PROCURMENT OF ELECTRONIC MARKETPLACES UTILISATION THROUG B2B E-COMMERCE

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1 PROCURMENT OF ELECTRONIC MARKETPLACES UTILISATION THROUG B2B E-COMMERCE Dr.P.Deivanai M.Com., MBA., M.Phil., Ph.D., Assistant professor of Commerce Avinashilingam Institute for Home Science and Higher Education for Women, Coimbatore -43 ABSTRACT Today many of our banking and shopping transaction by a simple click of mouse. While this means a lot of comfort, convenience and cost savings to us, it also exposes us to new-age risks like phishing. Customers can order products 24Hours a day wherever they are. They do not have to sit in traffic, find a parking space, and walk through countless aisles to find and examine goods. They do not have to drive all the way to a store, only to find out that the desired product is out of stock. There are many more factors involved that have influence on online consumer behavior while he would do online shopping, in simple word, it is a complex mixtures of so many factors such as social, culture, education, race, personality, environment and resources availability. It involve many variables some are controllable and some are uncontrollable such as environment and consumer personality are uncontrollable variable which always prevail in every online transaction but some are in our span of control such as medium of exchange, medium of goods information, products or services characteristics, merchant or inventory characteristics. There are other factors as well like building trust factor, confidence, appealing website, proper and full information about goods and services by this purchasing decision would be more encouraged. Key words: Commerce, Information, Services, Customer, Decision. INTRODUCTION E- Commerce is a technology mediated exchange between parties (individuals or organizations) as well as the electronically based intra or organizational activities that facilitate such exchanges. It is the business option in which the transactions take place via telecommunications networks. It changes the way you shop, learn, interact and transact business: this wave of emerging technology affects every facet of your lifestyle, home as well as your workplace. E-Commerce is directly or indirectly applicable in all areas of our life be it banking, entertainment, on line order processing cycle or SCM(Supply Chain Management) Due to its wide variety of applications e-commerce has gained a lot of popularity over the decade. It has drawn the attention of researchers regarding the new technologies and resolving the security issues regarding the electronic transactions. E Commerce has been defined broadly as the business transactions of business over the web. Just as the 80 s and 90 s were characterized by the businesses achieving greater efficiencies within their organization using information technology, the last half of this decade is seeing a new wave of increased efficiencies by extending the information technology to the web, both to the trading partners, as well as to end consumers. While efficiencies lead to increased profitability, the web offers others advantages, such as a greater reach, short-term relationships, one-toone marketing, re-intermediation, dis-intermediation etc. Which are either difficult, or impossible to do in the traditional physical economy. Obviously, electronic commerce will first pass through the phase of electrification of current trading practices, and only 82

2 later evolve into something radically different from its physical counterpart. E-commerce is definitely the future. It could become a significant global economic element in the future. The infrastructure of EC is networked computing. It connects several computers and other electronic devices by telecommunication networks. This allows the user to access information stored in several places and to communicate and collaborate with others from their desktop computers. A vast majority of people use computers connected to a global networked environment known as internet, or its counterpart within organization called an intranet. This new breed of computing is helping large number of organization. E- Business involves changes in an organizations business and functional processes with the application of technologies, philosophies and computing paradigms of the new digital economy. It is an internet initiative which transforms business relationships. It includes all aspects of e-commerce. With the help of e-business solutions, the companies have succeeded in developing their technology and increasing their turnover. Together e-business and e-commerce have helped create a system of applications and utilities whereby money, information and services can be exchanged via the web. It is important to align the main business of the firm with the e-business strategy of the firm in order to succeed. RESEARCH MODEL An electronic market is an inter-organisational information system through which multiple buyers and sellers interact to accomplish one or more of the following market making activities. Identifying potential trading partners Selecting a specific trading partner Execution of trade transitions An electronic market place allows buyers, sellers, independent third parties and multi-firm consortiums to exchange information about prices and product offerings. It has been suggested that electronic markets will create great benefits for both buyers and suppliers. At the same time, some of the myths still surrounding electronic markets have been challenged. STATEMENT OF THE PROBLEMS Specifically, this research is concerned with planned utilization of electronic market places as there were indications in India that very few companies were utilizing such markets at the point of time of this research leading to the following three research questions. To what extent do utilize the electronic market place for purchase? What benefits do organizations expect from utilizing electronic market place for purchase? Procurement between business partners on electronic markets is the dependent construct in this research attempts to explain variation in planned utilization of electronic procurement markets both by operational and a strategic variable. The operational variable was defined as the numbers of purchase orders issued by the organization, while the strategic variable was defined as the strategic business importance of electronic markets for the organization. RESEARCH DESIGN Research design is a plan structure and strategy to answer to problem. There are several methods of data collection. A systematic and scientific methodology, which is referred to as research design determines the correctness and accuracy of the results obtained. In the present study, exploratory research design has been used. The correlation study is successful in identifying the association among the variables upon discovery of such closely associated variables upon discovery of such closely associated variables. DATA COLLECTION The secondary data has been collected by scanning available literature, various professional magazines, works carried by other research scholars, various research agencies report and various policy announcements. BUSINESS MODELS OF E-COMMERCE To transform the scenario of the business, there are various models of e-commerce, which are being proposed to establish and electronic link between the businesses and consumers. These models have brought business and consumer closer to each other & transformed the way of conducting the business drastically. Business models are being change field as following: Business to consumer (B2C) Business to Business (B2B) 83

3 Consumer to consumer (C2C) Consumer to Business(C2B) Business to Government(B2G) BUSINESS TO BUSINESS (B2B) Business-to-Business involves online transactions between two businesses or any to organization. In B2B companies buying from and selling to each other online. But there s more to it than purchasing. It s evolved to encompass supply chain management as more companies outsource parts of their supply chain to their trading partners. A large number of companies are adopting this technique to curb the existing inefficiencies involved in potentially time consuming and tedious tasks, while cutting down the costs. It links suppliers, factories, distributors and retailers directly. B2B activity refers to all e-commerce transactions that can occur between to organizations. B2B include online companies that specialize in marketing strategies, advertising, companies, internet consultants, website development etc. DEVELOPMENT OF B2B E-COMMERCE The confused picture is not always helped by the wide variety of articles on such a complex subject. There is no single route map that a hard pressed business manager can follow to ensure they are part of the B2B success story. There is a huge difference between using e-commerce to improve the efficiency and effectiveness of existing trading procedures and exploiting the newer business concepts in a way that only a small percentage of organizations are currently doing. It would be easier to describe B2B e- commerce as a development process. B2B electronic commerce can be implemented by different e-marketplaces. There are many different types of E-marketplace based o a range of business models. These models can be broadly divided into categories based on the way in which there is operated. Chat -1 BILLER ( SELLER) DIRECT MODEL- B2B Solle's accounts receivables Entrolment Earler (Seller Direcct) invoice presentment payment invoice review INDEPENDENT E-MARKETPLACE This category is operated by a third party who is neither a buyer nor a seller. They are usually public marketplace ope to all buyer or sellers in a particular industry or region. There will typically be some form of payment required to participate. The main reason for the third party creating this type of e-marketplace is to generate revenue. BUYER ORIENTED E-MARKETPLACE This category is normally run by a consortium of buyers in order to establish an efficient purchasing environment. The intention is help buyers lower their administrative costs and achieve optimum prices from the suppliers. The e-marketplace is open to existing suppliers who are encouraged to place their catalogues online so that they can be accessed by all members of the consortium. SUPPLIER ORIENTED E-MARKETPLACE This marketplace is set-up and operated by a number of suppliers who are seeking to establish an efficient sales channel via the internet to a large number of buyers. 84

4 VERTICAL AND HORIZONTAL E- MARKETPLACES Vertical e-marketplaces address the requirements of a specific industry sector such as automotive, chemical, construction or textiles. A large organization may set up such a marketplace to enable it to work with smaller businesses in its supply chain, since it offers the potential to lower some of the high overheads associated with working with a smaller supplier. PRIVATE INDUSTRIAL NETWORKS Private Industrial Networks (PINs) from the largest part of B2B e-commerce today. They are web enabled networks for the coordination of trans-organisational business processes. They focus on continuous business process coordination between companies/ E-MARKETPLACE 1. Vertical e-marketplace A vertical e-marketplace spans vertically up and down every segment of one specific industry. Each level of the industry has access to every other level, which greatly increases collaboration. Buyers and Sellers in the industry are connected to increase operating efficiency, and decrease supply chain costs, inventories, and cycle times. This is possible because buying selling items to customers in a similar industry standardizes needs, therefore reducing the need for outsourcing many products. 2. Horizontal E-Marketplace A Horizontal E-Marketplace connects buyers and sellers across many industries. The most common type of materials traded horizontally across industries is MROs( Maintenance, Repair and operations materials). These items are popular because they are crucial to the daily running of a business, no matter what industry(or what level of that industry) you are in. These articles are mainly business and consumer articles. Many corporations have these bought directly on line by the maintenance team in order to relieve the purchasing department/ 3. No frills e-marketplace Developed in response to customers want to purchase products ithout service ( or ith very limited service). The approach parallels the B2C offering of no-frills Budget Airlines. B2B Hubs MRO (Maintenance, repair and operating hubs) These hubs concentrate on goods with low value. The transaction cost is relatively higher. These hubs provide vale by increasing the efficiency in the procurement process. These hubs use third party logistics supplier to deliver goods, thus enabling them to disintermediate or bypass existing middle men in the channel. Yield manager This type of e-markets creates spot markets for common operating resource like manufacturing capacity, labour or advertising. This functionality allows the companies to expand or contract their operations at a short notice. Yield managers add great value is situations here there is high degree of price and demand volatility, and where fixed assets cannot be liquidated or acquired quickly. Exchange Online exchange allow purchasing manager to effectively manage peaks and ebbs in demand and supply by allowing them to exchange commodities or near commodities for production. These exchanges maintain relationships with buyers and sellers focused or seller focused. 85

5 Operating input manufacturing input Catalog hubs Systematic Sourcing MRO hubs Spot sourcing Ariba BizBuyer.com Yield managers Capacityweb.com Employease Plastics net.com chemdex Exchanges E-steel Paper exchanges.com Source : E Hub the B2Bmarketplaces by Steven Kaplan and mogarnbir shawhney Harvard Business review may-june Private Exchanges In these exchanges company connects with its supplier base or known customer base. In other words it is one to many connections between the company and its trading partners. In private exchanges companies do not look beyond their existing customer / supplier base. These exchanges provide deep collaboration and focus on direct material procurement capabilities. These exchanges generally have sophisticated e-market capabilities, developed through use of advanced software applications and integration with trading partner s ERP systems. Private exchanges offer many advantages. They offer grates privacy, security and superior collaborative capabilities. The provide an opportunity for increased competitive advantage Industry consortium This model provides some to many connection among industry members and their trading partners. These e-markets give individuals members access to each other s trading partners. These exchange also offer collaborative capabilities as private exchanges. Industry consortiums serve large and captive customer based. Independent markets This type of e-market brings buyers and sellers come together. This is many -to- much connection among buyers and sellers. This market has widest variety of participants. But make collaboration difficult. These exchange focus on low risk activities like MRO and indirect material. These markets have a challenging task of building trust among unfamiliar buyers and sellers. Many independent markets will offer trust building services like supplier ratings, credit verification and escrow services. It s being said that the promise B2B e-commerce is yet to be realized. Its also being emphasized that B2B e-commerce needs to focus on broader set of activities in supply chain management, supply chains need to move away from simple auction and procurement capabilities. It needs to move toward more collaborative supply chain planning and execution automation for indirect and direct materials. In this context they introduce the concept of ehubs. B2B Procurement processes B2B e-commerce impacts across key areas within a business although the level of impact may vary according to the particular emphasis being given to an implementation. According to a report from the National Association of purchasing Management and forester research, companies in the US are only now beginning to move their procurement online. Almost half of the companies in the survey said they were in the earliest stage of using the Internet for purchasing. The large organizations were more likely to have purchased online and to have experienced major benefits from doing so and 27% claimed they had actually saved money. The percentage of business carried out this way was still small, with only 6% of the companies completing more than 40% of their purchasing online. Interest in e-procurement has been fueled by a number of developments, not all of which have necessarily employed high technology solutions. Innovative product and service suppliers, hoping to move into B2B, have found problems understanding the complex relationships that exist in the supply changing scenario and are increasingly looking towards suppliers who have traditionally operated in this arena. Suppliers have found that the purchase of direct materials is much more complex than indirect. There is no one reason but rather a whole range of issues that make it more difficult. 86

6 Fulfillment Taking an order is the easy part of any e-commerce activity. The goods have then to be delivered. Much of the B2B success has been associated with the ability to download products such as music or learning material, direct from the web although the same model can be applied to B2B, it is more likely that there ill be a need for physical delivery. There is much talk about globalization and the ability of the internet to give even the smallest business a presence in the global market place. This vision is at odds with the real world experience of many businesses. Even large multinationals remain suspicious of the potential for e-commerce to support a oneworld market theory. They still find that customers remain predominantly local and that the ability to physically deliver the goods is a prime consideration. The companies involved in B2B deliveries have an advantage over those involved in B2C trading. They can design efficient routes fairly easily since business customers tend to be clustered in areas. Shipments are typically much larger and consequently, B2B shipments are usually two-to-three times less expensive than B2C deliveries. Managing trading partner relationships The effective use of e-commerce can have a significant impact on trading partner relationships. For some, B2B e-commerce is a significant enabler in their move towards greater trading partner collaboration. E-Commerce technologies have allowed even the smallest companies to improve the processes for interfacing with customers. They are no able to develop services for individual clients rather than provide a standard service. Pentwyn Splicers from pontypool manufacture pneumatic splicers into the UK and world textile market. They evaluated all aspects of their business professes to determine where the greatest return could be obtained. Using the web to sell more products was an initial considerations but it was in the provisions of customer service and support to their overseas distributors that the greatest benefits have actually been achieved. Services can be customized to meet individual trading partner needs. This includes the provision of effective communications about the status of orders and delivery, together with the speedy resolution of queries and post-sales support issues. Such services have proved to be invaluable to pentwyn splicers, enabling them to provide a level of support which their larger competitors are not able to replicate. Conclusion E-commerce has been verified and proved that B2B e-commerce can save or make your company money. There has been study carried out by Goldman & sachs in which they compared various business to business techniques with the traditional techniques or methods of business such as paper, telephone or fax etc. & the found a drastic decrease in the cost in doing the business with e- commerce. The challenge in India will be to foster the creation of such B2B services. A combination of industry incumbents and strategic investors will be able to build a complete, full service marketplace. While the incumbents will provide the liquidity and industry/functional domain knowledge, the investors will provide risk capital to build key support services. Some ways companies have benefited from B2B e-commerce include: Managing inventory more efficiently Adjusting more quickly to customer demand Getting products to market faster Cutting the cost of paperwork Reigning in rogue purchases Obtaining lower prices on some supplies. Reference 1. Chitvu, A.M., Kauffmann.R.J(200), Limits to value in electronic commerce related IT investments Journal information systems, Vol,17,No.2,PP Earl, M.J(2000), Evolving the e-business strategy review, Vol.11No.2,P Mahadevan(2000) Business modles for internet based E-cokmerce an anatomy California Management Review, Vol.42, No.4 PP Rajv rastogi, India: country Report on E-Commerce initiatives country presentations: