Page 282 - Electronic Commerce

Business-to-Business Activities: Improving Efficiency and Reducing Costs
their selling Web sites. A private store has a password-protected entrance and offers
negotiated price reductions on a limited selection of products—usually those that the
customer has agreed to purchase in certain minimum quantities. Other companies, such
as Grainger, provide additional services for customers on their selling Web sites. These
customer portal sites offer private stores along with services such as part number cross
referencing, product usage guidelines, safety information, and other services that would be
needlessly duplicated if the sellers were to participate in an industry marketplace.
257
Private Company Marketplaces
Similarly, large companies that purchase from relatively small vendors can exert
comparable power over those vendors in purchasing negotiations. The Procurement
Departments of these companies can install procurement software (you will learn more
about all types of electronic commerce software in Chapter 9), generally referred to as
e-procurement software, that allows a company to manage its purchasing function
through a Web interface. It automates many of the authorizations and other steps (see
Figure 5-1) that are part of business procurement operations.
Although e-procurement software was originally designed to help manage the MRO
procurement process, today it includes other marketplace functions, such as requests for
quote posting areas, auctions, and integrated support for purchasing direct materials.
E-procurement software for large companies can cost millions of dollars for licensing fees,
installation, and customization; however, a growing number of companies are offering
e-procurement software for smaller businesses.
Companies that implement e-procurement software usually require their suppliers to
bid on their business. For example, an office supplies provider would create a schedule of
prices at which it would sell to the company. The company would then compare that
pricing to bids from other suppliers. The selected supplier would provide product price
and description information to the company, which would insert that information into its
e-procurement software. This permits authorized employees to order office supplies at the
negotiated prices through a Web interface.
When industry marketplaces opened for business, these larger companies were
reluctant to abandon their investments in e-procurement software or to make the software
work with industry marketplaces’ software—especially in the early years of industry
marketplaces when there were many of them in each industry. These companies use their
power in the supply chain to force suppliers to deal with them on their own terms rather
than negotiate with suppliers in an industry marketplace.
As marketplace software became more reliable, many of these companies purchased
software and technology consulting services from companies, such as Ventro and e-Steel,
that had abandoned their industry marketplace businesses and were offering the software
they had developed to companies that wanted to develop private marketplaces. A private
company marketplace is a marketplace that provides auctions, request for quote postings,
and other features (many of which are similar to those of e-procurement software) to
companies that want to operate their own marketplaces.

Copyright 2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.