Shawn has a masters of public administration, JD, and a BA in political science.
B2B E-Commerce Defined
Elisa is the president of an auto manufacturing company. Her company requires many different types of goods and services that it procures from other companies. These types of transactions are called business-to-business (B2B) commerce because it is commerce between two different businesses rather than a business and a consumer.
An ever-growing share of Elisa's B2B transactions is e-commerce transactions. E-commerce involves commercial activities transacted through the Internet. B2B e-commerce is simply business-to-business commercial transactions that are conducted online. Let's take a quick look at the type of B2B e-commerce transactions conducted by Elisa's company.
Elisa's company relies on some e-distributors, online businesses that provide goods and services directly for Elisa's company. For example, her company produces different types of motor vehicles that require different components, such as steel, plastic, fiberglass, engine components, tires and entertainment systems.
Just like traditional brick and mortar distributors, some e-distributors are retailers, while others provide wholesale goods. For example, while the parts ordered for the production of the company's autos are provided by a wholesale e-distributor, the company's office supplies are provided by a retail e-distributer. Let's take a look at some other e-commerce options on how e-commerce may be transacted.
As mentioned earlier, Elisa's auto company needs to procure a wide variety of goods and services in order to manufacture its vehicles. E-procurement can help Elisa do this efficiently. E-procurement is an e-commerce business model where a business creates a digital marketplace where buyers and suppliers can engage in sales transactions. You can kind of think of it as Etsy for businesses, though businesses often pay for the access.
Aside from creating the online market place, the e-procurement business may also provide specialized software to help suppliers and their customers transact business, such as e-invoicing, e-auctions, e-payment, e-catalogues and order tracking, among others. In Elisa's case, her company may decide to use an e-procurement service to acquire a variety of auto parts. However, there are other options available. Let's take a look.
Elisa's company sometimes may turn to an electronic exchange. An exchange provides a marketplace that is focused on serving one vertical market, such as the steel market, chemical market or copper market. It's different from e-procurement because it's more narrowly focused. Elisa's company may utilize an exchange to acquire raw inputs, such as copper wire or steel that it will machine into engine components.
Rather than use an exchange, Elisa may have her company turn towards an industry consortium. An industry consortium is like an exchange as it also is a vertical market, but an industry consortium is owned by a specific industry, such as the aerospace industry, the auto industry and the pharmaceutical industry. An industry consortium typically will permit only a limited number of suppliers in to try to serve its members.
Private Industrial Network
Sometimes a company will ditch the middleman and create its own private industrial network. A private industrial network is a computer network owned by a company that allows its suppliers to communicate and coordinate with the company regarding its supply chain needs.
You can distinguish a private industrial network by remembering that it's private - owned by and for one business - and suppliers may participate by invitation only. For example, Elisa's company may set up a private industrial network with her most trusted supply partners to improve procurement communication and efficiency. The network will provide key information such as current inventory levels, sales data and the status on delivery of shipments.
Let's review what we've learned. Business-to-business e-commerce involves commercial transactions between two or more businesses that are undertaken digitally online. E-distributors sell goods and services online. E-procurement companies provide a digital broad marketplace where buyers and seller can engage in transactions. Exchanges are more narrowly focused than e-procurement and focus on an industry-specific market.
An industry consortium is a market developed and maintained by a specific industry and only allows a limited number of suppliers to participate. Finally, a private industrial network is a private network owned and operated by a single company that allows it and its select suppliers to communicate and coordinate concerning the company's supply chain needs.
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