E-Commerce Chapter 11

Net marketplaces

- Bring together potentially thousands of sellers and buyers in single digital marketplace operated over Internet - Transaction-based - Support many-to-many as well as one-to-many relationships

Private industrial networks

- Bring together small # of strategic business partner firms that collaborate to develop highly efficient supply chains - Relationship-based - Support many-to-one and many-to-few relationships - Largest form of B2B e-commerce

Steps in procurement process

- Deciding who to buy from and what to pay - Completing transaction

Internet-based B2B Commerce

- Net marketplaces - Private industrial networks

Classify Net marketplaces

- Pricing mechanism - Nature of market served - Ownership What & How businesses buy

Potential benefits of B2B e-commerce

- lower administrative costs - lower search costs for buyers - reduced inventory costs - lower transaction costs - increased production flexibility - improved quality of products by increasing cooperation among buyers and sellers - decreased product life cycle time - increased opportunities for collaboration - greater price transparency - increased visibility, real-time info sharing - risk by increased globalization and consolidation

B2B commerce

All types of computer-enabled inter-firm trade

Creating regional or product-based supply chains

Allowing production to be moved to temporary safe harbors in case of local manufacturing disruptions

Before Internet

B2B transactions called trade or procurement process

Electronic Data Interchange (EDI)

Broadly defined communications protocol for exchanging documents among computers

Multi-tier Supply Chain

Complex series of transactions between firm and thousands of suppliers, supplying thousands of goods

Supply Chain Management Systems

Continuously link activities of buying, making, and moving products from suppliers to purchasing firms - Integrates demand side of business equation by including order entry system in the process - With SCM system and continuous replenishment, inventory is eliminated and production begins only when order is received

Stages of EDI

Document automation (1970s-1980s) Document elimination (Early 1990s) Continuous replenishment/access model (Mid-1990s)

Types of net marketplaces

E-distributor E-procurement Exchanges Industry consortia

Tight coupling

Ensuring precise delivery of ordered parts at specific times

Supply chain

Firms that purchase goods, their suppliers, and their suppliers' suppliers, relationships and processes involved

E-procurement

Independently owned intermediaries - connect 100s of suppliers of indirect goods - firms pay fees to join market - revenues from transaction fees, licensing consultation services, network fees - offer value chain management services (VCM)

Exchanges

Independently owned online marketplaces - Connect 100s-1000s of suppliers and buyers in dynamic, real-time environment - Vertical markets, Spot purchasing in single industry - Charge commission fees on Transaction - Many have failed due to low liquidity

Industry Consortia

Industry-owned vertical markets - Purchase of direct inputs from set of invited participants - Emphasize long-term contractual purchasing, stable relationships, creation of data standards - Objective: Unification of supply chains within entire industries through common network and computing platform - Revenue: transaction & subscription fees

Contract purchasing

Involves long-term written agreements to purchase specified products, with agree-upon terms and quality

Spot purchasing

Involves purchase of goods based on immediate needs in larger marketplaces that involve many suppliers

Accountable Supply Chains

Labor conditions in low-wage, under-developed producer countries are acceptable to consumers

E-distributor

Most common type of Net marketplace - electronic catalogs representing products of thousands of direct manufacturers - Horizontal - Offer industrial customers single source to purchase Indirect goods on Spot basis

Reducing centralization

Reduce risks caused by relying on single suppliers who are subject to local instability (Japanese earthquake)

Sustainable Supply Chains

Taking social and ecological interests into account (water usage, air pollution) - Using most efficient environment - regarding means of production, distribution, logistics

B2B e-commerce

The portion of B2B commerce enabled by the Internet

Collaborative Commerce

Use of digital technologies for organizations to collaboratively design, produce, and manage products through life cycles - Transactions to relationships - More interactive teleconference - Use Internet for rich communications environment (Central Data Repository in middle)

Private Industrial Networks---Private trading exchanges (PTXs)

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 (Proctor & Gamble)

Collaborative resource planning, forecasting, and replenishment (CPFR)

Working with network members to forecast demand, develop production plans, and coordinate shipping, warehousing and stocking activities to ensure that retail and wholesale shelf space is replenished with just the right amount of goods - Demand chain visibility - Marketing coordination and product design

Evolution of B2B Commerce

1. Automated order-entry systems 2. Electronic data interchange (EDI) 3. B2B electronic storefronts 4. Net marketplaces 5. Private industrial networks

Procurement process

The way firms purchase materials they need to make products

Total inter-firm trade

Total flow of value among firms