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