Introduction

Applied Management Research Project

VGSOM, IIT Kharagpur

Author

Jishnu Roychaudhuri

VGSOM, IIT Kharagpur

11BM60010

Academic Guide

Prof. Sujoy Bhattacharyya

VGSOM, IIT Kharagpur

Introduction

B2B transactions represent a much larger percentage of the global economy than B2C transactions. Automating the procurement process using online B2B exchanges lowers the cost per transaction and increases market reach for both buyers and suppliers. These exchanges or hubs are a primary means of collaboration because the members of the hub (be it suppliers, customers, financial institutions etc.) can avoid forming numerous individual interfaces.

A B2B marketplace or exchange creates an electronic space in which the buyers and sellers can optimize, automate and coordinate transactions. A successful exchange will result in faster decision making, lower costs and inventory, and better collaboration, planning and production. 

B2B marketplaces include the following:

1. Supplier and Service broker services
2. Supplier and product search functionalities
3. Bidding events, including setup and pre-qualifying bidders
4. Cost-savings identification
5. Access to larger market 
6. Supplier identification and support
7. Online catalogs listing products, sales promotions, and special pricing
8. Online SRM functions including strategic sourcing for direct materials
9. Open, standard-based systems for automated connections
10. Financial billing and payment processing for faster transfer of funds to suppliers

Traditionally, the ownership model of the B2B exchanges are classified as follows:

1. Independent public trade exchanges or public marketplaces 
2. Private Trade exchanges - Trade exchanges hosted by a single company for its own sourcing.
3. Consortia Trade exchanges - These web based marketplaces are semi public in nature and operate in a some-to-many model. Normally a consortia of companies form such an exchange to find out new suppliers. E.g: Ford, GM and Daimler-Chrysler formed a consortium-based exchange - Covisint, in 2000.
4. Virtual Trading exchanges - online trading exchanges that enable both information integration and collaboration between multiple trading partners.

The following figure shows the interactions among the various players in a B2B hub/exchange:

The marketplace is placed at the center because it serves as a hub for numerous transactions among the network.