Unit II Business-to-Business Electronic Commerce:

Characteristics of B2B EC, Models of B2B EC, Procurement Management Using the Buyer’s Internal
Marketplace, Just in Time Delivery, Other B2B Models, Auctions and Services from Traditional to
Internet Based EDI, Integration with Back-end Information System, The Role of Software Agents
for B2B EC, Electronic marketing in B2B, Solutions of B2B EC, Managerial Issues.
Electronic Data Interchange (EDI) The Nuts and Bolts, EDI & Business.

Characteristics of B2B in EC:

1.Multiple decision makers. In B2B, there are often four or more decision makers involved in
the purchase process. In practice, this may require multiple user roles in the checkout /cart
process with multiple stages taking many days (or weeks).

2.Longer decision cycle. The B2B buying cycle is much longer than for B2C – so the lead time
between initial contact and receiving any payment are longer. But also, customer expectation is
different - wanting to change exact details of the order through the process.

3.Customer specific discounts. In B2B, the variations in price lists, discounts, and even
available products are generally more complex than for B2C. This is historical. Whether
necessary is not the appropriate question when building a B2B e Commerce solution as this is
usually a fixed requirement in all but the smallest businesses.

4.Conflict with direct sales channels. Many B2B businesses have an established sales team
who will be unhappy with online competition that can be seen to decrease their performance
bonus. Careful thought must be given to how this is introduced.

Models of B2B EC:

A website following the B2B business model sells its products to an intermediate buyer who then
sells the products to the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, it sells the endproduct to the final
customer who comes to buy the product at the wholesaler's retail outlet.
B2B identifies both the seller as well as the buyer as business entities. B2B covers a large
number of applications, which enables business to form relationships with their distributors, re-
sellers, suppliers, etc. Following are the leading items in B2B eCommerce.

 Electronics
 Shipping and Warehousing
 Motor Vehicles
 Petrochemicals
 Paper
 Office products
 Food
 Agriculture

Key Technologies

Following are the key technologies used in B2B e-commerce −

 Electronic Data Interchange (EDI) − EDI is an inter-organizational exchange of

business documents in a structured and machine processable format.
 Internet − Internet represents the World Wide Web or the network of networks
connecting computers across the world.
 Intranet − Intranet represents a dedicated network of computers within a single
organization.
 Extranet − Extranet represents a network where the outside business partners, suppliers,
or customers can have a limited access to a portion of enterprise intranet/network.
  Back-End Information System Integration − Back-end information systems are
database management systems used to manage the business data.

Architectural Models

1.Supplier Oriented marketplace − In this type of model, a common marketplace provided by

supplier is used by both individual customers as well as business users. A supplier offers an e-
stores for sales promotion. In this type of model, there are many buyers and few suppliers. For
the success of this model, goodwill in the market and a group of loyal customers is very
important.

A successful example of this business model is Cisco. Cisco owns an online marketplace which
goes by the name of Cisco Connection Online. In 1997 Cisco sold US$1 billion worth of
network products such as routers and switches to business customers.

2.Buyer Oriented marketplace − In this model, there are few buyers and many suppliers. The
buyer has his/her own online marketplace. It then invites suppliers and manufacturers to display
their products. Buyers search in electronic stores in malls and markets for similar service
providing products and compare them.

So the buyer company makes it simple by opening a bidding site where a particular product is
available from different sellers at different prices.

A successful example of a buyer-oriented marketplace is GE’s electronic bidding site which goes
by the name of GE TPN Post. On GE’s bidding site, buyers pay a nominal fee for using the site.
After that, the buyers post their project information on site. Potential suppliers download the
project information and submit bids for the project. Buyers then compare the suppliers’ bids.
This helps buyers to build new partnerships with sellers and receive and compare different bids
and negotiate for better prices.

Sellers also benefit as they get a communication platform which has large-scale buyers and thus,
in turn, expand the market with low marketing and sales costs.

3.Intermediary Oriented marketplace − In this type of model, an intermediary company runs a

market place where business buyers and sellers can transact with each other and there are many
buyers and many suppliers. An intermediary company runs a marketplace where business buyers
and sellers meet and do business with each other.

The best example of an intermediary-oriented marketplace is the giant player in this space,
Alibaba. It started in 1999 when the founder created Alibaba.com, a business-to-business portal
to connect many Chinese manufacturers with many overseas buyers. In 2012 alone, two of
Alibaba’s portals handled $170 billion in sales. To get a feel for the size of Alibaba, since 2015
its online sales and profits surpassed that of all US retailers, including Walmart, Amazon, and
eBay combined!
International markets. B2B eCommerce is often used as a way of reaching international
markets, maybe in small numbers. Regulations, legal and cultural issues can cause more of an
impact than for B2B eCommerce and this impact is exaggerated if products are small in number
and high in value.

B2B eCommerce is the selling, buying, and trading of goods and services through an online sales
portal between businesses. Since both parties involved are business entities, the transactions are
more rational than impulsive. Furthermore, the relationship between the companies involve long-
term interests.

Trading online has several benefits such as the expansion of business, the rise in the number of
customers, and increased brand-awareness. In this article, we’ll try to cover all the aspects you
need to know about B2B eCommerce.

What is Just-In-Time Delivery?

Just-In-Time delivery, or JIT delivery, is a supply chain inventory management technique that is
designed to increase efficiency while decreasing waste by receiving products or materials only
when they are needed. With drop shipping being the increasingly preferred method of order
fulfillment for smaller e-commerce retailers, JIT delivery is even more appealing.

The other important tool of the B2B marketing is the just in time delivery. JIT is the way to
manage the stock in the storage. It involves getting products from the suppliers and handling
other issues related to it. Direct marketing needs a just-in-time manufacturing system. It is an
advanced confirmation of the supplier’s inventory. It is a compulsory element for b2b. For
increasing the profit of the business, it is very important to increase the sales. The sales are
increased on the wide platform. The B2B marketing provides solid support to the businessmen.
Here, they can introduce their products at the wide level.
Two Different B2B Models in e Commerce(other B2B model)
B2B e Commerce, by nature, is tailored to the specific selling strategies of various
suppliers, demanding multiple selling models. The two most common selling strategies
of B2B platforms are Marketplace and Direct.

The Marketplace B2B model in e Commerce involves multiple suppliers selling in one
centralized online marketplace, such as Alibaba (pictured below), whereas
the Direct model offers a personalized B2B e Commerce portal meant for your specific
brand (or brands that you represent).

Side note: We have a blog post specifically dedicated to the pros and cons of these two
models, which we’ll summarize here.

The Marketplace model is:

 A more discoverable, but competitive environment. While having your

products located in a central marketplace, in theory, makes your products easier
to find, it also creates fierce competition between suppliers, who often get caught
up in the pricing game.
With the Marketplace B2B model for e Commerce, your products are positioned against your

competitors, side-by-side, which leads to stiff competition.

 Helpful for small start-up brands. B2B companies that are just getting started and
lack name recognition often find the Marketplace model helpful in getting their name
and products out in front of prospective customers.
 Not easily customizable. Some Marketplaces offer lightweight customizations, but it
is difficult to implement personalized pricing and product assortments in an
environment completely controlled by the Marketplace.

The Direct model offers:

 Distraction free buying. The Direct model is your personal B2B e Commerce
portal, only displaying your products, not your competitors’.
 Complete control. Since you are in charge of the buyer experience, your brand,
design and other portal features are exactly as you want them to be —which helps
you build brand trust and maintain relationships with your buyers.
Companies that sell using the Direct model can more easily reflect their branding and position
their products in the best light.
A personalized experience. As previously discussed, buyers in the Direct model only
see the prices, products and promotions they are eligible for.

While some suppliers choose only one of these B2B e Commerce models to implement,
others blend the two strategies. Manufacturers and distributors with complex selling
rules, promotional structures, and pricing tiers, however, tend to focus more on the
Direct model to handle the complexities of their businesses.

TRADITIONAL EDI: EDI is a communication standard that enables the electronic transfer of
routine documents, such as purchasing orders, between business partners. It formats these
documents according to an agreed-upon structure. An EDI implementation is a process in which
two or more organizations determine how to work together more effectively through the use of
EDI. EDI is basically a computer-to-computer messaging system with a minimum of human
intervention. For a comparison of EDI versus no EDI see Exhibit W5A.1. EDI often serves as a
catalyst and a stimulus to improve the business processes that flow between organizations. It
reduces costs, delays, and errors inherent in a manual document-delivery system.

Business transaction messages. EDI primarily is used to electronically transfer repetitive

business transactions. These include purchase orders, invoices, credit approvals, shipping
notices, confirmations, and so on. ◗ Data formatting standards. Because EDI messages are
repetitive, it makes sense to use formatting (coding) standards. Standards can shorten the length
of the messages and eliminate data entry errors, because data entry occurs only once. EDI deals
with standard transactions, whereas e-mail is more open. EDI uses a special standard language
and is secure, whereas e-mail is not. When a user enters data into the EDI system, the data are
automatically converted to EDI language. If there are missing or incorrect data, the EDI
converter offers assistance. EDI fosters collaborative relationships and strategic partnerships. In
the United States and Canada, data are formatted according to the ANSI X.12 standard or the
UCS code. An international standard developed by the United Nations is called EDIFACT (see
bambooweb.com). ◗ EDI translators. An EDI translator automatically translates data. The
software organizes information into a standard format. EDI has been around for about 30 years in
the non-Internet environment. To distinguish it from Internet-based EDI, we call EDI on the non-
Internet platform traditional EDI.

INTERNET-BASED EDI: Internet-based (or Web-based) EDI is becoming very popular. Let’s
see why this is the case and review the various types of Web-based EDI. WHY INTERNET-
BASED EDI? When considered as a channel for EDI, the Internet appears to be the most feasible
alternative for putting online B2B trading within reach of virtually any organization, large or
small. Firms should use Internetbased EDI for several reasons:

◗ The Internet is a publicly accessible network with few geographical constraints. Its largest
attribute, large-scale connectivity (without the need for any special company networking
architecture), is a seedbed for growth of a vast range of business applications.

◗ The Internet’s global network connections offer the potential to reach the widest possible
number of trading partners of any viable alternative currently available.

◗ Using the Internet instead of a VAN can cut communication costs by over 50 percent.

◗ Using the Internet to exchange EDI transactions is consistent with the growing interest in
delivering an ever-increasing variety of products and services electronically, particularly via the
Web.

◗ Internet-based EDI can complement or replace many current EDI applications.

◗ Internet tools such as browsers and search engines are very user-friendly, and most employees
today know how to use them.

◗ Internet-based EDI has several functionalities not provided by traditional EDI, such as
collaboration, workflow, and search engine capabilities (see Boucher-Ferguson 2002). A
comparison of the traditional EDI and Internet-based EDI is provided in Exhibit W5A.4
Role of Software Agents In E-Commerce:

This part focus on the basic fundamentals including, the terms used in E-Commerce with respect
to software agents and different examples which explains the role. 4.1. Software Agents enabling
the formation of virtual organization: Virtual systems are the decentralized business networks
which work in flexible. To have efficient operation and productivity virtual organizations must
be able to communicate, Co-operate and Co-ordinate (the 3Cs of business) with each other.

Software agents are effective tool to virtual organizations since they provide mechanisms to
automate several activities like, gathering data, refining information, negotiate business deals and
also intelligent agents work like human beings in supplying and buying goods having the
artificial machine knowledge. Software have variety of applications which includes, B2B E-
Commerce, Internet based info systems, robotics, smart systems, DSS, data mining and
Knowledge discovery.

Agent technology helps in finding intranet or internet, Customer relation management, supply
chain management and market pricing. 4.2. The reason behind the use of Software Agents: The
software agents are used due to the effect of following reasons:
 [1] Software Agents and Mobility: Mobile agents are a kind of software agent that represent a
revolution in how programs are distributed, run and server resources shared and how computer
users interact with online services.. They can act on behalf of their principals autonomously
while performing their actions in some level of pro-activity and reactivity.

[2] A software agent is a software entity that acts with autonomy to accomplish tasks on behalf
of its users. They function continuously and autonomously in a particular environment, often
inhabited by other agents of processes. The idea here is the use of software agents for
collaboration.

[3] Coping with Emergencies: There are situations where people, organizations or computer
systems will undergo stress. During this stage they fail to take quick actions which are common
or daily tasks. For an individual, if there are some natural problems like death in the family,
illness, or job problem etc. they fail to take care of simple thing like paying phone bill or
electricity bill etc. For these kinds of problems it is not the solution to have a automated systems.
Dynamic Distributed systems: Software agents provide a better figure for utilizing parallelism
and dynamics of Computer networks which increases the usage of the available networks.
Software agents give an ideal figure out for distributed computing. Life agents: Life agents are
software agents that are initiated and run in the background and act directly or indirectly on the
client‟s side automatically, monitoring the progress over the period of time.

E-Marketing:-
E-Marketing also known as Internet Marketing, Online Marketing, Web Marketing.
It is the marketing of products or services over the internet.
It is consider to be broad in scope because not refers to marketing on the internet but also done in
Email and wireless media.
E-Marketing ties together the creative and technical aspects of the internet, including design
development, advertising and sales.
Internet marketing is associated with several business models i.e., B2C, B2B, C2C.
Internet marketing is inexpensive when examine the ratio of cost to the reach of the target.
Managerial issues and solutions of B2B EC:

In order to better understand the most common challenges B2B vendors face and to look at how
to solve them, we first need to answer one key question - why do e-commerce to begin with?
What’s its main goal?

The goals of B2B e-commerce are quite different from those of B2C and thus, the ways of
achieving them will also be different. B2C e-commerce targets a huge pool of customers and
lower sales quantities per customer, so acquisition will be its main focus. B2B on the other hand
sells high quantities of product or service to the same buyer, who is often not the end consumer,
but a purchasing agent specially trained to make buying decisions. So, the main priority is to
build and maintain long-term partner relations. The focus in e-commerce here is on the tools
being easy and convenient to use rather than having a flashy and catchy website.

E-commerce is meant to help B2B vendors achieve their main goals by getting routine orders out
of the way, so that field sales managers can focus on building and maintaining partner
relationships rather than simply be the order-takers. And here is where some common challenges
come up. We’ve put together the top 5 ones on the list paired with convenient solutions that
quality e-commerce platforms provide.
1. Product assortment and filtering

Unlike B2C sector, where everyone pretty much gets the same assortment, B2B needs to be able
to adapt to different customer requirements. You may have proprietary kits or bundles, tiers of
product for different retailers based on relationship you have with them or other specific sales
scenarios. And your e-commerce solution needs to be able to accommodate that.

The perfect B2B e-commerce platform will let you enable filtering in your product catalog based
on vendors, so each buyer’s experience will be locked down to them specifically.

If you already have a large catalog set up however, migration can be a scary and painful process.
Sometimes it’s just simply not worth the risks of loosing important items or creating additional
mess in your database, even if a new platform offers the most fantastic features. It’s totally
understandable. The good news is there are solutions out there, which let you avoid the
nightmare of data migration by simply merging the new system with your already existing third
party PIM or CMS solution.

For example, you are a major B2B vendor with a massive catalog of products, which all your
partners and distributors are ordering from. Your current set-up for this catalog might not be
ideal, but it works, and that’s what matters. Having B2B-specific features in it would be amazing
and being able to run promotions with a few clicks could make your life so much easier (and
very likely up your sales), but then again, there is the challenge of migrating of an entire
database that is not only huge, but also extremely valuable. One wrong move can cost a major
disaster! So, no – migration is just not an option.

Here is where you can look at solutions like a Virto Commerce-based catalog that can either be
configured to simply handle all your catalog information or integrated into your existing PIM or
CMS, so that you can get the much needed B2B features listed above without taking the risks of
relocating major loads of valuable data. It also offers flexible properties and structures to help
you manage your digital and physical products; and if you’re using one of the popular Content
Distribution Networks (CDN), it lets you configure and store your digital assets there, if you so
choose.

2. Contract based pricing

B2B sales sector deals with significantly larger volumes and more complicated transactions than
B2C, including multi-level approval processes, negotiations, etc. In terms of money spent for
online purchasing B2B e-commerce is already a lot bigger than B2C - and Forrester predicts it
will be twice the size by 2020.

All of these your B2B e-commerce solution needs to account for. One more key difference with
B2C is that in B2B you can negotiate. And your platform needs to be able to support that option.
If your customer is ordering higher volumes or if it’s a custom order or a long-term customer
you’re working with, the outcome of your negotiations needs to be reflected in your customer’s
personalized settings.
B2C e-commerce software only needs to make sure you can set a price for your product - that
same price will be displayed to every customer, who views the product page. For B2B sector this
is often not enough – a B2B focused platform needs to be able to work with contract based price
adjustments and apply any specific terms you work out with each specific customer.

On top of that, for complex transactions or bigger orders your B2B customer would often want to
talk to a sales person, so the system needs to support more complicated interactions, where there
is a sales person involved. It also needs to accommodate additional payment options, like credit
checks or credit account status.

3. Multiple Vendors catalogs

We have pretty much determined that B2B is its own type of sales with processes, logistics and
shipping vastly different from those in B2C. Thus, it requires a different system and approach.
As your business grows, it acquires more and more customers and partners until eventually there
comes a point when adding a new vendor to your distributed catalog and get the updated version
to every customer in your database becomes a real challenge.

A quick example here – let’s say you’re a big car and parts vendor. You have a number of
dealerships selling your products. Each of them gets a catalog from you, from which their direct
customers can order. Every time a new dealership or location gets added, it needs to receive the
most recent version of the catalog. Now, let’s say a new vendor gets added to your system, so
that aside from cars and parts, the customers can now purchase branded accessories at their
dealership, for example. Now you need to update the catalog with the new vendor’s products,
and all your dealerships (or the selected few) need to receive the updated version. Someone also
needs to keep track of who received what and make sure everyone is up-to-date.

Then you decide to launch a promotion on one of your vendor’s products…

Sounds like a nightmare, doesn’t it? It doesn’t have to, if you have one centralized system in the
cloud, which all of your dealerships have an easy access to. Each new vendor simply gets added
to one central catalog and each dealership can have its own customized profile with the specific
products it sells. A few clicks – done!

Virto Commerce solution lets you create and easily manage multi-vendor catalogs, where all the
data about all available products or services by every vendor you work with is stored in one
place and can be easily accessed, updated and shared with all the parties involved. The platform
supports multiple catalogs, storefronts, languages, and tax systems, which can be an essential
functionality for global businesses.

4. Order Approval process / Integrating with external ERPs

Unlike B2C, which works directly with end-buyers, B2B often deals with a whole chain of
negotiations and approval processes. So, your e-commerce platform needs to be able to support
approval process with up to 10 different roles and the order trail needs to be accessible by some
 or all of those roles. A B2B-focused e-commerce solution will make it easy to track orders and
manage access and approval rights.

Let’s look at another example. A distributor orders product from your company and requests a
quote. The end price in the quote is based on the number of products in the order and also on
possible promotions held by the vendor during that current time period. So the price would vary
and your distributor will need to be able to approve/decline it, often on multiple levels within the
company. It gets even more complicated when this needs to be done on a multi-vendor level
(orders from separate vendors with different quotes and approvals).

B2C focused software doesn’t often face those challenges and might not have a quick solution
for situations like this, but Virto Commerce does!

5. Negotiated pricing - quotation system

Working with customers ordering high volumes of product, naturally your business negotiates
different pricing with different buyers based on a number of factors, like purchase volumes,
customer loyalty programs and so on.

B2B-specific software needs to be able to reflect customer relationships and/or specific order
conditions in pricing, as well as special offers, special conditions on shipping and delivery, etc.

For instance, you may want to offer special conditions on bundle-purchases, include a free gift
with a certain order volume, adjust the price based on the order size, provide expedited shipping
for this one special customer – the options are endless, and this is most definitely not the field
where you can settle for limitations. Thus, you need to make sure your platform of choice can
easily accommodate any of such requirements.

Conclusions

To sum it up, B2B e-commerce sector has its specifics and its unique requirements, which might
not be as essential in B2C and thus, might not be included in a regular B2C-focused solution.

EDI: THE NUTS AND BOLTS

EDI Standards:
• At the heart of any EDI application is the EDI standard. The essence of EDI is the coding &
structuring of the data into a common & generally accepted format.
• Documents sent via EDI can serve as input for a receiving a company's business application
because they are formatted according to standards that stipulate where certain information should
be located, such as where net total amount should appear on an invoice.
• These standards also define how individual pieces of information should be represented. For
example, in the standards for an electronics industry purchase order, there are specific codes
defined to identify the type of product or service being requested, e.g. PN (company part
number), BY (buyers part number), VP (vendors part number), PW (part drawing), etc.
EDI stands for Electronic Data Interchange. EDI is an electronic way of transferring business
documents in an organization internally, between its various departments or externally with
suppliers, customers, or any subsidiaries. In EDI, paper documents are replaced with electronic
documents such as word documents, spreadsheets, etc.

EDI Documents

Following are the few important documents used in EDI −

 Invoices
  Purchase orders
 Shipping Requests
 Acknowledgement
 Business Correspondence letters
 Financial information letters

Steps in an EDI System

Following are the steps in an EDI System.

 A program generates a file that contains the processed document.
 The document is converted into an agreed standard format.
 The file containing the document is sent electronically on the network.
 The trading partner receives the file.
 An acknowledgement document is generated and sent to the originating organization.

Advantages of an EDI System

Following are the advantages of having an EDI system.

 Reduction in data entry errors. − Chances of errors are much less while using a
computer for data entry.
 Shorter processing life cycle − Orders can be processed as soon as they are entered into
the system. It reduces the processing time of the transfer documents.
 Electronic form of data − It is quite easy to transfer or share the data, as it is present in
electronic format.
 Reduction in paperwork − As a lot of paper documents are replaced with electronic
documents, there is a huge reduction in paperwork.
 Cost Effective − As time is saved and orders are processed very effectively, EDI proves
to be highly cost effective.
 Standard Means of communication − EDI enforces standards on the content of data
and its format which leads to clearer communication.