Supply chain management is the combination of the process and information technology that integrates the suppliers of raw materials or components,
the manufacturers or assemblers of the finished products, and distributors of the products or services into one cohesive process to include
demand forecasting, materials requisition, order processing, order fulfillment, transportation services, receiving, invoicing, and payment processing.
B2B or Business to Business refers to electronic trade or partnering between organizations. The volumes of B2B transaction is estimated to be
counted about 90% of ecommerce transaction, while B2C or business to consumer takes about 10% of ecommerce activity. Many B2B exchanges offer
functionality for managing procurement of row materials and coordinating with suppliers. Spectating of B2B market had driven the stock prices of
B2B software providers (such Ariba) to sky-high in 2000. Public B2B exchanges have not lived up to their original ambitions. Today, many companies
use both public B2B exchanges and their private supply chain management software for procurement.
Advantages and Disadvantages of Public B2B Exchanges
Public B2B exchanges often have more suppliers participating in. Companies have more options to select the suppliers that fit in their business needs,
and they also have more power in negotiating the prices and terms of services. The cost of participating in a public exchange is significantly lower
than implementing your owner SCM systems.
The disadvantages of public B2B exchanges are lack of customization and limited supplier participants in a specific industry. Both industry-specific
business requirements and company-specific business models dominate the processes of procurement. While public B2B exchanges usually have features
for supporting common procurement, they have very little to offer to support procurement processes in particular industry.
Advantages of Disadvantages of Private Supply Chain Management Systems
Private supply chain management software, on the other hand, is tailored to specific industry and particular company. SCM systems are often tightly
integrated a limited few suppliers and trading partners. The purposes of SCM is more of collaboration than price negotiation.
The disadvantage of private supply chain software, compared with public B2B exchanges, is the cost of implementation. Many small companies
who could not offer a implementation of private SCM systems, will use B2B exchanges for their supply chain management.
Strategies of e-procurement
To get the most out of supply chain management software and public B2B exchanges, large organizations have both of them in place.
They use B2B exchanges for the procurement of commonly used materials, and use private SCM systems for collaboration with the suppliers
and trading partners who are industry-specific.
The public exchanges, with their independence and neutrality, may eventually attract more buyers and suppliers together in one place. Before
that happens, companies will continuously build private exchanges in their supply chain management systems.
Related Topics
Supply Chain Execution
Supply Chain Collaboration
Supply Chain Management Software - Planning, Collaboration, Automation and Optimization
Supply Chain Project Management
Inventory Management Overview - Demand Forecasting, Inventory Monitoring and Inventory Reporting
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