Business-to-business e-commerce (B2B refers to businesses selling to other businesses. For example, when a shop (whether an online or a physical outlet) orders new products for its shelves or a factory orders new steel to make its products.
Business to business e-commerce offers benefits in cost savings and improved efficiency. Consider a completely electronic example: a supermarket that uses bar-code scanners at the cashier (it also uses bar code scanners in other areas to monitor incoming inventory, what's on the shelves, pricing and more). A computer is able to keep track of inventory, monitor buying trends and order new products when necessary. The new orders are made via a network to the computer at a factory. This computer records the order, and sends information to the sales department, production department, distribution department and accounting department to ensure the sale is made, the products are produced and delivered and a bill is sent.
Since computers can operate automatically once programmed, it saves on the cost of staff performing all operations. Computers information is precise and can be up-to-the minute if it is operating in a real-time environment. If used to underpin just-in-time systems, less storage space is required and fewer products become spoiled because they are not sold in time. Also by monitoring buying trends, retailers and manufacturers can make observations about new products that might interest consumers and when is a good time to have a sale to clear excess inventory.
Research shows that B2B e-commerce is being driven from two sides. At the practical level businesses are looking to use technology to develop improved ways of working and relationships with trading partners up and down the supply chain. At the other end of the spectrum are the e-commerce product and service providers who are developing new ideas and concepts and hoping that some will take off. There is a huge difference between using e-commerce to improve the efficiency and effectiveness of existing trading procedures and exploiting the newer business concepts in a way that only a small percentage of organisations are currently doing. Much of the attention given to B2B relates to the emerging developments such as e-marketplaces, and e-exchanges, but in reality most of the actual use is at a lower level in the e-commerce cycle.
B2B e-commerce is used to:
- Attract, develop, retain, and cultivate relationships with customers
- Streamline the supply chain, manufacturing, and purchasing processes and automate corporate processes to deliver the right products and services to customers quickly and cost effectively
- Capture, analyse, and share information about customers and company operations in order to make better and more informed decisions
Taking an order is the easy part of any e-commerce activity. The goods have then to be delivered. Much of the B2C success has been associated with the ability to download products such as music or learning material, directly from the web. Although the same model can be applied to B2B, it is more likely that there will be a need for physical delivery.