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| The marketplace of on-line enterprises that seek to facilitate commercial transactions for the purchase and transfer of goods and services has become a very cluttered landscape. There are now over 1,000 business-to-business (B2B) eMarketplaces up-and-running or about to be launched - all staking a claim in the internet supply-chain universe. B2B marketplaces have been created to fill several needs: 1) efficient pricing through pooling of supply and demand, often using auctions or reverse-auctions, 2) automated transaction processing, including full integration with client ERP systems, and 3) they may facilitate fulfillment through logistics and financing services.
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| B2B marketplaces are either vertically oriented (operating within a given industry), or horizontally oriented (operating across industries).
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| B2B marketplaces can be categorized as one of three major types (show below as Figure 1):
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Buyer-dominated sourcing networks or exchanges aggregate demand and use volume to leverage prices downward through reverse-auctions, where suppliers bid for business, while also lowering transaction costs. Two prime examples of this type of site are Covisint.com and FreeMarkets.com. Covisint.com is essentially a purchasing consortium by major automakers that targets a dramatic reduction in the current $150 cost of transacting a purchase order. FreeMarkets.com uses a reverse-auction, or bidding process to place orders for commodities, components and parts. |
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Neutral exchanges or hubs are not biased toward either the buyer or seller. Their purpose is to create efficient markets by bringing larger numbers of buyers and sellers together. Examples include eSteel for the metal market and PlasticsExchange.com for resins. Neutral exchanges need a critical mass of both buyers and sellers in able to function - often a chicken and egg problem. A bias toward the buyer could bring volume sooner, but neutrality is viewed as a critical factor by B2B executives in the effort to generate truly large volume and the liquidity that volume generates. This category also includes the market hubs for maintenance, repair, and operating supplies (MRO). These hubs are generally catalog collections of supplier offerings. An example of such a site is Grainger.com. |
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Supplier-dominated exchanges are designed to benefit sellers. An example is GE Polymerland, which provides resins from a group of manufacturers. |
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| All of these B2B sites are supported by a fourth group - enabler enterprises, which provide the software backbone to run exchanges and integrate with client ERP systems: Ariba, Vertical Net, Commerce One, Oracle, and Ventro, to name a few.
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| The matrix below (Figure 1) illustrates the classification of B2B sites by buyer/supplier bias and by industry orientation:
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| Many of the 1,000+ web-based exchanges have very little actual transaction volume, and may not be financially viable long-term. While there is a clear opportunity to create value by facilitating web-based commerce, it is also clear that natural selection and the consolidation it brings is inevitable. In addition, the assumption of unfettered on-line competition from a large group of suppliers or buyers runs counter to the established trend of many businesses to reduce the number of suppliers while forging stronger long term partnerships that often involve transferring engineering responsibilities to the supply base. In that regard, commodities, standardized products, and perishables like food and flowers are the likely candidates to generate sustained volumes than more highly engineered parts and components used by heavy industry. However, any purchase can benefit from more efficient and integrated processing of the transaction.
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| Forrester Research of Cambridge Mass has recently published the following analysis:
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74% of B2B eCommerce will occur in eMarketplaces. |
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$1.4 trillion will flow through online markets in 2004, and sales completed through dynamic online pricing models will reach $746 billion in 2004 in the US. |
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93% of firms expect some of their business trade to flow over the Net in 2002. |
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A quarter of firms anticipate that most of their online trade will flow through eMarketplaces in 2002. |
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74% of B2B eCommerce will occur in eMarketplaces. |
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Purchasing execs plan to buy 64% of their indirect materials in online markets by 2002. |
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| However,
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Many B2B Dot Coms will die within 12 months. |
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The Forrester model predicts just 181 will be left standing in 2003. |
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| See the Supply Chain section of the MoreSteam.com Article Archive for online articles and white papers. In particular, see the Forbes.com article Best of the Web - B2B for a comprehensive discussion of the current B2B landscape.
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