Will e-marketplaces change business forever?
Of all the changes the Web has brought to business methods, e-marketplaces are having the greatest impact to date. This is reflected in terms of growth: Merrill Lynch estimates that the Web-based business-to-business marketplaces will grow to be worth $14bn by 2002. They are so dynamic because they attack the fundamentals of trade, and by influencing cost structure, enabling collaboration and improving sourcing possibilities.
What is the most important commercial reason to get involved in an e-marketplace?
In short, cost savings. Costs are being taken out of the supply chain, new revenue streams are being generated, supplier contracts can be optimized, and quicker response times can be achieved. For example, the Volkswagen online exchange expects to save 50% on supplies through increased efficiency in procurement.
What is the most important impact e-marketplaces are having upon the supply chain?
Fear is probably the biggest user response to e-marketplaces, since suppliers do not understand what is going on. But more positively, e-marketplaces might in a sense be said to perfect the connectivity that electronic data interchange (EDI) and enterprise resource planning (ERP) systems brought to the supply chain. With the connectivity of the former and the knowledge flow of the latter come deeper ways to collaborate – a result of the many models of e-marketplaces, and clearer ways to disintermediate – since e-marketplaces bring transparency.
They are also making the supply chain more flexible – a development that has a number of ramifications. For example, it reduces customer loyalty, which means that sticking to delivery promises is vital. Alternatively, the supply chain has to be efficient in order to enable well-informed decisions.
What is the most important impact e-marketplaces are having upon procurement?
When it comes to the specifics of procurement, e-marketplaces show potential in a number of areas. For example, they give small companies greater buying power since they can club together. Alternatively, automating procurement reduces purchasing costs (research shows that in traditional procurement processes up to 10% of the total cost stems from administration). For example, FreeMarkets enables customers to identify global suppliers and prepare detailed requests for quotes by tapping into its extensive sourcing database. FreeMarkets estimates it has saved customers nearly $1.5bn to date.
When might an auction suit a business’s purposes better than an e-marketplace?
Auctions are good for spot-sourcing goods so they are useful if a company needs to make a one-off purchase or when it is buying a new product. For example, Tesco used an online auction as a one-off in August to attract corned beef suppliers. In the space of three hours the supermarket had offers from seven suppliers at lower costs than would normally be expected when its demand was immediate. The auction also meant that Tesco was able to receive offers from an open arena. In an e-marketplace it would have pre-determined suppliers.
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