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Chapter 6. Public B2B Exchanges and Support Services. Outline. B2B Electronic Exchanges Overview Third-party Exchanges Consortium Trading Exchanges Dynamic Trading Building and Integrating E-marketplaces Support Services for E-marketplaces and PRM B2B Implementation Issues

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Chapter 6

Chapter 6

Public B2B Exchanges and Support Services


Outline

Outline

  • B2B Electronic Exchanges Overview

  • Third-party Exchanges

  • Consortium Trading Exchanges

  • Dynamic Trading

  • Building and Integrating E-marketplaces

  • Support Services for E-marketplaces and PRM

  • B2B Implementation Issues

  • Managing Exchanges

S. Kungpisdan


Roadmap

Roadmap

  • B2B Electronic Exchanges Overview

  • Third-party Exchanges

  • Consortium Trading Exchanges

  • Dynamic Trading

  • Building and Integrating E-marketplaces

  • Support Services for E-marketplaces and PRM

  • B2B Implementation Issues

  • Managing Exchanges

S. Kungpisdan


B2b electronic exchanges an overview

B2B Electronic Exchanges:An Overview

public e-marketplaces (public exchanges)

Trading venues open to all interested parties (sellers and buyers); usually run by third parties

exchange

  • A many-to-many e-marketplace. Also known as e-marketplaces, e-markets, or trading exchanges

    market maker

    The third-party that operates an exchange (and in many cases, also owns the exchange)

S. Kungpisdan


Exhibit 6 1 trading communities

Exhibit 6.1 Trading Communities

Market

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B2b electronic exchanges an overview1

B2B Electronic Exchanges:An Overview

  • Classification Of Exchanges

    vertical exchange

    An exchange whose members are in one industry or industry segment

    horizontal exchange

    An exchange that handles materials used by companies in different industries

S. Kungpisdan


Exhibit 6 2 classification of b2b exchanges

Exhibit 6.2 Classification of B2B Exchanges

Maintenance, Repair, and Operations

(materials used in activities that support production)

Purchases involving long-term contracts that usually are based on private negotiations btw sellers and buyers

Purchases of goods and services as they are needed, usually at prevailing market prices

S. Kungpisdan


Dynamic pricing

Dynamic Pricing

dynamic pricing

A rapid movement of prices over time, and possibly across customers, as a result of supply and demand

  • Typical steps in dynamic pricing in most exchanges:

    • A company posts a bid to buy a product or an offer to sell one.

    • An auction is activated.

    • Buyers and sellers can see the bids and offers, but not see who is making them (anonymity)

    • Buyers and sellers interact with bids and offers in real time.

    • A deal is struck when there is an exact match btw a buyer and a seller on price, volume, and others variables e.g. location or quality.

    • Once the deal is done, payment and delivery are arranged.

S. Kungpisdan


B2b electronic exchanges an overview2

B2B Electronic Exchanges:An Overview

  • Functions of Exchanges

    • Matching buyers and sellers

    • Facilitating transactions

    • Maintaining exchange policies and infrastructure

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Chapter 6

RFP = Request for Proposal

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B2b electronic exchanges an overview3

B2B Electronic Exchanges:An Overview

  • Revenue Models

    • Transaction fees

      • Commission paid by sellers for each transaction they make

      • However, cannot charge very high, need to find other revenue sources

    • Fee for service

      • Some sellers prefer to pay service charges rather that transaction fees

    • Membership fees

      • Annual or monthly fee to get some free services or discount

    • Advertising fees

    • Other revenue sources

      • Auction fees, license fees for software usage

S. Kungpisdan


Chapter 6

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Roadmap1

Roadmap

  • B2B Electronic Exchanges Overview

  • Third-party Exchanges

  • Consortium Trading Exchanges

  • Dynamic Trading

  • Building and Integrating E-marketplaces

  • Support Services for E-marketplaces and PRM

  • B2B Implementation Issues

  • Managing Exchanges

S. Kungpisdan


Third party trading exchanges

Third-Party (Trading) Exchanges

  • Third-party exchanges are characterized by two contradicting properties:

    • They are neutral, because they do not favor either sellers or buyers and

    • They do not have a built-in constituency of sellers or buyers, they sometimes have a problem attracting enough buyers and sellers to attain financial viability

S. Kungpisdan


Third party trading exchanges1

Third-Party (Trading) Exchanges

market liquidity

The degree to which something can be bought or sold in a marketplace without affecting its price.

  • It is measured by the number of buyers and sellers in the market and the transaction volume

    Different from a portal, 3rd party exchange not only presents catalogs, but also tries to match buyers and sellers and encourages them to make transactions by providing e-trading floors an rooms

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Exhibit 6 6 supplier aggregation model

Exhibit 6.6 Supplier Aggregation Model

May be web-based

Need system integration between companies

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Exhibit 6 7 buyer aggregation model

Exhibit 6.7 Buyer Aggregation Model

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Third party trading exchanges2

Third-Party (Trading) Exchanges

  • Suitability of Third-Party Exchanges

    As in other types of e-marketplaces, the most important key to the success of any third-party exchange is the critical mass of buyers and sellers

S. Kungpisdan


Roadmap2

Roadmap

  • B2B Electronic Exchanges Overview

  • Third-party Exchanges

  • Consortium Trading Exchanges

  • Dynamic Trading

  • Building and Integrating E-marketplaces

  • Support Services for E-marketplaces and PRM

  • B2B Implementation Issues

  • Managing Exchanges

S. Kungpisdan


Consortium trading exchanges

Consortium Trading Exchanges

consortium trading exchange (CTE)

  • A subset of 3rd Party Exchange

    An exchange formed and operated by a group of major companies to provide industry-wide transaction services

  • Markets operate in three basic types of environments that indicates the third-party exchange that is most appropriate

    • Fragmented markets: many buyers, many sellers

      • Life sciences and food industries

      • 3rd Party Exchange

    • Seller-concentrated markets: few sellers, many buyers

      • Plastics and transportation

      • Consortia

    • Buyer-concentrated markets: few buyers, many sellers

      • Automotive, airlines

      • Consortia

  • S. Kungpisdan


    Consortium trading exchanges1

    Consortium Trading Exchanges

    • CTEs are classified by:

      • Focus on buying or selling

      • Are vertical or horizontal

    • The four types of consortia are:

      • Purchasing oriented, vertical

      • Purchasing oriented, horizontal

      • Selling oriented, vertical

      • Selling oriented, horizontal

    S. Kungpisdan


    Consortium trading exchanges2

    Consortium Trading Exchanges

    • Purchasing-Oriented (Procurement) Consortia

      • Most popular B2B consortium model

      • Vertical Purchasing-Oriented CTEs: the players are in the same industry

      • Horizontal Purchasing-Oriented CTEs: the owner-operators are large companies from different industries that unite for the purpose of improving the supply chain of MROs used by most industries

      • www.corprocure.com.au

    • Selling-Oriented Consortia

      • Most of them are vertical

      • www.staralliance.com

    S. Kungpisdan


    Roadmap3

    Roadmap

    • B2B Electronic Exchanges Overview

    • Third-party Exchanges

    • Consortium Trading Exchanges

    • Dynamic Trading

    • Building and Integrating E-marketplaces

    • Support Services for E-marketplaces and PRM

    • B2B Implementation Issues

    • Managing Exchanges

    S. Kungpisdan


    Dynamic trading matching and auctions

    Dynamic Trading: Matching and Auctions

    dynamic trading

    Exchange trading that occurs in situations when prices are being determined by supply and demand (e.g., in auctions)

    • Two major mechanisms: matching and auctions

  • Matching—Buyers place their bids and sellers list their asking prices, the market makers conduct the matching

  • Auctions—Exchanges offer members the ability to conduct auctions or reverse auctions in private trading rooms

  • S. Kungpisdan


    Chapter 6

    S. Kungpisdan


    Roadmap4

    Roadmap

    • B2B Electronic Exchanges Overview

    • Third-party Exchanges

    • Consortium Trading Exchanges

    • Dynamic Trading

    • Building and Integrating E-marketplaces

    • Support Services for E-marketplaces and PRM

    • B2B Implementation Issues

    • Managing Exchanges

    S. Kungpisdan


    Building and integrating e marketplaces and exchanges

    Building and Integrating E-Marketplaces and Exchanges

    • Building E-Marketplaces

      Building e-marketplaces and exchanges is a complex process.

      • It is usually performed by a major B2B software company e.g. Commerce One, Ariba, Orable, or IBM

      • Management consulting companies e.g. PWC, Gartner Group, or McKinsey

      • Technology companies e.g. IBM, Oracle, Intel, Microsoft, and SAP

    S. Kungpisdan


    Building and integrating e marketplaces and exchanges1

    Building and Integrating E-Marketplaces and Exchanges

    • The Integration Issue

      • Seamless integration is needed between the third-party exchange and the participants’ front- and back-office systems is necessary

      • In private exchanges, one needs to integrate:

        • Sell-side: seller’s computing system with that of the customers

        • Buy-side: buyer’s system with that of the suppliers

    S. Kungpisdan


    Building and integrating e marketplaces and exchanges2

    Building and Integrating E-Marketplaces and Exchanges

    • Four most common elements of B2B integration solutions

      • External communications

        • Web/client access: web browser

        • Data exchange, e.g. EDI over VANs and Internet-based EDI

        • Direct application integration: require middleware

        • Shared procedures

      • Process and Information Coordination

        • Involves the coordination of external communications and internal information systems

        • e.g. online sales transaction

      • Use of Web Services

        • Enable different web-base systems to communicate with each other using Internet-based protocols

      • System and Information Management

        • Management of software, hardware, and information

    S. Kungpisdan


    Roadmap5

    Roadmap

    • B2B Electronic Exchanges Overview

    • Third-party Exchanges

    • Consortium Trading Exchanges

    • Dynamic Trading

    • Building and Integrating E-marketplaces

    • Support Services for E-marketplaces and PRM

    • B2B Implementation Issues

    • Managing Exchanges

    S. Kungpisdan


    Support services for e marketplaces and prm

    Support Services for E-Marketplaces and PRM

    • Directory Services and Search Engines

      Directory services can help buyers and sellers manage the task of finding potential partners

    • Partner and Supplier Relationship Management

      partner relationship management (PRM)

      Business strategy that focuses on providing comprehensive quality service to business partners

      • Partners: customers, suppliers, joint ventures, service providers, etc

        supplier relationship management (SRM)

        A comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services it uses

    S. Kungpisdan


    Chapter 6

    S. Kungpisdan


    Exhibit 6 11 srm from peoplesoft

    Exhibit 6.11 SRM from Peoplesoft

    See Exhibit W6.3 for more details

    S. Kungpisdan


    Chapter 6

    S. Kungpisdan


    Roadmap6

    Roadmap

    • B2B Electronic Exchanges Overview

    • Third-party Exchanges

    • Consortium Trading Exchanges

    • Dynamic Trading

    • Building and Integrating E-marketplaces

    • Support Services for E-marketplaces and PRM

    • B2B Implementation Issues

    • Managing Exchanges

    S. Kungpisdan


    B2b implementation issues

    B2B Implementation Issues

    • Problems with Public Exchanges

      • Attracting sellers to public exchanges is difficult for these reasons:

        • Transaction fees

          • Large suppliers do not want to pay transaction fees when they engage in transactions with their existing customers.

        • Sharing information

        • Cost savings

          • not much cost saving for low cost items

        • Recruiting suppliers

          • Large supplier may have their own e-purchasing capabilities for their customers

        • Too many exchanges

          • Competitors believe that they can do better job than first movers

    S. Kungpisdan


    B2b implementation issues1

    B2B Implementation Issues

    • Supply Chain Improvers

      • Public exchanges prepare the entire necessary infrastructure and ask suppliers to just “plug in” and start selling

        • But company is also interested in streaming their internet supply chain, not just plugging in

      • Focusing on supply chain savings rather than on buy/sell savings can be very beneficial to exchanges

    S. Kungpisdan


    B2b implementation issues2

    B2B Implementation Issues

    • Problems with Private Exchanges

      • Private exchanges are usually run by one large company; trust becomes an issue

    S. Kungpisdan


    Roadmap7

    Roadmap

    • B2B Electronic Exchanges Overview

    • Third-party Exchanges

    • Consortium Trading Exchanges

    • Dynamic Trading

    • Building and Integrating E-marketplaces

    • Support Services for E-marketplaces and PRM

    • B2B Implementation Issues

    • Managing Exchanges

    S. Kungpisdan


    Managing exchanges

    Managing Exchanges

    • Centralized Management

      • Managing exchanges and providing services to participants on an individual basis is very expensive

      • So, “families” of jointly-managed exchanges are more cost-effective

      • One market maker can build and operate several exchanges from a unified, centralized location

      • Dealing with 3rd-party vendors that provide logistic services and payment systems may be more efficient if a vendor is supplying services to many exchanges

    S. Kungpisdan


    Managing exchanges1

    Managing Exchanges

    • Critical Success Factors for Exchanges

      • Early liquidity

        • Liquidity requires having a sufficient number of participants and amount of transaction volume

      • The right owners or partners

      • The right governance

        • Good management and effective operations

        • Governance provides rules for the exchange, minimize conflicts, and supports decision making

      • Openness

        • Must be open to all, from both organizational and technological perspectives

        • Commitment to open standards

      • A full range of services

    S. Kungpisdan


    Questions

    Questions?

    Next lecture:

    E-Supply Chain, Collaborative Commerce, Intrabusiness EC, and Corporate Portals


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