Trading relationships in B2B markets
Application service provision
CommerceOne, SAP Portals, Hewlett-Packard and other organisations provide open portal
solutions offering fully integrated packages that provide companies with complete
end-to-end solutions. In other words, their promise is to unify disparate applications,
information and services. However, the availability of high-performance solutions does
not necessarily equate to high levels of uptake of such solutions. Many organisations are
currently taking a piecemeal approach towards the adoption of Internet technologies.
There are examples where the inbound logistical and e-procurement systems are
completely integrated with the outbound systems: for example, POSCO, the world’s
largest steel manufacturer, uses Oracle’s E-Business Suite in order to reduce budgeting
time (by as much as 80 days in some instances), reducing costing time and sales planning
lead time, and simplifying order processing for tens of thousands of daily orders. It
should be remembered that not all organisations in B2B markets have fully integrated
networked systems. Indeed POSCO had many disparate systems in each application area
that could no longer meet the company’s growing needs. Collaboration with Oracle
helped to streamline operations and foster interoperability between strategic business
units throughout the company. In cases where organisational use of Internet technologies
is limited, levels of involvement with the online trading process will be reduced and the
organisation may be using the web to merely establish an online presence to provide
customers with company information.This section focuses on the potential impact of the Internet on the exchange process,
buying functionand trading partnerships.Table 11.1Potential advantages of online purchasing systemsAdvantage factor Online purchasing situations
Quality of information Ensures access to comparable information whereas incomplete
knowledge can cause confusion in human-based systems as parties
may not have access to the same information.
Uncertainty Is potentially lower than for human systems. This means that in
routine purchasing situations (at least) there is potential advantage in
outsourcing the purchasing function. Potentially, removes some of
the need for vertical integration.*
Risk From a functional perspective risk can be reduced by improvement of
buyer information. However, the risk of fraud is significantly increased
when dealing with previously unknown buyers and suppliers.
Frequency Allows better management of ordering (automated grouping of small
orders is practicable).
Coordination Rather than having networks only, coordination links existing trading
partners in a tightly coupled arrangement. Such new electronic
markets could conceivably include larger numbers of buyers and
sellers (Malone et al., 1987). Additionally, coordination reduces the
costs of searching for appropriate goods and services.
* Vertical integration refers to the practice of supply chain activities being controlled within an organisation.Trading relationships in B2B markets