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KAPLAN-SAWHNEY B2B BUSINESS MATRIX
SUPPLY CHAIN INFORMATION SYSTEMS
BY C.MAXWELL REJIL
INTRODUCTION 2. KAPLAN-SAWHNEY MATRIX 2.2.2 YIELD MANAGERS 2.3 EXCHANGES 2.1 MRO HUBS 2. CONCLUSION 4.2.4 CATALOG HUBS 3.1 THE WHATS AND HOWS OF BUSINESS PURCHASING 2. REFERENCES .2.2.2 CLASSIFYING B2B HUBS BASED ON PURCHASE SITUATIONS 2.CONTENTS 1.
Due to the wide fragmentation. Over 90% of e-commerce revenues presently come from B2B transactions and the situation is remain that way in the foreseeable future. Steven Kaplan and Mohanbir Sawhney categorize inter-industry purchases into two broad groups-manufacturing inputs and the operating inputs. KAPLAN-SAWHNEY MATRIX: In order to better understand the nature and the benefits of online B2B marketplaces. INTRODUCTION: B2B markets have been predicted to revolutionize traditional forms of interaction and to be a milestone within the evolution of the network economy. The B2B sector is thus not only the most important segment of e-commerce but it is also poised for spectacular growth in the near future. Failing to attract an adequate number of participants. While internet-based retail activity may be the most visible face of e-commerce. The organizations of online B2B marketplaces vary considerably and depend to a large extent on the nature of the commodity being traded. The process of business purchasing on two simple dimensions – what companies buy and how they buy. A consolidation process can be observed in the way. the potential of B2B transactions over the web is truly mind-boggling.1. these electronic markets never unfold their endemic potentials. (2) purchase situation (systematic versus spot purchasing). that markets either exiting the “market for markets” or even taken over by competitors. . we must first understand the nature and the B2B transactions to begin with. most of them have not yet surpassed the critical mass. But most of these electronic markets are floundering. and (3) bias of the marketmaker (one-sided/biased versus two-sided/neutral). 2. The dimensions to create taxonomy of B2B hubs along three key dimensions – (1) value creation mechanism (aggregation versus matching).
and Operating) inputs. it is useful to understand how businesses buy.2. business purchases can be classified into manufacturing inputs and operating inputs. At the broadest level. For instance. Businesses buy a diverse set of products and services ranging from paper clips to computer systems. Operating inputs. Repair. on the other hand. They are typically sourced from industry-specific suppliers and distributors. because the finished products that they go into are industry-specific. and what they buy. and they require specialized logistics and fulfillment mechanisms. Manufacturing inputs tend to be vertical in nature. are indirect materials and services that do not go into finished products. THE WHATS AND HOWS OF BUSINESS PURCHASING: To understand B2B hubs. Operating inputs. Manufacturing inputs are raw materials and components that go directly into the manufactured product or manufacturing process. and steel to machinery. capital . sometimes called MRO (Maintenance.1. include industrial supplies. UPS is not a good fulfillment provider for Hydrochloric Acid or High Density Polyethylene.
Commodity trading for commodities like oil. systematic sourcing. and airline tickets. These contracts are often long term in nature. spot sourcing. and systematic sourcing versus spot sourcing (the “how”) allows us to classify B2B hubs into four categories MRO hubs (operating supplies. for instance. so systematic sourcing tends to be relationship-oriented.equipment. who aggregate MRO catalogs for a diverse set of industries. On the other hand. and rarely involves a long-term or ongoing relationship between buyers and sellers. A large proportion of manufactured inputs are purchased through this mechanism. operating inputs tend to be horizontal in nature (with the exception of capital equipment and some industrial supplies). For instance. The other important distinction in business purchasing lies in how businesses buy products and services.W. Operating inputs have been traditionally sourced from MRO suppliers like W. and energy exemplifies this mechanism. Grainger. over 90% of purchasing is through pre negotiated catalog-based mechanisms. But an advertising agency does not buy steel. every business needs computers. businesses can also buy commodity-like products on the spot market from anonymous sellers. services. Businesses can either engage in systematic sourcing or in spot sourcing. horizontal focus) B2B HUBS BASED ON PURCHASE . Spot sourcing is transaction-oriented. Systematic sourcing involves buying through prenegotiated contracts with qualified suppliers. Another important difference is that operating inputs are much more amenable to being shipped through 3rd party logistics providers like UPS. 2. In the semicommodity chemicals. CLASSIFYING SITUATIONS: This simple two-way classification . horizontal focus) Yield managers (operating supplies.manufacturing inputs versus operating inputs (the “what”). and travel-related services. and a chemicals company does not buy semiconductors. office supplies. steel.2. Unlike manufacturing inputs.
MRO hubs tend to use “horizontal” third-party logistics. Newer entrants who have started out with the hub architecture in this space include Bizbuyer. by moving from a licensed model to a hosted model for software. . Therefore. because operating inputs are common to a significant extent across a wide variety of industries.com. MRO HUBS: MRO hubs focus on improving the efficiencies in the procurement process for operating supplies for a diverse set of industries. These firms started out with an enterprise focus by licensing expensive “buy-side” software for e-Procurement to large enterprises.1. MRO.com.com. Classic examples of these players are W. they can disinter mediate existing middlemen in the channel. systematic sourcing. spot sourcing. Grainger. and Commerce One.2.com. where all catalogs are hosted on a common hub that businesses connect into. without having to replicate the fulfillment capabilities and assets owned by the current channel. Given their horizontal nature. PurchasingCenter. and by moving from an enterprise-centric model to a network-centric model. Ariba.W. vertical focus) Exchanges (manufacturing inputs. These players are horizontal in nature. These MRO players are now scrambling to reinvent themselves as MRO hubs on the Internet. and ProcureNet. vertical focus) Fig: Kaplan-Sawhney Matrix 2.Catalog hubs (manufacturing inputs.
Yield managers tend to be more vertical in nature than MRO hubs. or where there are huge fixed-cost assets that cannot be liquidated or acquired at short notice (e. Examples include human resources (Employease.com).com). Elance. They add most value in situations where there is high degree of price and demand volatility (e.g. utilities). YIELD MANAGERS: Yield managers focus on the spot procurement of operating inputs. manpower or manufacturing capacity).2. manufacturing capacity (CapacityWeb.2.com.com.com).g. These yield managers aim to insulate buyers and sellers from ups and downs in operations by allowing them to scale their operating resources upwards or downwards at short notice by participating in the spot market. utilities (Youtilities. and advertising inventory (AdAuction.. but are less vertical in nature than industry-specific vertical hubs like Chemdex or PlasticsNet.Fig: MRO hub 2. .. capital equipment (iMark.com).com).
buyers and sellers may not even know each others’ identities. . because they allow purchasing managers to smooth out the peaks and valley in demand and supply by “playing the spot market”. but buyers and sellers rarely have direct relationships. and IMX Exchange.Fig: Yield managers example 2. Exchanges serve a yield-management role. Paper Exchange. and largely focus on transactional sourcing. In fact. The exchange maintains relationships with buyers and sellers. These exchanges approximate commodity exchanges. EXCHANGES: Exchanges aim to create spot markets for commodities or near-commodities within specific industry verticals.2. in many exchanges. Examples of exchanges include E-Steel.3.
especially on specialized fulfillment and logistics requirements for each vertical. Examples include PlasticsNet. .4. CATALOG HUBS: Catalog hubs streamline the systematic sourcing of manufactured input within specific vertical industries. and SciQuest. depending upon who they create more value for. Catalog hubs need to work closely with distributors.Fig: Exchanges example 2. and creating a large universe of supplier catalogs within the vertical. These catalog hubs can be buyerfocused or seller-focused.2.com. They aim to automate the systematic sourcing process. and create value for buyers by lowering transaction costs. These players start out by putting industryspecific catalogs online. Chemdex.
REFERENCES: 1. many companies are stumbling to navigate through it. “The Asian Manager’s Handbook of E-commerce”. . The e-hub frame work will help entrepreneurs identify the promising e-hub business models ones that are most profitable and defensible. Harvard Business Review. sellers and market makers a map to the new landscape.Rajesh Chakrabarti and Vikas Kardile. “E-hubs: The new B2B marketplaces”. May-June. The Kaplan-Sawhney classification network provide some clarity by what are the different e-hubs do and how they add the most value giving buyers. 2000. 4. CONCLUSION: The B2B marketplace is changing so rapidly. Kaplan. 2.Fig: catalogs example 3. Steven and Mohanbir Sawhney. “B2B E-Commerce Hubs: Towards a Taxonomy of Business Models” 3.
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