Page 288 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes and Web-based systems to perform transactions, because it includes proprietary services also.
This "scalability" and "choice" has put small businesses on an equal footing with large corporations
and created opportunities for buyers, sellers, and new intermediaries to create value in electronic
channels. It offers enormous opportunities for both developed and modernizing countries alike.

Notes Scope of e-Commerce
Business-to-business services Business-to-consumer services
Traditional E-commerce Messaging services
EDI and EFT E-mail
Messaging/E-mail Fax
Fax
Online Information services, Online information services,
eg Lexis-Nexis e.g. America Online, CompuServe
Electronic marketplace/transactions, Electronic marketplaces/transactions, eg.
eg industry, Net, electronic malls Internet home shopping

E-commerce means more choices, convenience and lower prices for consumers. It also provides
new ways for businesses to grow and meet customer needs, and important benefits and cost-
savings for governments and the people they serve. Its growth has been phenomenal. In 2000,
the total investment in infrastructure exceeded $200 billion. By 2002, global revenues associated
with electronic commerce had crossed $500 billion. This investment and growth is attributed to
the value created by B2B marketplaces to:
1. Expand everyone's market reach.

2. Generate lower prices for buyers from the ability of buyers to reach more suppliers or the
most efficient supplier and from increased price competition and, in some cases, access to
surplus inventory stocks,
3. Cut the cost of the buyers' operations by providing services that significantly reduce the
cost of B2B procurement processes, which traditionally consume much staff time and
effort, and
4. Finally, help these marketplaces identify industry's best practices.
The first wave of e-commerce was the establishment of independent online companies such as
Paper Exchange and E-Steel who used a readily understood business model – charge a small fee
for matching up buyers and sellers. By some estimates, more than 1,000 such E-marketplaces –
for products that ranged from commodities such as lumber to specialized components such as
airplane parts – managed to receive funding.
These marketplaces were initially designed to reduce bid-ask spreads and to bring down
transaction costs by matching buyers with suppliers and enabling suppliers to trade with one
another – the very kinds of procurement-based benefit that would be expected of an efficient
marketplace. Most independent, fee-based marketplaces could not provide real economic value
as they were not able to achieve scale volumes.

As volumes can be achieved only if suppliers and buyers invest to integrate their systems and to
manage the change process actively in their buying organizations, in the second wave of B2B,
large incumbents took matters into their own hands, banding together into consortia with their
current trading partners and competitors. During the year 2000, an estimated $10 billion
investment in B2B was made for public consortia-backed e-marketplaces alone.

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