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Introduction

Basic B2B Concepts and Process:

Business-to-business e-commerce (B2B EC) , also known as eB2B ( electronic B2B ), or just B2B, refers to transactions between businesses conducted electronically over the Internet, extranets, intranets, or private networks.
Such transactions may take place between a business and its supply chain partners, as well as between a business and a government, and with any other business.
In this context, a business refers to any organization, private, public, for profit, or nonprofit. In B2B, companies aim to computerize trading transactions and communication and collaboration processes in order to increase efficiency and effectiveness.
B2B EC is very different and more complex than B2C. It is much more difficult to sell to a company than to individuals.

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Basic B2B Concepts and Process:

Key business drivers for electronic B2B (some of which were shown in the opening case) are the need to reduce cost, the need to gain competitive advantage, the availability of a secure Internet platform (i.e., the extranet), and the private and public B2B e-marketplaces.

In addition, there is the need for collaboration between business partners, the need to reduce transaction time and delays along the supply chain, and the emergence of effective technologies for interactions and systems integration.

Several large companies have developed efficient B2B buying and selling systems.

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The Basic Types of B2B Transactions and Activities

The number of sellers and buyers and the form of participation used in B2B determine the five basic B2B transaction activity types:

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
Collaborative commerce

The last two categories include activities other than buying or selling inside organizations and among business partners. They include, for example, removing obstacles from the supply chain, communicating, collaborating, sharing information for joint design and planning, and so forth

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The Basic Types of B2B E-Marketplaces and Services

One-to-Many and Many-to-One:

Private E-Marketplaces In one-to-many and many-to-one markets, one company does either all the selling (sell-side market) or all the buying (buyside market). Because EC is focused on a single company’s buying or selling needs, this type of EC is also referred to as company-centric EC.

Many-to-Many: Public Exchanges (or E-Marketplaces)

In many-to-many e-marketplaces, many buyers and many sellers meet electronically to trade with one another. There are different types of such e-marketplaces, which are also known as exchanges (trading communities or trading exchanges). We will use the term exchanges in this book. Exchanges are usually marketplaces owned and run by a third party or by a consortium.

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The Basic Types of B2B E-Marketplaces and Services

Supply Chain Improvers and Collaborative Commerce

B2B transactions are conducted frequently along segments of the supply chain. Therefore, B2B initiatives need to be examined in light of other supply chain activities such as procurement of raw materials, fulfilling orders, shipments, and logistics.

Collaboration:-

Businesses deal with other businesses for purposes beyond just selling or buying. One example is that of collaborative commerce, which includes communication, joint design, planning, and information sharing among business partners

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Market Size and Content of B2B

The US Census Bureau estimates B2B online sales to be about 40% of the total B2B volume depending on the type (e.g., 49% in manufacturing). Chemicals, computer electronics, utilities, agriculture, shipping and warehousing, motor vehicles, petrochemicals, paper and office products, and food are the leading items in B2B. According to the authors’ experience and several sources, the dollar value of B2B comprises at least 85% of the total transaction value of all e-commerce, and in some countries, it is over 90% for a total of about $20 trillion worldwide. Even with this volume of transactions, many believe that the

B2B space is still maturing and that continued IT improvements will drive future growth (eMarketer 2016a), with total US sales in 2020 projected to be $1.1 trillion. For statistics, see Pick (2015) and Econsultancy (2017).

B2B EC is now in its sixth generation, in this generation includes collaboration with suppliers, buyers, government, and other business partners via extensive use of mobile computing; use of blogs, wikis, and other Web 2.0 tools; deployment of in-house social networks; use of public social networks such as LinkedIn and Facebook; and increased use of intelligent systems. In addition, the sixth generation is capitalizing on mobile computing, especially tablets and smartphones

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B2B Components

Parties to the Transaction: Sellers, Buyers, and Intermediaries B2B commerce can be conducted directly between a customer and a manufacturer or it can be conducted via an online intermediary. An online intermediary is a third-party entity that serves as transaction broker between the buyer and seller; it can apply to either a virtual or click-and-mortar business. Some of the electronic intermediaries for individual consumers can also be used for B2B by replacing the individual consumers with business customers. 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 and indirect. Direct materials are materials used in making products, such as steel in a car or paper in a book. Indirect materials are items, such as office supplies or light bulbs, which support operation and production. They normally are used in maintenance, repair, and operation (MRO) activities. Collectively, they are also known as nonproduction materials.

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B2B Marketplaces and Platforms

B2B transactions are frequently conducted in marketplaces such as Alibaba.com. B2B marketplaces can be classified as vertical or horizontal. Vertical marketplaces are those for one particular industry or industry segment. Examples include marketplaces specializing in electronics, cars, hospital supplies, steel, or chemicals. Horizontal marketplaces are those in which trading is in a service or a product that is used in many types of industries. Examples are office supplies, cleaning materials, or paint. Alibaba.com is an example of a horizontal marketplace.

The types of materials traded and the types of B2B transactions are used to define the B2B marketplaces. One way of classifying these markets is:

• Strategic (systematic) sourcing and indirect materials = MRO hubs (horizontal markets for MRO)

• Systematic sourcing and direct materials = vertical markets for direct materials

• Spot buying and indirect materials = horizontal markets for spot sourcing

• Spot sourcing and direct materials = vertical markets

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