Management Considerations for B2B Online Exchanges

Management Considerations for B2B Online Exchanges

Norm Archer (McMaster University, Canada)
DOI: 10.4018/978-1-60566-026-4.ch395
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Information systems that link businesses for the purpose of inter-organizational transfer of business transaction information (inter-organizational information systems, or IOIS) have been in use since the 1970s (Lankford & Riggs, 1996). Early systems relied on private networks, using electronic data interchange (EDI) or United Nations EDIFACT standards for format and content of transaction messages. Due to their cost and complexity, the use of these systems was confined primarily to large companies, but low-cost Internet commercialization has led to much more widespread adoption of IOIS. Systems using the Internet and the World Wide Web are commonly referred to as B2B (business-to-business) systems, supporting B2B electronic commerce. Technological innovations have led to several forms of B2B Internet implementations, often in the form of online exchanges. These are virtual marketplaces where buyers and sellers exchange information about prices, products, and service offerings, and negotiate business transactions. In addition to substituting proprietary lines of communication, emerging technologies and public networks have also facilitated new business models and new forms of interaction and collaboration, in areas such as collaborative product engineering or joint offerings of complex, modularized products. During the years 1999-2001 a number of online exchanges were introduced, but many of these failed (Gallaugher & Ramanathan, 2002), due mainly to an inability to attract participating business partners. Those that have survived are often owned by companies or consortia that are also exchange customers or suppliers. The objective of this overview is to describe the evolution and the characteristics of B2B Internet implementations, and to discuss management considerations, the evaluation and adoption of B2B applications, and the technical infrastructure supporting these systems. We also indicate some of the open issues that remain as the technology and its adoption continues to evolve.
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Although there are many classification schemes available for online exchanges (Choudhury, 1997; Kaplan & Sawhney, 2000), we will use a more generic and functional focus, with three categories: sell-side, buy-side, and neutral/market-type applications (Archer & Gebauer, 2001). Early B2B sell-side applications featured online catalogs, made available to the Internet community by distributors and manufacturers, often complemented by features such as shopping baskets and payment functionality. Many now provide customized and secure views of the data, based on business rules from contract agreements with individual customers. In some cases, buying processes of the customers are supported, including features such as approval routing and reporting. While some sophisticated applications exist to support collaborative forecasting or the configuration of complex products, many sell-side systems handle only the simpler transactions, such as maintenance, repair, and operation (MRO) supplies. Recently, more advanced features have become more widely available, such as CPFR (collaborative planning, forecasting, and replenishment) to support joint initiatives between customer and supplier (Holmstrom, Framling, Kaipia & Saranen, 2002).

Key Terms in this Chapter

Application Service Provider (ASP): An ASP is a service company that can support and relieve a firm from the daunting challenges of finding, hiring, inspiring and training technical personnel to manage an application in-house. An ASP provides software applications on a pay-per-use or service basis via the Internet and leased lines.

Enterprise Resource Planning (ERP): A business management system that can integrate all facets of the business, including planning, manufacturing, sales, and marketing, through a common database. As the ERP methodology has become more popular, software applications have been developed to help business managers implement ERP in business activities such as inventory control, order tracking, customer service, finance and human resources.

Extensible Markup Language (XML): Document type definitions that can be used to specify or describe various types of objects. When a set of these is used on the Web to describe product information, it is referred to as cXML or commerce XML. It works as a meta-language that defines necessary information about a product, and standards are being developed for cXML in a number of industries, performing a function similar to that of EDI for non-Web-based systems. It will help to standardize the exchange of Web catalog content and to define request/response processes for secure electronic transactions over the Internet. The processes include purchase orders, change orders, acknowledgments, status updates, ship notifications and payment transactions.

Collaborative Planning, Forecasting, and Replenishment (CPFR): CPFR is a global, open, and neutral business process standard for value chain partners to coordinate the various activities of purchasing, production planning, demand forecasting, and inventory replenishment, in order to reduce the variance between supply and demand and share the benefits of a more efficient and effective supply chain.

Electronic Data Interchange (EDI): A standard used to govern the formatting and transfer of transaction data between different companies, using networks such as the Internet. As more companies are linking to the Internet, EDI is becoming increasingly important as an easy mechanism for companies to share transaction information on buying, selling, and trading. ANSI (American National Standards Institute) has approved a set of EDI standards known as the X12 standards. Although not yet a global standard, because of EDIFACT, a standard developed by the United Nations and used primarily in non-North American countries, negotiations are underway to combine the two into a worldwide standard.

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