Page 138 - Introduction to Electronic Commerce and Social Commerce

118 4 Business-to-Business E-Commerce

and Samsung Group operates the Samsung iMarketKorea to the one we described for B2C. For B2B group purchasing
(imarketkorea.com), which provides procurement services in China, see Young (2015). Two sub-models are in use:
and MRO goods. Samsung’s iMarketKorea’s revenue comes internal aggregation and external (third-party) aggregation.
primarily from B2B transactions (see Online File W4.3).
This practice is popular in the healthcare industry in the Internal Aggregation of Purchasing Orders
United Kingdom, the United States, and other countries
where hospitals are banding together to buy their supplies at Large companies, such as GE, spend many millions of dol-
a quantity discounted low prices. lars on MROs every year. These companies aggregate the
orders from their subsidiaries and various departments
(sometimes there are hundreds of them) for quantity dis-
SECTION 4.5 REVIEW QUESTIONS counts. They can cut administrative costs by 20%.

1. Describe the manual tendering system and its deficien- External Aggregation for Group Purchasing
cies.
2. How do online reverse auctions work? Many SMEs would like to enjoy quantity discounts but have
3. List the benefits of Web-based reverse auctions. difficulty finding others to join a group purchasing organiza-
4. Describe group reverse auctions. tion to increase the procurement volume. Finding partners
can be accomplished by an external third party such as
BuyerZone (buyerzone.com), the Healthcare Supply Chain
4.6 OTHER E-PROCUREMENT METHODS Association (supplychainassociation.org), or the United
Sourcing Alliance (usa-llc.com). The idea is to provide
Other innovative e-procurement methods have been imple- SMEs with better prices, larger selections, and improved ser-
mented by companies. Some common ones are described in vices by aggregating demand online and then either negotiat-
this section. ing with suppliers or conducting reverse auctions. The
external aggregation/group-purchasing process is shown in
Figure 4.8.
Desktop Purchasing Several large companies, including large CPA firms and
software companies such as EDS Technologies (edstech-
Desktop purchasing refers to purchasing by employees nologies.com) and Ariba, Inc. (ariba.com), provide external
without the approval of supervisors and without the involve- aggregation services, mainly to their regular customers.
ment of a procurement department. This usually is done Yahoo! also offers such services. A key to the success of
by using a purchasing card (P-card). Desktop purchasing these companies is a critical mass of buyers.
reduces the administrative cost and the cycle time involved
in purchasing urgently needed or frequently purchased items
of small dollar value. This approach is especially effective Buying from Other Sources
for MRO purchases.
The desktop purchasing approach can be implemented by Section 4.2 described how companies use e-distributors as
collaborating with external private exchanges. For instance, sales channels. When buying small quantities, purchasers often
Samsung Electronics of South Korea, a huge global manu- buy from an e-distributor. Another option for e- procurement is
facturer, and its subsidiaries, have integrated its iMarket- to buy at a B2B exchange using one of several available
Korea (imarketkorea.com) exchange (see Online File methods. In all of these options, one may automate some
W4.3) with the e-procurement systems of its buying agents. actions in the process, such as the generation of a purchasing
This platform can also be linked easily with group purchas- order (e.g., see esker.com and ariba.com).
ing, which is described next.
Acquisition via Electronic Bartering
Group Purchasing
Bartering is the exchange of goods or services without the
Many companies, especially small ones, are moving to group use of money. The basic idea is for a company to exchange
purchasing. With group purchasing, orders from several its surplus for something that it needs. Companies can adver-
buyers are aggregated so that better prices due to larger tise their surpluses in classified ads and may find a partner to
quantities purchased can be negotiated. This model is similar make an exchange, but in many cases, a company will have