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BUSINESS MODELS OF E-COMMERCE

There are four main general e-commerce models:

1. Business to Business (or B2B) e-commerce (sometimes called e-procurement)

Business-to-business (B2B) describes commerce transactions between businesses, such as between a

manufacturer and a wholesaler, or between a wholesaler and a retailer. The volume of B2B transactions
is much higher than the volume of B2C transactions. The primary reason for this is that in a typical
supply chain there will be many B2B transactions involving subcomponent or raw materials, and only
one B2C transaction, specifically sale of the finished product to the end customer. For example, an
automobile manufacturer makes several B2B transactions such as buying tires, glass for windscreens,
and rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a
single (B2C) transaction.

Example
Cisco is an example of one of the first B2B catalogs online.
Other examples of B2B e-commerce are intranet services and Web meetings.

2. Business to Consumer (or B2C) e-commerce

In B2C transactions, online transactions are made between businesses and individual
consumers. Businesses sell products and services through electronic channels directly to the
consumer (Bidgoli, 2002, p.50).

B2C E-Commerce involves what is known as electronic retailing or e-tailing. E-tailing involves
online retail sales. E-tailing makes it easier for a manufacturer to sell directly to a customer,
cutting out the need for an intermediary (retailer). With B2C transactions there is no need for
retailers and therefore, no need for a physical store from which to distribute products. An
electronic or Web storefront refers to a single companies Web site where products and
services are sold. Customers can browse online catalogs or electronic storefronts when it best
suits them. Amazon.com is an excellent example of a B2C company. Here, customers can
browse catalogs when they want, place an order and the product of service will be delivered
directly to them.

Example
Amazon is an example of one of the first and still one of the most successful B2C e-
commerce companies. The B2C model sells goods or services to the consumer, generally
using online catalog and shopping cart transaction systems. Services such as subscriptions
to information sites or online data backup are also examples of B2C e-commerce.

3. Business-to-government (or B2G) e-commerce

It often referred to as a market definition of "public sector marketing" which encompasses

marketing products and services to government agencies through integrated marketing
communications techniques such as strategic public relations, branding, marcom,
advertising, and web-based communications.

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Examples of B2G of domestic production may be the projects zakupki.gov.ru, tendery.ru.

Typically, Internet resources of B2G directions can be: 1) sites of public authorities, both of
local and federal levels. At such resources there are posted news of regions, adopted bills,
etc.; 2) information resources, portals, useful to public officials and employees, focused
primarily on them; 3) Internet projects dealing with tenders, procurement, quotes, contests,
which show information about the conditions of passage and a list of necessary
documentation for participation.

4. Consumer-to-consumer (or C2C) e-commerce

Consumer2Consumer (C2C) or as it is sometimes referred to Peer2Peer (P2P) exchanges
involve all transactions between and among consumers. These transactions can also
include third party involvement, usually in the form of those who facilitate the marketplace
such as EBay.com. C2C exchanges can include classified ads music and file sharing,
career and job websites and also personal services such as dating websites.

In C2C networks, consumers sell goods and services to other consumers. There are
millions of sellers with different items to sell and an equally large number of buyers. Finding
each other can incur quite a high cost to both buyer and seller, and thus this is why
intermediaries like eBay are so important. They simply mediate between consumers who
want to buy and sell, and take small cuts of the sellers profit as a fee for bringing their
customers to one marketplace.

Consumer2Consumer e-commerce has given online shopping and trading a new

dimension. While this sort of trading is prevalent in the offline world (garage sales, etc) it
was not expected to take off so well online, due to the anonymity of users.
Example
Craig's List and e-Bay are examples of C2C where consumers can post classified ads or
offers to sell their property to other consumers. This is the fastest growing segment of e-
commerce thanks to the advent of social networking.

OTHER MODELS -

C2A (Customer to Administration)

- Electronic web-based means that enable the citizens to pay their taxes and obligations to the
public administration. They also provide updated information aimed at the citizens.
Example
Paying taxes & fees

A2C (Administration – to – Customer)

- Electronic internet-based solutions by means of which the public administration sends
notifications to the citizens
Example
Disseminating information to consumer forums etc.

Examples of E-commerce Models

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You are a computer manufacturing company who performs the following activities on
the Internet:
– Purchases parts (e.g. hard drives, power supplies etc.) from a supplier (B2B)
– Sells computers to individuals (B2C)
– Sells computers to the Government to be used in schools (B2G)
– On eBay.com individuals buy and sell this brand of computers (C2C)
Supply chain
A supply chain is a system of organizations, people, technology, activities, information and resources
involved in moving a product or service from supplier to customer. Supply chain activities transform
natural resources, raw materials and components into a finished product that is delivered to the end
customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any
point where residual value is recyclable. Supply chains link value chains.

The Council of Supply Chain Management Professionals (CSCMP) defines Supply Chain Management
as follows: “Supply Chain Management encompasses the planning and management of all activities
involved in sourcing and procurement, conversion, and all logistics management activities. Importantly,
it also includes coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third-party service providers, and customers. In essence, supply chain management
integrates supply and demand management within and across companies. Supply Chain Management is
an integrating function with primary responsibility for linking major business functions and business
processes within and across companies into a cohesive and high-performing business model. It includes
all of the logistics management activities noted above, as well as manufacturing operations, and it drives
coordination of processes and activities with and across marketing, sales, product design, finance and
information technology.”

Supply chain management (SCM)

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Supply chain management (SCM) is the management of a network of interconnected businesses

involved in the ultimate provision of product and service packages required by end customers (Harland,
1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process
inventory, and finished goods from point of origin to point of consumption (supply chain).

Another definition is provided by the APICS Dictionary when it defines SCM as the "design, planning,
execution, control, and monitoring of supply chain activities with the objective of creating net value,
building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with
demand, and measuring performance globally."

Thus, the main aim of supply chain management is to enable best utilization of resources like including
distribution capacity, inventory and labor to fulfil the needs of the customer. In order to meet its
objective of matching demand with supply with the minimal inventory, the SCM includes liaising with
suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost
and transportation, implementing JIT (Just In Time) techniques to optimize manufacturing flow;
maintaining the right mix and location of factories and warehouses to serve customer markets, and using
location/allocation, vehicle routing analysis, dynamic programming and, of course, traditional logistics
optimization to maximize the efficiency of the distribution side.

Networks and distribution facilities functions

a. Customer service management

b. Procurement
c. Product development and commercialization
d. Manufacturing flow management/support
e. Physical distribution
f. Outsourcing/partnerships
g. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its
customers. Customer service is the source of customer information. It also provides the customer with
real-time information on scheduling and product availability through interfaces with the company's
production and distribution operations. Successful organizations use the following steps to build
customer relationships:

• determine mutually satisfying goals for organization and customers

• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are drawn up with suppliers to support the manufacturing flow management process and
the development of new products. In firms where operations extend globally, sourcing should be

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managed on a global basis. The desired outcome is a win-win relationship where both parties benefit,
and a reduction in time required for the design cycle and product development. Also, the purchasing
function develops rapid communication systems, such as electronic data interchange (EDI) and Internet
linkage to convey possible requirements more rapidly. Activities related to obtaining products and
materials from outside suppliers involve resource planning, supply sourcing, negotiation, order
placement, inbound transportation, storage, handling and quality assurance, many of which include the
responsibility to coordinate with suppliers on matters of scheduling, supply continuity, hedging, and
research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be integrated into the product development process in order to
reduce time to market. As product life cycles shorten, the appropriate products must be developed and
successfully launched with ever shorter time-schedules to remain competitive. According to Lambert
and Cooper (2000), managers of the product development and commercialization process must:

1. coordinate with customer relationship management to identify customer-articulated needs;

2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and integrate into the best
supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process produces and supplies products to the distribution channels based on past
forecasts. Manufacturing processes must be flexible to respond to market changes and must
accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in
minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times,
meaning improved responsiveness and efficiency in meeting customer demand. Activities related to
planning, scheduling and supporting manufacturing operations, such as work-in-process storage,
handling, transportation, and time phasing of components, inventory at manufacturing sites and
maximum flexibility in the coordination of geographic and final assemblies postponement of physical
distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the

customer is the final destination of a marketing channel, and the availability of the product/service is a
vital part of each channel participant's marketing effort. It is also through the physical distribution
process that the time and space of customer service become an integral part of marketing, thus it links a
marketing channel with its customers (e.g., links manufacturers, wholesalers, retailers).

f) Outsourcing/partnerships

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This is not just outsourcing the procurement of materials and components, but also outsourcing of
services that traditionally have been provided in-house. The logic of this trend is that the company will
increasingly focus on those activities in the value chain where it has a distinctive advantage, and
outsource everything else. This movement has been particularly evident in logistics where the provision
of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics
partners. Also, managing and controlling this network of partners and suppliers requires a blend of both
central and local involvement. Hence, strategic decisions need to be taken centrally, with the monitoring
and control of supplier performance and day-to-day liaison with logistics partners being best managed at
a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to market
share and profitability. Taking advantage of supplier capabilities and emphasizing a long-term supply
chain perspective in customer relationships can both be correlated with firm performance. As logistics
competency becomes a more critical factor in creating and maintaining competitive advantage, logistics
measurement becomes increasingly important because the difference between profitable and
unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms
engaging in comprehensive performance measurement realized improvements in overall productivity.
According to experts, internal measures are generally collected and analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

APPLICATIONS OF E-COMMERCE TO SCM

E-commerce affects the distribution channels through which consumers and businesses have
traditionally bought and sold goods and services.

E-Supply chain

As brick and mortar enterprises go about web enabling their processes, there is one area where most of
the early action should take place - the Supply Chain. A web enabled Supply Chain management (e-
SCM) solution is the digital nervous center of the entire business and an effective e-SCM solution can
save companies millions of dollars in costs.

E-SCM is the optimal combination of technology and business processes that optimizes delivery of
goods, services and information from the supplier to the consumer in an organized and efficient way. It
gives companies involved in developing, manufacturing, distributing and retailing of products access to
all of the critical information they need to plan their operations in an efficient way - whatever and
wherever they need it. A complete supply chain management solution also includes customers, service
providers and partners. So, we can conclude that e-SCM is a large, dynamic network of complex but
well-defined relationships with multiple channels in the business which provides accurate information to
everyone in the network.

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Impact of E-Commerce on Supply Chain Management

A production supply chain refers to the flow of physical goods and associated information
from the source to the consumer.

E-commerce impacts supply chain management in a variety of keyways. These include:

 Cost efficiency: E-commerce allows transportation companies of all sizes to exchange

cargo documents electronically over the Internet. E-commerce enables shippers, freight
forwarders and trucking firms to streamline document handling without the monetary
and time investment required by the traditional document delivery systems. By using e-
commerce, companies can reduce costs, improve data accuracy, streamline business
processes, accelerate business cycles, and enhance customer service.

 Changes in the distribution system: E-commerce will give businesses more

flexibility in managing the increasingly complex movement of products and information
between businesses, their suppliers and customers. E-commerce will close the link
between customers and distribution centers. Customers can manage the increasingly
complex movement of products and information through the supply chain.

 Customer orientation: E-commerce is a vital link in the support of logistics and

transportation services for both internal and external customers. E-commerce will help
companies deliver better services to their customers, accelerate the growth of the e-
commerce initiatives that are critical to their business, and lower their operating costs.
Using the Internet for e-commerce will allow customers to access rate information,
place delivery orders, track shipments and pay freight bills.

 Shipment tracking: E-commerce will allow users to establish an account and obtain
real-time information about cargo shipments. They may also create and submit bills of
lading, place a cargo order, analyze charges, submit a freight claim, and carry out many
other functions. In addition, e-commerce allows customers to track shipments down to
the individual product and perform other supply chain management and decision
support functions. The application uses encryption technology to secure business
transactions.

 Freight auditing: This will ensure that each freight bill is efficiently reviewed for
accuracy. The result is a greatly reduced risk of overpayment, and the elimination of
countless hours of paperwork, or the need for a third-party auditing firm. By
intercepting duplicate billings and incorrect charges, a significant percent of shipping
costs will be recovered. In addition, carrier comparison and assignment allows for

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instant access to a database containing the latest rates, discounts, and allowances for
most major carriers, thus eliminating the need for unwieldy charts and tables.

 Online Shipping Inquiry: This gives instant shipping information access to anyone
in the company, from any location. Parcel shipments can be tracked and proof of
delivery quickly confirmed. A customer's transportation costs and performance can be
analyzed, thus helping the customer negotiate rates and improve service.

E-Supply Chain Management

The online channel (Internet) provides :-

1. Online shopping

Online shopping is the process consumers go through to purchase products or services over
the Internet. An online shop, e-shop, e-store, internet shop, web-shop, web-store, online store,
or virtual store evokes the physical analogy of buying products or services at a bricks-and-
mortar retailer or in a shopping mall.

Online shopping is a type of electronic commerce used for business-to-business (B2B) and
business-to-consumer (B2C) transactions.

2. Sellers with the ability to reach global audience

Internet marketing, also referred to as i-marketing, web-marketing, online-

marketing, or e-Marketing, is the marketing of products or services over the Internet.

The Internet has brought media to a global audience. The interactive nature of Internet
marketing in terms of providing instant response and eliciting responses, is a unique quality of
the medium. Internet marketing is sometimes considered to have a broader scope because it
not only refers to the Internet, e-mail, and wireless media, but it includes management of
digital customer data and Electronic Customer Relationship Management (ECRM) systems.

Internet marketing is relatively inexpensive when compared to the ratio of cost against the
reach of the target audience. Companies can reach a wide audience for a small fraction of
traditional advertising budgets. The nature of the medium allows consumers to research and
purchase products and services at their own convenience. Therefore, businesses have the
advantage of appealing to consumers in a medium that can bring results quickly. The strategy
and overall effectiveness of marketing campaigns depend on business goals and cost-volume-
profit (CVP) analysis.

3. Operate with minimal infrastructure

E-commerce is either a major opportunity or a significant business threat. The cost of entry is
low in terms of capital costs but high in terms of effort and opportunity cost. It can significantly

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lower the cost of trading but using it for this purpose is sub-optimal; it allows restructuring of
the supply chain, of business processes and of the nature of the business itself. Its effective
deployment requires an understanding of the way in which the company operates now and of a
vision of the way it could operate in the future. E-commerce offers the technology to make, and
can act as a catalyst for this change.

4. Reduced costs and overhead

No Need to Take Valuable Retail Space to Display Inventory

Compare the cost of maintaining a "virtual" store using eCommerce technology to the cost of
one or more physical stores. Regardless of the number of transactions you have per day, with a
physical location(s) you need personnel, space, displays, utilities, security, inventory and
parking. Your virtual store needs only a winning website, security software, including a
"shopping cart," a good web hosting company and the ability to ship your products efficiently.
Whether you have 5 or 500 transactions per day, you will have a lower transaction cost with a
virtual store than you could with physical locations.

5. Convenience

Online stores are usually available 24 hours a day, and many consumers have Internet access
both at work and at home. A visit to a conventional retail store requires travel and must take
place during business hours.

Searching or browsing an online catalog can be faster than browsing the aisles of a physical
store. Some consumers prefer interacting with people rather than computers sometimes
because they find computers hard to use. Not all online retailers have succeeded in making
their sites easy to use or reliable.

For efficiency reasons, online stores generally do not ship products immediately upon receiving
an order. Orders are only filled during warehouse operating hours, and there may be a delay of
anywhere from a few minutes to a few days to a few weeks before in-stock items are actually
packaged and shipped. Many retailers inform customers how long they can expect to wait
before receiving a package, and whether or not they generally have a fulfillment backlog. A
quick response time is sometimes an important factor in consumers' choice of merchant. A
weakness of online shopping is that, even if a purchase can be made 24 hours a day, the
customer must often be at home during normal business hours to accept the delivery.

6. Price and selection

One advantage of shopping online is being able to quickly seek out deals for items or services
with many different vendors. Search engines and online price comparison services can be used
to look up sellers of a particular product or service.

Shipping a small number of items, especially from another country, is much more expensive
than making the larger shipments bricks-and-mortar retailers order. Some retailers (especially

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those selling small, high-value items like electronics) offer free shipping on sufficiently large
orders.

E-SUPPLY CHAIN MANAGEMENT

Procurement Production Distribution

S E-commerce C
U Enabled SCM U
P S
P T
L O
I Electronic Product Distribution, M
E Procurement Optimization Sales & Service E
R coordination R
S S

E-Supply Chain Components

Advanced Scheduling
Demand
forecasting
Order Customer
commitment Order
Transportation
logistics
Distribution
planning

E-Supply Chain Architecture

In a supply chain management context, the enterprise architecture concept to efficiently

support the collaborative processes among the supply chain members involved has been

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evolving. Each supply chain has an organizational structure that describes the hierarchical
relationships among its members, ranging from centralized to decentralized organizations.
From a decentralized perspective, each supply chain member is able to identify collaborative
and non collaborative partners and the kind of information to be exchanged to support
negotiation processes. The same concepts of organizational structure and negotiation rules can
be applied to a multi-agent system.

We present a software component architecture for supply chain management across dynamic
organisational networks. The local management in the architecture is done by existing
enterprise resource planning (ERP) systems, warehouse management systems (WMS) and
transportation management systems (TMS). The integral management in the architecture is
executed by supply chain engines (SCEs). These software components make up a layer of
systems for supply chain management running on top of ERP, WMS and TMS. The SCEs
provide both the intelligence and the flexibility as required for the integral management of
dynamic supply chains. The software component architecture can be implemented with
technology for components, interfaces and services as available in Java Enterprise, CORBA and
Web Services.

Complete
order life Commit Schedule Make Deliver
cycle

Order Demand Advanced

Partial commitment Forecasting Scheduling
functional
solutions Transportation Distribution

Complete
Integrated Integrated E-SCM Applications
solution

FEATURE OF E-SCM

• Global trading capabilities

• Mass personalization and customization
• Global knowledge exchange
• Collaborative workflow

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• Industry specific (vertical)market places

• Horizontal market places
• Enterprise-to-enterprise connectivity
• E-marketplace-to-e-marketplace connectivity
BENEFITS OF E-SCM

• It is web-based(Client/Server), not web-enabled

• Incorporates broadcast and active messaging to pro-actively notify an individual of a
condition that requires their attention
• Supports the exchange of “real-time” information through trading communities
• Has open Internet Application Architectures for rapid deployment and scalability
• Has an interface capability with any 3rd party software
• Is platform independent
• Is fully integrated system
• Has web visibility and processing capability-24x7
• Is rules based.

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