internal operations instead of ―plugging in‖ to an exchange’s infrastructure • Major problem is trust in the large corporation running the exchange www.AuiSuKe.com 143
  144. 144. Implementation Issues (cont.) • Software agents in B2B enable customized syndication of content and services from multiple sources on the Internet to any device connected to the Internet – provide real-time, tighter integration between buyers and sellers – facilitate management of multiple trading partners and their transactions across multiple virtual industry exchanges www.AuiSuKe.com 144
  145. 145. Example: Asite • Asite’s B2B marketplace for the construction industry – B2B e-marketplace for the construction industry in the United Kingdom – This industry is typified by a high degree of physical separation and fragmentation, and communication among the members of the supply chain is a primary problem www.AuiSuKe.com 145
  146. 146. Asite (cont.) – Two of the major advantages of the Internet: • ability it provides to communicate more effectively • increased processing power made possible by Internet technologies – Asite decided not to build its own technology, but to establish partnerships with technology vendors that have highly specialized products www.AuiSuKe.com 146
  147. 147. Asite (cont.) • Commerce One provides the business solution for the portal • Microsoft provides the technology platform and core applications • Attenda is the designer and manager of the Internet infrastructure – Asite is committed to strong partnerships that allow it to seamlessly interact with other e- marketplaces www.AuiSuKe.com 147
  148. 148. Asite (cont.) – Internet browser is all that is needed to connect to Asite’s portal – Ease of access makes it particularly well suited to an industry such as construction • Construction firms streamline their supply chains www.AuiSuKe.com 148
  149. 149. Asite (cont.) www.AuiSuKe.com 149
  150. 150. Managing Exchanges • Open standards mean that the technology can be incorporated easily with participating firms’ back-end technologies, allowing full visibility of the supply and demand chains www.AuiSuKe.com 150
  151. 151. Managing Exchanges (cont.) • Networks of exchanges (E2E) – Large corporations may work with several exchanges, and they would like these exchanges to be connected in a seamless fashion Commerce One and Ariba developed a strategy that allows them to plug a broad range of horizontal exchanges into their main networks www.AuiSuKe.com 151
  152. 152. Managing Exchanges (cont.) www.AuiSuKe.com 152
  153. 153. Managing Exchanges (cont.) • Centralized management – Managing exchanges and providing services to participants on an individual basis is expensive – Build ―families‖ of exchanges managed jointly in order to operate several exchanges from a unified, centralized place www.AuiSuKe.com 153
  154. 154. Managing Exchanges (cont.) – Manages all of the exchanges’: • Catalogs • Auction places • Discussion forums – Managing and centralizing: • Accounting • Finance • Human resources • IT services www.AuiSuKe.com 154
  155. 155. Managing Exchanges (cont.) • Critical success factors for exchanges according to Ramsdell: 1. Early liquidity 2. The right owners 3. The right governance 4. Openness 5. A full range of services www.AuiSuKe.com 155
  156. 156. Managing Exchanges (cont.) • Other CSF: – Importance of domain expertise – Targeting inefficient industry processes – Targeting the right industries – Brand building – Exploiting economies of scope – Choice of business/revenue models – Blending content, community, and commerce – Managing channel conflict www.AuiSuKe.com 156
  157. 157. Managing Exchanges (cont.) • New directions in B2B marketplaces – Early failures of exchanges were due mainly to the failure of these marketplaces to foster a broad-based sharing of information – Recognize the fundamental asset provided by their member base is the unique knowledge of the industry www.AuiSuKe.com 157
  158. 158. Managing Exchanges (cont.) – e-distributors • Take title to the goods they sell • Aggregate those goods for the convenience of buyers • Advise buyers which to choose • Reach hard-to-find buyers • Result in extra value for buyers and decent profits for sellers www.AuiSuKe.com 158
  159. 159. Managerial Issues 1. Have we ―done our homework‖? 2. Can we use the Internet? 3. Which exchange to join? 4. Will joining an exchange force restructuring? 5. Will we face channel conflicts? 6. What are the benefits and risks of joining an exchange? www.AuiSuKe.com 159
  160. 160. Summary 1. E-marketplaces and exchanges defined and the major types of exchanges. 2. Ownership and revenue models. 3. B2B portals. 4. Third-party exchanges. 5. Consortia and e-procurement. 6. Dynamic pricing and trading. www.AuiSuKe.com 160

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