B2B Models differentiate Themselves on Three Levels
B2B models aim at 1) low-entry cost, 2) functionality, and 3) more comprehensive automation of business cycle, and differentiate themselves on three levels.
- Business process: for example, supply chain management, distribution channel management and procurement
A business process is a collection of related, structured activities or tasks that produce a specific service or product (serve a particular goal) for a particular customer or customers. It can often be visualized with a flowchart as a sequence of activities with interleaving decision points or with a Process Matrix as a sequence of activities with relevance rules based on data in the process.
- Method: for example, EDI, Web-EDI, Internet
(EDI) Electronic data interchange is an electronic communication system that provides standards for exchanging data by means of any electronic means. By adhering to the same standard, two different companies in two different countries can electronically exchange documents (such as purchase orders, invoices, shipping notices). EDI has existed for more than 30 years and there are many EDI standards, some of which address the needs of specific industries or regions.
It also refers specifically to a family of standards.
- Type: for example, software, implementation services and ongoing services
Merits and Limitations of B2B e-commerce
Along with other business models in the e-marketplace, B2B e-commerce has been welcomed as an innovative means of conducting transactions over the Internet. These business models promise not only effective and efficient business operations/transactions, but also competitive advantages to early adopters. Companies have adopted B2B e-commerce more slowly than predicted, but even conservative projections estimate that B2B transactions will grow exponentially in the future. .
It has been predicted that 66% of bids for MRO (maintenance, repair, operations) igoods will be solicited over the Internet and 43% of MRO orders will be achieved using ecommerce web technology.
MRO items include consumables (such as cleaning, laboratory, or office supplies), industrial equipment (such as compressors, pumps, valves to generate vacuum within a tube) and plant upkeep supplies (such as gaskets, repair tools), and computers, fixtures, furniture, and distributed networks.
An example of cost savings in B2B e-commerce is the story of Sun Microsystems of California. In 2001, the company was working with 1,003 suppliers, with a total MRO budget of $193 million.
About 73% of its expenditures went to 43 suppliers, yet its purchasing staff spent 81% of their time manually processing transactions with the 901 smallest suppliers. The switching to e-Procurement was predicted to generate a savings of $31 million directly from e-Procurement, $63 million from the redeployment of the purchasing workforce, and $11 million in inventory reductions.
It is noteworthy that these savings come from process automation, not from forcing price concessions from distributors. Although having certain merits, these business models encounter some limitations that hinder
the effective and efficient implementation and operation of a sustainable business. However, there are many possible solutions for overcoming these limitations.