E-Business and E-Commerce

B2B E-Commerce
B2B E-commerce
• Transactions among businesses, facilitated by use of technology

• Business relationships were earlier limited by cost, geo-location, and

time

• E-commerce promotes relationships, helps restructure supply chains,

and improve efficiency, speed and quality of operations
B2B EC Typologies
B2B Transactions and Activities
• Five basic B2B transaction activity types based on:
• Number of sellers and buyers
• Form of participation used in B2B

• Sell-side: One seller to many buyers

• Buy-side: One buyer from many sellers
• Marketplaces or exchanges: Many sellers to many buyers
• Supply chain improvements and Collaborative commerce
Types of B2B E-Marketplaces and Services
• One-to-many and Many-to-one: Private marketplaces

• Many-to-Many: Public exchanges (or E-Marketplaces)

• Supply Chain Improvers and Collaborative Commerce

Private E-Marketplaces (1-to-M and M-to-1)
• One company does either all the selling (sell-side market) or all the
buying (buy-side market)

• Also called company-centric EC → since it is focused on a single

company’s buying or selling needs
Public Exchanges / E-Marketplaces (M-to-M)
• Many buyers and many sellers meet electronically to trade with one
another

• Different types of e-marketplaces:

• Trading communities
• Trading exchanges

• Exchanges are usually marketplaces owned and run by a third party or

by a consortium
• Public e-marketplaces are open to all interested parties (Ex – Alibaba)
Supply Chain Improvers
• B2B transactions are conducted frequently along segments of SC

• B2B initiatives need to be examined in light of other SC activities such

as –
• Procurement of raw materials
• Fulfilling orders
• Shipments
• Logistics
Collaborative Commerce
• Businesses deal with other businesses for purposes beyond just
selling or buying

• One example is that of collaborative commerce

• This includes communication, joint design, planning, and information

sharing among business partners
B2B E-commerce
• B2B Internet-enabled technologies

• Private industrial networks (private exchanges)

• Net marketplaces and exchanges

• Exchanges are websites where many buyers and sellers conduct

business transactions
B2B Private Industrial Network
• Also known as private exchange
• Links firm with suppliers,
distributors and other key
business partners
• Efficient SC management
• Collaborative commerce
activities

•Extranet is one way

http://www.vwgroupsupply.com/
B2B Net Marketplace
• Online marketplaces where
multiple buyers can purchase
from multiple sellers

• https://www.exostar.com/industr
y/aerospace-defense/
16000+ trading partners use
Exostar’s sourcing, e-procurement
and collaboration tools
B2B Model based on
Connectivity and
Purpose
B2B Components
Components of B2B E-Commerce
Parties to the transaction: Sellers, Buyers,
Intermediaries
• B2B commerce can be conducted:
• Directly between a customer and a manufacturer OR
• Can be conducted via an online intermediary

• Online intermediary is a 3rd party entity that brokers the transactions

between the buyer and the seller → can be either virtual or click-and-
mortar

• Some electronic intermediaries can also be used for B2B →

Aggregations of buyers or sellers are typical B2B activities conducted
by intermediaries
Types of Materials Traded: What Do Firms Buy?
• Two major types of materials and supplies are traded in B2B markets:
• Direct
• Indirect

• Direct materials are materials used in making products (steel in a car)

• Indirect materials are items (such as office supplies or light bulbs)

which support operation and production
• Normally are used in maintenance, repair, and operation (MRO)
• Also called non-production materials
B2B Marketplaces and Platforms
• B2B marketplaces are classified as vertical or horizontal

• Vertical marketplaces are those for one particular industry or

industry segment

• Horizontal marketplaces are those in which trading is in a service or a

product that is used in many types of industries
Summary of B2B Characteristics
Benefits of B2B EC
Benefits
• Lowering of administrative costs

• Lower search costs for buyers

• Reduction of inventory costs → increased price transparency

increases competition among suppliers

• Lowering of transaction costs → elimination of paper work;

automation of parts of the procurement process
Benefits
• Increased production flexibility → JIT delivery of parts

• Improved quality of products → due to increased co-operation

• More opportunities for collaboration between suppliers and distributors

• Greater price transparency → see actual buy & sell prices in the market

• Increased visibility and real-time information sharing in the supply chain

Challenges in B2B Context
Challenges
• Real-world supply chains fail to provide visibility
• Lack of data on real-time demand, production & logistics
• Inadequate financial data on suppliers

• Risks of supplier failure and supply chain disruption

• B2B supply chain builders have little concern for environmental

impacts
B2B E-Commerce Ecosystem
Challenge Description
Highly technical barriers B2B EC ecosystem is highly fragmented → fewer companies due to requirement of
to market entry domain expertise, detailed knowledge of product features and specifications
Lack of robust technology Likely to be using standalone systems for – handling inventory & orders
integration Integrating existing systems with B2B EC is critical → usually not implemented
efficiently
High costs associated with Delivering orders quickly & efficiently depends on size, scale & location
complex logistics Demands use of specialist freight services → increases cost considerably
fulfilment
Long customer acquisition Impulse purchase less likely; Bulk nature of orders; Slow decision-making
process processes due to multiple levels of stakeholders
Rigid procurement Stringent procurement & approval processes for bulk buying → restricts
processes in large procurement teams from buying on B2B EC platforms
corporates
Lack of level-playing field
B2B Platform Owners
Challenge Description

Unorganized 95% of B2B market is dominated by local vendors / mom & pop shops
Lack of education & familiarity with Internet use → lack of access to buyers
Small sellers unable to scale up & compete with big producers
No way of providing critical feedback to small sellers for improving operations

Preference for credit In offline B2B transactions – credit is preferred mode of payment historically
Payment in offline trade is made 30 days after receipt of goods
B2B EC will force upfront payment → At the most COD might be accepted

Nomination for PSEs Current lack of transparent and efficient competitive bidding route to choose PSEs
Restricts public sector entity / public exchequer from getting the best options for
service providers
B2B Trends
Business Trends
• Significant disruptions in SC → further digitization of B2B sales

• E-distributors adopting similar marketing and sales techniques as

successful B2C EC companies such as Amazon

• Net marketplaces bring 100s of suppliers and 1000s of buying firms

• SAP Ariba has over 4.6 million connected businesses
• Transaction value of $3 trillion a year
Business Trends
• Increased focus on SC risk management due to natural and man-
made disasters

• Rise of regional manufacturing → moving production closer to

market demand

• Growing focus on flexibility → rapid-response and adaptive SC rather

than lowest cost SC
Business Trends
• Supply chain visibility is increasing due to growing use of real-time
data → managers can see across their own production as well as into
the production and financial condition of key suppliers

• Social and mobile commerce is also rising in B2B space → emphasis

on customer intimacy
Technology trends
• Big Data → huge repositories of B2B data generated by global trade
and logistics systems

• Business analytics → BI tools to understand large data sets +

predictive analytics to identify most profitable customers

• Cloud → migration of legacy B2B hardware and software

Technology trends
• Mobile platform → mobile version of B2B systems such as CRM,
SCM, and Enterprise / ERP

• Social networks → customer feedback; strengthening relationships

with customers & suppliers; adjusting prices and orders

• IoT → growing number of sensors / intelligent devices to measure

and monitor data

• Blockchain → Trust in supply chain and logistics

Inter-Organizational Systems
Value Chain

Firm Infra
Human
Resource
Technology
Development
Procurement

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales
Value Linkage

Firm Infra

HRM
Technology
Development

Procurement

Inbound Outbound Marketing

Operations Service
Logistics Logistics and Sales
Value System

Firm Infrastructure Firm Infrastructure Firm Infrastructure

Human Resource Development Human Resource Development Human Resource Development
Technology Development Technology Development Technology Development
Procurement Procurement Procurement

Oper Servi Oper Servi Oper Servi

IBL OBL Mktg IBL OBL Mktg IBL OBL Mktg
ations ce ations ce ations ce

SUPPLIER FIRM BUYER

Linkages in value systems
• Create interdependence – suppliers and channels

• Competitive advantage – optimizing or co-ordinating value system

linkages

• JIT (just-in-time) deliveries

Value System Linkages

Firm Infrastructure Firm Infrastructure Firm Infrastructure

Human Resource Development Human Resource Development Human Resource Development
Technology Development Technology Development Technology Development
Procurement Procurement Procurement
Oper Servi
Oper Servi Opera Servi IBL OBL Mktg
IBL OBL Mktg IBL OBL Mktg ations ce
ations ce tions ce

SUPPLIER FIRM CUSTOMER

Types of linkages
• Optimization linkages
• Reflect trade-offs among activities to achieve the same overall result
• More costly product design → greater in-process inspection → reduction
in service costs

• Co-ordination linkages
• Facilitate on-time delivery by co-ordination between operations,
outbound logistics, and service
• Better co-ordination → reduced inventory throughout the firm → cost
reduction and / or enhanced differentiation
Overview
• IOS are at the core of B2B E-commerce → have evolved since 1960s

• IOS have evolved concurrently with evolution of organizational forms

1. Vertically Integrated Firms

2. Firms with outsourcing partners – Selective Sourcing
3. Virtual – Networked Organization
Reasons for the rise of IOS
• Need to exchange information quickly and reliably in response to
rapidly changing markets, products and services
• Increasing global competition
• Increasing de-regulation across many countries
• Decreasing geographical separation due to expanding markets

• Evolution of guidelines, standards and protocols particularly in

respect of IT – developed by governments and industry associations
Reasons for the rise of IOS
• Penetration of IT into the internal business processes of firms

• Technical quality, capability, and reliability of IT

• Increasing application of IT to achieve cost advantages and higher

degree of differentiation
Basic types of firms in B2B environment
• Initiator and Participant

• For Initiator firm, priorities of considerations are:

• Strategy and Structure
• Changes in skill levels and staff
• Business processes

• For Participant firm,

• Business processes
• Employee skill sets, even new categories of staff
• Strategy and Structure
Interactions among IOS participants
One-to-One
• Key customers
• Customer with very distinct requirements from the Initiator
• Initial stages of a particular e-commerce initiative

One-to-Many
• Standard products and services to participant organizations
• Fairly mature stage of the IOS
Interactions among IOS participants
Many-to-Many
• Mature stage of the IOS
• Recognition by the Initiator that the functionality can be enhanced by
connecting both downstream and upstream participants, with the Initiator in
control of the electronic marketplace
• Electronic marketplaces by coalitions of industry players or third-party
network operators
Levels of IOS Control – Data Control
• No information processing by the participant
• Participant just enters and receives data
• Data exchanges are normally two-way
• Data formats are rigidly controlled by the initiator(s)
• Switching costs are generally low for the user → To prevent switching,
initiator may specify high penalty clauses in the contract
• System is simple → no/low charges levied on the user
• Important for initiator to keep improving the system & improve value
added to user → in order to sustain the proprietary advantage
Levels of IOS Control – Process Control
• Initiator firms develop and maintain the business processes through
software + maintain & control information shared about them
• Advantages to firms investing in such process control activities:
• Access to crucial market information
• Access to critical activities required to design, produce, distribute & sell
• Heavy investments needed to develop & operate these process control
activities
• When participant firms invest and begin participating at the process
control level, IOS begins to become a strategic partnership model involving
the exchange of a broad range of services (ex – inventory mgmt.)
• Involves heavy ongoing co-ordination and control costs
• Often a separate specialized entity is established and spun off
Levels of IOS Control – Network Control
• Often, one or more participant firms own and / or manage the
network and concerned IT resources
• Involves ensuring security & integrity of the data transferred over the
network (be it private network or Internet)
• Cost and complexity increase very significantly
• Often, the responsibility for and control of the network is assumed by
technology firms
• But these firms may not be in control of data and business processes
• At this stage, initiator firms often diversify into a new business built
using their control over data and business processes
B2B Marketing: Sell-Side E- Marketplaces
Overview
• B2B Marketing refers to marketing by manufacturers and wholesalers
on the sell-side of the supply chain

• In a B2B sell-side e-marketplace, a business sells products and

services to business customers electronically
• Intel, Cisco, Dell
• One seller and many buyers
Overview
• Three major marketing models:

• Selling from electronic catalogs with fixed prices

• Selling via forward auctions

• One-to-one selling, usually under a negotiated long-term contract

Sales from Catalogs: Webstores
• Using Internet to sell directly from their online catalog
• One catalog for all
• Customized catalog for each large customer

• Example – Staples (office supply vendor) offers business customers

customized catalog of 1,00,000 products at different pricing schemes

• Webstore may be one of multiple channels for a company

• May face challenges similar to B2C sellers (ex – channel conflict)

Distributors’ Catalogs
• Webstores used by distributors rather than manufacturers

• B2B distributors are similar to B2C retailers

• Example – Stonewheel distributes 1,00,000 different auto parts from

15 warehouses serving over 3500 independent repair shops
Self-Service Portals
• Enables business partners to conduct self-service

• Whirlpool → global manufacturer of home appliances

• Highly competitive market → needs to operate efficiently
• Needs to collaborate with partners in sell-side of supply chain
• Small retailers entered orders manually → slow, costly, error-prone

• Whirpool B2B Trading Partner Portal

• Developed for small retailers
• Enables them to self-order → reduces transaction costs considerably
Comprehensive sell-side systems
• Sell-side systems must provide several essential functionalities

• Should enable B2B vendors to:

• Execute sales efficiently
• Provide outstanding customer service
• Allow integration with existing IT systems
• Provide integration with non-Internet sales systems

• Example – Sterling Commerce (an IBM company)

Selling via distributors and other intermediaries
• Manufacturers use intermediaries to distribute their products to a large
number of smaller buyers

• Intermediaries buy products from many manufacturers & aggregate those

products into one catalog from which they sell to customers or to retailers

• Ex – Sam’s Club, W.W. Grainger, Boeing PART page

• Amazon Business provides services to different types of sellers as well as a

marketplace
Selling via E-Auctions
Forward auctions
• Many companies use forward auctions to liquidate their surplus
products or capital assets

• Items are usually displayed on an auction site for quick clearance

• Can be conducted in two ways:

• Auctioning from company’s own website
• Auctioning from an intermediary auction site (Ebay)
Benefits of forward auctions
• Revenue generation – support & expand online and overall sales

• Cost savings – reduces costs of selling auctioned items

• Increased stickiness – potential buyers stay there longer

• Member acquisition and retention – registered members of auctions

can invite their business contacts + auction software enables sellers
to search and report on virtually every relevant auction activity