B2B E-Commerce

B2B E-commerce
Copyright © 2020, 2019, 2018 Pearson Education, Inc. All Rights Reserved
WWW
https://www.youtube.com/watch?v=GUrDI6OkJfU
Basic Definitions
B2B commerce:
 All types of computer-enabled inter-firm trade
 Before Internet, B2B transactions called trade or
procurement process
B2B e-commerce:
 The portion of B2B commerce enabled by the Internet
Supply chains
 Organizations, people, business processes, technology,
information required to produce products efficiently
 Often global
Amazon Takes on B2B with Amazon
Business
Amazon B2B
https://sell.amazon.com/programs/amazon-business
https://business.amazon.com/
Class Discussion
 What made the difference in Amazon Business moving from
being a distributer of supplies to a real B2B marketplace?
 What benefits over other B2B marketplaces does Amazon
Business offer buyers?
 What benefits do suppliers have in using Amazon Business?
 Does Amazon Business pose any disadvantages for buyers
or sellers?
https://www.youtube.com/watch?v=xQTGjLXWP8M
Alibaba
https://www.youtube.com/watch?v=bw_DVGJLvTw
Please explore AlibabaB2B business model in detail

and explain what type of retails and B2B services it is
providing globally.
You may also refer to a case study Alibaba: China’s

E-commerce King from your text book. (p. 791 – 792)
Potential Benefits and Challenges of
B2B E-commerce (1 of 2)
Lower administrative costs

Lower search costs for buyers
Reduced inventory costs
Lower transaction costs
Increased production flexibility by ensuring just-in-time
parts delivery
Improved quality of products by increasing cooperation
among buyers and sellers
Potential Benefits and Challenges of
B2B E-commerce (2 of 2)
Decreased product cycle time

Increased opportunities for collaboration
Greater price transparency
Increased visibility, real-time information sharing
However, some risk is posed by increased globalization
and consolidation
Insight on Society: Where’s My iPad?
Supply Chain Risk and Vulnerability
Class discussion:
1. Why does concentrating production on fewer suppliers also
concentrate risk?
2. How does globalization play a part in increased risk?
3. What types of procedures could be implemented, given increased
globalization, to reduce risk?
 Hints: 2011 Earthquake hits northern Japan created tsunami waves

 Six coastal nuclear reactors in Fukushima near the own of Okuma (the largest
nuclear power site in the world). NR exploded and started leakage; temp
5,000 degrees
 Ipad 5 major components sourced from Northern Japan; not all suppliers
effected but some sub-suppliers were affected
 iPad and Iphone lithium batteries used crucial polymer made by Kureha (a
Japanese firmi n the nuclear contamination zone), control 70% of Polymer
 Apple learnt the lesson; Retina display screen manufactured in both Korea
and Japan
The Procurement Process and the
Supply Chain
Procurement process:
The way firms purchase materials they need to make
products
Steps in procurement process
Deciding who to buy from and what to pay
Completing transaction
Each step is composed of many business processes
and sub activities requiring data to be recorded in
seller, buyer, and shipper information systems
Figure 12.4 The Procurement Process
Types of Procurement (1 of 2)
Firms purchase two types of goods
 Direct goods: Integrally involved in production process
 Indirect goods: All goods not directly involved in production
process (MRO goods)
Firms use two methods to purchase
 Contract purchasing:
Involves long-term written agreements to purchase
specified products, with agreed-upon terms and quality
 Spot purchasing:
Involves purchase of goods based on immediate needs
in larger marketplaces that involve many suppliers
Class Activity (critical
thinking)
 Discuss the Pakistani textile industry which is facing many challenges in

global markets despite being the most profitable export industry in the
past.
 How B2B ecommerce can improve the efficiency and quality of the
textile industry and reduce cost for both import and export?
 Hint: you may critically analyze the industry and its supply chain
processes w.r.t. potential benefits of the B-2-B ecommerce.
Net Marketplaces
 Ways to classify Net marketplaces:

 Pricing mechanism, nature of market served, ownership
 By business functionality
 What businesses buy (direct v s indirect goods)
er su
 How businesses buy (spot purchasing v s long-term sourcing)

er su
 Four main types

E-distributors
E-procurement
Exchanges
Industry consortia
Table 12.3 Characteristics of Net
Marketplaces: A B2B Vocabulary
Characteristic Meaning
Bias Sell-side v s buy-side v s neutral. Whose interests are

er s u er s u
advantaged: buyers, sellers, or no bias?
Ownership Industry v s third party. Who owns the marketplace?

er s u
Pricing mechanism Fixed-price catalogs, auctions, bid/ask, and RFPs/RFQs
Scope/focus Horizontal v s vertical markets

er s u
Value creation What benefits do they offer customers or suppliers?
Access to market In public markets, any firm can enter, but in private
markets, entry is by invitation only
Figure 12.10 Pure Types of Net
Marketplaces
E-distributors
Most common type of net marketplace
Electronic catalogs representing products of thousands of
direct manufacturers
Typically, independently owned intermediaries
Offer industrial customers single source to purchase
indirect goods (MRO) on spot basis
Typically, horizontal
Owned by one company seeking to serve many customers
Revenue model: Sales of goods and commission
Usually, fixed price discounts for large customers
Example: Grainger, Amazon Business, Alibaba, McMaster-
Carr
Figure 12.11 E-distributors
E-procurement
Independently owned intermediaries
Creates mini digital markets where participants transact for
indirect goods
Connect hundreds of suppliers of indirect goods
Firms pay fees to join market
Long-term contractual purchasing of indirect goods
Revenues from transaction fees, licensing consultation services
and software, network fees, supply-chain management,
fulfillment services
Offer value chain management (VCM) services
Example: Ariba (owned by SAP), Perfect Commerce, Bravo
Solution, A.T. Kearney Procurement and Analytic Solution
Figure 12.12 E-procurement Net
Marketplaces
Exchanges
Independently owned vertical online marketplaces
Connect hundreds to thousands of suppliers and buyers in
dynamic, real-time environment
Tend to be buyer-biased; suppliers disadvantaged by
competition
Revenue model: Transaction, commission fees
Create powerful competition between suppliers
Tend to force suppliers into powerful price competition;
number of exchanges has dropped dramatically
They serve vertical single industry; spot purchasing e.g.
chemicals, steel
Example: Go2Paper, Powersource Online, Converge
Figure 12.13 Exchanges
Industry Consortia
Industry-owned vertical digital marketplace open to select suppliers
More successful than exchanges
Sponsored by powerful industry players
Strengthen traditional purchasing behavior
Purchase of direct inputs from set of invited participants
Emphasize long-term contractual purchasing, stable relationships,
creation of data standards
Aim to unify supply chain within entire industry through common
platform
Revenue model: Transaction, commission fees
Example: The seam, SupplyOn (found in 2000 and owned by
Bosch –world largest supplier of automotive components,
Continental – a leading automotive manufacturer and Schaeffler- a
global manufacturer of various types of bearings)
In 2015 more stakeholders joined hand e.g. BMW, Airbus, Siemens
Figure 12.14 Industry Consortia
Private Industrial Networks (1 of 2)
Most prevalent form of B2B e-commerce

Web-enabled networks for coordination of trans-
organizational business processes (collaborative
commerce)
Direct descendant of EDI; closely tied to ERP systems
Manufacturing and support industries
Single, large manufacturing firm sponsors network
Range in scope from single firm to entire industry
Example: Procter & Gamble, GE, Dell, Nike, Coca-Cola,
Walmart etc
Private Industrial Networks (2 of 2)
Digital network used to coordinate among firms engaged in business

together
Typically evolve out of large company’s internal enterprise system
Key, trusted, long-term suppliers invited to network
Example: Walmart’s network for suppliers
Objectives include:
 Efficient purchasing and selling industry-wide
 Increasing supply chain visibility
 Closer buyer-supplier relationships
 Global scale operations
Focus on continuous business process coordination
Typically, focus on single sponsoring company that “owns” the
network
Figure 12.15 P&G’s Private Industrial
Network
Implementation Barriers
Concerns about sharing of proprietary, sensitive data

Integration of private industrial networks into existing ERP
systems and EDI networks difficult, expensive
Requires change in mindset and behavior of employees
and suppliers
All participants lose some independence
Class Activity (critical
thinking)
 Discuss the Pakistani textile industry which is facing many challenges in

global markets despite being the most profitable export industry in the
past.
 How B2B ecommerce can improve the efficiency and quality of the
textile industry and reduce cost for both import and export?
 Hint: you may critically analyze the industry and its supply chain
processes w.r.t. potential benefits of the B-2-B ecommerce.
 Analyse all B-2-B business models we have discussed and propose the
suitable models for addressing the challenges of Pakistani textile
industry.

B2B E-Commerce

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B2B E-commerce

Please explore AlibabaB2B business model in detail

You may also refer to a case study Alibaba: China’s

Lower administrative costs

Decreased product cycle time

 Hints: 2011 Earthquake hits northern Japan created tsunami waves

 Discuss the Pakistani textile industry which is facing many challenges in

 Ways to classify Net marketplaces:

 How businesses buy (spot purchasing v s long-term sourcing)

 Four main types

Bias Sell-side v s buy-side v s neutral. Whose interests are

advantaged: buyers, sellers, or no bias?

Ownership Industry v s third party. Who owns the marketplace?

Pricing mechanism Fixed-price catalogs, auctions, bid/ask, and RFPs/RFQs

Scope/focus Horizontal v s vertical markets

Value creation What benefits do they offer customers or suppliers?

Most prevalent form of B2B e-commerce

Digital network used to coordinate among firms engaged in business

Concerns about sharing of proprietary, sensitive data

 Discuss the Pakistani textile industry which is facing many challenges in

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