NOTE: These papers are meant to make you think and contain thoughtful opinions.

“Some people find it useful to categorize electronic commerce by the types of entities participating in the transactions or business processes. The five general electronic commerce categories are business-to-consumer, business-to-business, business processes, consumer-to-consumer, and business-to-government.” (Schneider, G.P., (2004), pg. 5). When a person goes to a retail web site and makes a transaction, they are experiencing a business-to-customer e-business transaction. When businesses go to another businesses web site, they are experiencing a business-to-business e-business transaction. In order to fulfill the requirements or product orders for the individual customer or business, both transactions require a supply chain; however, there are differences in the fulfillment methods used for each party. This paper will examine the two primary differences between business-to-customer (B2C) and business-to-business (B2B) web site supply chains, negotiation and integration.

Negotiation

One difference between the supply chain on B2B and B2C sites is negotiation. “Selling to another business involves haggling over prices, delivery and product specifications. Not so with most consumer sales. That makes it easier for retailers to put a catalog online, and it’s why the first B2B applications were for buying finished goods or commodities that are simple to describe and price.” (CIO, (2006), n.p.).

 One company engaging in B2B e-business is Alcoa. Their web site, http://www.alcoa.com, we do not see any prices for their raw materials. Looking at a particular product, Aluminum Hydroxide, we see a description of the product and contact information for the sales representative. Businesses must contact the sales representative to negotiate a price for the raw material. In contrast we see the B2C site of http://www.walmart.com, which does not allow price negotiation, but lists the products and their retail price.

Reasons for having price negotiation on B2B sites as opposed to B2C sites is due to the quantities ordered and the methods of transportation used. When a customer orders a cellular phone from a B2C site, they generally order one phone and have it shipped by the United States Postal Service or another express shipping company. Businesses tend to order massive quantities of raw materials and the Interstate Commerce Commission regulates the transportation of the product.

Integration

“Retailers don’t have to integrate with their customers’ systems. Companies selling to other businesses, however, need to make sure they can communicate without human intervention.” (CIO, (2006), n.p.). Retailers provide a web site that customers can browse and make specific selections as the need for the product arises. On the other hand, manufactures need to be able to order and conduct business 24/7 to insure there are no interruptions in the supply chain.

In this network economic structure, companies coordinate their strategies, resources, and skill sets by forming long-term, stable relationships with other companies and individuals based on shared purposes. These relationships are often called strategic alliances or strategic partnerships, and when they occur between or among companies operating on the Internet, these relationships are also called virtual companies. (Schneider, G.P., (2004), pg. 21).

B2C businesses do not create strategic alliances with their customers within the supply chain. They basically sell the product to the customer and follow up with through customer service if there is a problem. A B2B supply chain is very different in that they form strategic alliances with their suppliers and use their suppliers Information Technology Infrastructure for business transactions.

An example of B2B supply chain integration through strategic partnerships would be Ford Motor Company. “At Ford Motor Company, we forge partnerships to better connect with our customers …We carefully select those alliance opportunities that enable us to deliver better ideas into the marketplace in new and exciting ways.” (Ford Motor Company, (2006), n.p.). Ford Motor Company uses various technologies to accomplish these strategic partnerships. Ford Motor Company chose NewView to help us launch a steel-e-commerce procurement system that maximizes efficiency and operational savings. Newview’s “Coordinated Network Procurement” accomplished the following for Ford Motor Company: Newview’s Coordinated Network Procurement application is focused on materials that exist at the “Bottom of the Bill of Materials”. These may include raw materials, fabricated parts (with high raw material content), and standard components (other things that get lost in the details).

With better management of this segment of materials, a company can:

• Reduce direct material costs by 5-10%
• Reduce administrative costs through process automation and the timely resolution of disputes
• Improve working capital efficiency by accelerating the invoice-to-pay cycle and reducing inventory expenses

Newview’s CNP is the only solution designed with a full set of processes to manage the complex environment of raw materials, fabricated parts and other components that exist at the “Bottom of the BOM”. (Newview, (2006), n.p.).

Conclusion

The differences between the supply chain for a Business-to-Customer site and a Business-to-Business site are subtle, but very important to understand. These sites differ in respect to negotiation and integration. Negotiation is very important for a Business-to-Business site because in order to be able to provide the customer with the lowest priced product, businesses need to be able to procure their raw materials at the lowest price possible. Integration is very important for the Business-to-Business site so there remains an uninterrupted supply of the raw materials to produce the finished goods for the customer. Business-to-Business sites and Business-to-Customer sites differ in respects to the supply chain, because their clientele differ in respects to the reasons they need to use the site for business transactions.

Mikhail Kniaziewicz, MIS

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