Chapter 5

B2B E-Commerce

Learning Objectives
1.
2.
3.
4.
5.
6.

Describe the B2B field.

Describe the major types of B2B models.
Discuss the characteristics of the sell-side marketplace,
including auctions.
Describe the sell-side models.
Describe the characteristics of the buy-side marketplace
and e-procurement.
Explain how reverse auctions work in B2B.

Learning Objectives
7.

Describe B2B aggregation and group purchasing

models.
8. Describe other procurement methods.
9. Define exchanges and describe their major types.
10. Describe B2B portals.
11. Describe third-party exchanges.
12. Describe partner relationship management (PRM).

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.

Concepts, Characteristics, and Models of B2B

Concepts, Characteristics, and Models of B2B

The Basic Types Of B2B Transactions And
Activities

Sell-side
Buy-side
Exchanges
Supply chain improvements and collaborative
commerce

Concepts, Characteristics, and Models of B2B

Concepts, Characteristics, and Models of B2B

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 companys buying needs
(many-to-one, or buy-side) or selling needs (one-to-many, or sellside).
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.

Concepts, Characteristics, and Models of B2B

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

Concepts, Characteristics, and Models of B2B

B2B CHARACTERISTICS

Parties to the Transaction: Sellers, Buyers, and

Intermediaries
online intermediary
An online third party that brokers a transaction online
between a buyer and a seller; may be virtual or click-andmortar.

Concepts, Characteristics, and Models of B2B

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.

Concepts, Characteristics, and Models of B2B

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)
Indirect materials used in activities that support production.

Concepts, Characteristics, and Models of B2B

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).

Concepts, Characteristics, and Models of B2B

SUPPLY CHAIN RELATIONSHIPS IN B2B
VIRTUAL SERVICE INDUSTRIES IN B2B
THE BENEFITS OF B2B

One-to-Many: Sell-side E-Marketplaces

SELL-SIDE MODELS AND ACTIVITIES

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

One-to-Many: Sell-side E-Marketplaces

One-to-Many: Sell-side E-Marketplaces

DIRECT SALES FROM CATALOGS

Configuration and Customization

Benefits and Limitations of Direct Sales from
Catalogs

DIRECT SALES: THE EXAMPLE OF CISCO

SYSTEMS

Selling Via
Intermediaries and Distributors
Manufacturers frequently use intermediaries to
distribute their products to a large number of
buyers.
The intermediaries (known as distributors)
usually buy products from many vendors and
aggregate them into one catalog from which
they sell.

Selling Via Auctions

USING AUCTIONS ON THE SELL SIDE

Revenue generation
Cost savings
Increased stickiness
Member acquisition and retention

Selling Via Auctions

AUCTIONING FROM THE COMPANYS
OWN SITE
USING INTERMEDIARIES IN AUCTIONS
EXAMPLES OF B2B FORWARD AUCTION

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.

One-from-Many: Buy-Side
E-Marketplaces and E-Procurement
PROCUREMENT METHODS

e-sourcing
e-tendering
e-reverse auctioning
e-informing
Web-based ERP (electronic resource planning)
e-MRO (maintenance, repair, and operating)

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 organizations mission.
maverick buying
Unplanned purchases of items needed quickly, often at higher
prices, not pre-negotiated.

One-from-Many: Buy-Side
E-Marketplaces and E-Procurement
THE GOALS AND BENEFITS OF EPROCUREMENT

e-procurement
The electronic acquisition of goods and services for
organizations.

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

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

Buy-Side E-Marketplaces: Reverse Auctions

request for quote (RFQ)
The invitation to participate in a tendering
(bidding) system.
CONDUCTING REVERSE AUCTIONS
E-Tendering by Governments

GROUP REVERSE AUCTIONS

Buy-Side E-Marketplaces: Reverse

Auctions

Other E-Procurement Methods

internal procurement marketplace
The aggregated catalogs of all approved suppliers
combined into a single internal electronic catalog.

Benefits of Internal Marketplaces

desktop purchasing
Direct purchasing from internal marketplaces without the
approval of supervisors and without the intervention of a
procurement department.

Other E-Procurement Methods

BUYING AT E-AUCTIONS

group purchasing
The aggregation of orders from several buyers into
volume purchases so that better prices can be
negotiated.
Internal Aggregation
External Aggregation

Other E-Procurement Methods

Other E-Procurement Methods

BUYING FROM E-DISTRIBUTORS
PURCHASING DIRECT GOODS
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.

B2B Electronic Exchanges: Definitions

and Concepts

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.
FUNCTIONS OF EXCHANGES
Matching buyers and sellers
Facilitating transactions
Maintaining exchange policies and infrastructure

B2B Electronic Exchanges: Definitions

and Concepts

B2B Electronic Exchanges: Definitions and

Concepts
Revenue Models of Exchanges

Transaction fees
Fee for service
Membership fees
Advertising fees
Other revenue sources

B2B portals
Information portals for businesses.
vortals
B2B portals that focus on a single industry or industry
segment; vertical portals.

B2B Portals, Directories, and Trading

Exchanges
THIRD-PARTY AND DIRECTORIES
EXCHANGES

consortium trading exchange (CTE)

An exchange formed and operated by a group of major
companies in an industry to provide industry-wide
transaction services.

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

Managerial Issues
1.
2.
3.
4.
5.
6.
7.
8.
9.

Can we justify the cost of B2B applications?

Which vendor(s) should we select?
Which B2B model(s) should we use?
What are the ethical issues in B2B?
Will there be massive disintermediation?
How can trust and loyalty be cultivated in B2B?
Will joining an exchange force restructuring?
Which exchange to join?
What are the benefits and risks of joining an
exchange?

Summary
1.
2.
3.
4.
5.

The B2B field.

The major B2B models.
The characteristics of sell-side marketplaces.
Sell-side intermediaries.
The characteristics of buy-side marketplaces and eprocurement.
6. B2B reverse auctions.

Summary
7. B2B aggregation and group purchasing.
8. Other procurement methods.
9. E-marketplaces and exchanges defined and the major
types of exchanges.
10. B2B portals.
11. Third-party exchanges.
12. Good relationship with business partners is critical to
the success of B2B.