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Business models for e-Marketplaces

According to Paul Timmers , business models should be understood as an architecture for the (organization of) product, service and information flows. Each business model is characterized by:

• • Various business actors and the roles they play in the product, service or information flow,

• • Potential benefits for those business actors and

• • The sources of revenue.

In practice several business models are implemented. Some of them are fully operational, while others are still in the experimental stage:

• • Catalogue aggregation model

• • Buyer aggregation model

• • Request for quotas (RFQ) and Request for Proposal (RFP) models

• • Auction model

  • (a) Standard (English) Auction

  • (b) Dutch Auction

  • (c) Reverse Auction

  • (d) Other types of auction

• • Real time exchange (NASDAQ-like)

• • Collaboration platform

4.1 Catalogue

An E-Catalogue is an electronic version of a company’s paper catalogue. It may include information such as products that a company sells, their descriptions, quantities available, prices (per unit, per order size, for different customers) product presentations (pictures, sound, 3D images) and, possibly, links to Web sites with related information. An electronic catalogue, in comparison with the paper version, enables a much faster search, provides in-depth, extensive information supported with images and 3D pictures and gives a possibility to update information as frequently as the seller wishes, at virtually zero cost.

E-Catalogues are made accessible either through the suppliers who own Web sites or through one or more e-marketplaces in which suppliers participate. Whether suppliers choose to build their own Web sites or whether they join an e-marketplace, or both, depends primarily on the size and the nature of their business.

SMEs usually have an e-catalogue built and hosted by an e-marketplace. They are often invited to join an e-marketplace by their major customer, already a member. In this case, they usually get their catalogues built and hosted free of charge. If they decide to join an e-marketplace without the invitation, they are likely to pay certain charges. They could be either charged with a package price for the whole catalogue or they could pay for the catalogue hosting per line item.

Companies may chose either to build a catalogue in house or to accept an e-marketplace solution. There are two types of e-catalogues that could be offered. Certain e-marketplaces offer a catalogue that enables online purchasing at predetermined fixed prices via e-commerce, while others offer just the possibility of posting online the inventories and the prices, if available, and link the sellers with the potential buyers. In this case the negotiations are conducted offline. Since having a catalogue built by an e-marketplace is the least expensive solution and helps avoid problems caused by the wrong choice of the catalogue taxonomy or its structure, smaller companies and the ones that don’t have complex catalogue demands prefer this solution. The e-marketplace catalogues are usually user-friendly and easy to update. For instance, when a supplier using the Covisint catalogue decides to introduce a new product, all he has to do is to be able upload the product and the price files into the catalogue by filling in a desktop application and a Covisint-provided template. The seller can use the same spreadsheet to delete discontinued items from the catalogue or to update newly contracted prices. As another example, to give its suppliers a boost, GE works with them to get all the information needed to meet requirements of its e-marketplace, meaning at times even scanning images from their paper catalogues.

Companies with complex catalogue needs generally prefer to build their catalogues without the help of an e-market. In this case, they usually engage eCatalogues Solution Providers specializing in catalogues building and management. Dell for example has built his catalogue with thehelp of the ArcadiaOne Solution Provider while Deutsche Telekom’s T-mart e-market used the services of Poet Software. Those companies may decide to publish catalogues either on their own Web page, or to make them accessible through one or more e-marketplaces.

Catalogue solutions are mostly used within fragmented industries, such as chemicals, semiconductors and electronic components and routine medical supplies, in the attempt to decrease search costs. For example, within the medical equipment industry, which counts just in Europe more then 5000 manufacturers, most of which are SMEs, search costs that buyers face when trying to find a particular piece of equipment at an acceptable price are tremendously high. Buyers can’t rely on general business directories, such as Yahoo, since they are not customized for the medical industry and not efficient when searching for a specific product. Therefore, in the absence of an e-catalogue, they have to search through a number of catalogues and brochures available in paper form trying to discover which products are available on the market and under which conditions. In such fragmented markets sellers spend as well large amounts of time and money on heavy advertising and price lists updating to make the customers aware of their existence. E-marketplaces trying to combat those inefficiencies are numerous. One of the most successful ones is Neoforma. Neoforma offers the possibility to manufacturers to enter their itemized product listings into its catalogue, sometimes even with 3D images.

Catalogues are also used for time critical purchasing. They are mostly used in situations when buyers can’t afford the risk related to the confirmation of the availability of the products and services at an acceptable price, or when the buyers are simply not willing to wait for an auction to save a small amount on a critical component.

The limitation of the e-catalogues is that the prices posted in a catalogue may not reflect necessarily the true market conditions. In the case when the prices are not stable, but volatile, some of dynamic trading models, such as Liquid exchange or Auction, that allow real-time pricing based on market conditions, might be a better solution.

4.2. Buyer aggregation model

Buyer aggregation (also known as demand aggregation, volume purchasing, group buying and on-the-fly co-op) is the opposite model to supplier aggregation (catalogue aggregation) model. The model is driven by the small buyers who get together online to receive volume discounts from larger suppliers. Jim Rose, cofounder and CEO of MobShop, an e-marketplace offering the possibility of group buying, explains the logic in very simple words: “Your company needs 100 new printers? Maybe a larger firm down the block needs 1000, and you can both get the volume discount for 1100 .” The more buyers participate, the larger the collective buying power and the lower the prices.

Buying cycles are generally seller-initiated, but there are also buyer initiated ones. MobShop, for example, developed a new “Demand-cycle” format, through which buyers can make requests that are pooled into suppliers databases, from which suppliers can bid on what the final price of an item will be. ShopMates, another group purchasing enabler, has a different approach, but enables group purchasing as well. It offers the possibility to suppliers to integrate its GroupCart software solution into their Web sites. All suppliers need to do is to enter their products and the scale of prices according to order volume for each product and to add a discount link beside the product description on their Web site. Buyers may screen the conditions that are offered and regroup themselves to get targeted discounts.

The benefit for the small buyer using this model is clear: he becomes able to buy under the conditions that just the largest buyers can get. On the supplier side, group buying leverages word-of-mouth communications between buyers in chat rooms, newsgroups, email lists, and other forums. That enables sellers to capitalize on the ease of communications within Internet communities, to reduce marketing costs and to acquire new customers. They also profit from the enhanced ability to preview the buyer demand prior to inventory build-up and thereby from improved inventory management and reduced risk. Some sellers launched discrete Web sites dedicated to volume purchasing for their entire inventory, while others incorporate volume purchasing just for a few products as an unique promotion, cross-promoting in that way high-margin products and services to their newly acquired customers at low costs.

4.3 Request for Quote (RFQ) and Request for Proposal (RFP)

In a traditional purchasing flow buyers first need to identify potential suppliers. After having identified suppliers with whom they might be interested to work, buyers send out either a Request for Quote (RFQ) or a Request for Proposal (RFP).

The RFQ and RFP models differ. In the case of a RFP, the buyer creates a specific request for products, services or a combination of both. A RFQ is specific to a product or service. There is a difference between specifying a quote for certain products by giving the parameters a product has to comply with (for example, a quote for a VoIP system giving certain parameters) and requesting information on a particular product (a quote for 3Com’s NBX 100).

Traditionally RFQs and RFPs are sent by fax. In the attempt to improve the process, some buyers have started e-mailing them as Excel spreadsheets as well. The whole process is, however, slow and cumbersome. Buyers have to collect the information about the needs of the enterprise, put it in the Excel, cut-and-paste it a number of times and send it to various distributors. Replies usually arrive in a variety of formats, therefore sorting out all quotes and keeping track of the past experiences with different suppliers is time consuming and expensive.

By streamlining the process, e-marketplaces increase the efficiency within this “pain point” in the industry. One of the most visible advantages that buyers get, if they decide to start working through an e-marketplace, is that their quotes return back in the same format. That eases comparison across a number of parameters, such as product availability, delivery times, quality or price. Most of the e-marketplaces, like, for example, A Plus Manufacturing, maintain as well a database of distributors and the brands they handle, and, as Dave Kichar, director of supply-base management describes “the quote engine that knows to send the RFQ only to the relevant distributors.” This saves time, because whenever a product requires a specific brand or component, which is often the case, only the distributors carrying that particular product get the RFQ. E-marketplaces also often maintain the history of different transactions that firms have been conducting when using their services. In that way, buyers are able to speed up and simplify the sourcing and the ordering procedures. For example, they can make just small adjustments on the RFQ/RFPs they have already sent and use them for the purchases that follow, without starting the form each time again. They may also easily check payment and performance records of companies they have previously worked with which provides a good knowledge base.

Filling out RFP/RFQ and purchasing the goods through an e-marketplace is generally made easy. For instance, Printoffer, an e-marketplace for printing services, offers to its customers an interface that is simple and self-explanatory. The customer does not have to be an expert to get through the procedure. Printoffer’s RFQ form contains all information that printers need to be able to quote on the job, such as the number of pages, the type of paper and binding, the delivery date and so on. After the RFQs are distributed, interested printers reply directly by e-mail to the buyer. In that way there is no danger of collusive bidding. At the end, the buyer examines all the bids and makes a selection based on the price and other factors. Some other e-marketplaces provide a hybrid platform where the trading event starts with a RFQ workflow, with sourcing and posting a RFQ by buyers, and later becomes a reverse auction, with real time, competitive downward pricing by sellers. This hybrid model is termed either as an “RFQ” or a “Reverse Auction”, depending on the e-marketplace providing it.

RFQ/RFP e-marketplaces became an important venue for SMEs, because small niche players which are registered at such e-marketplaces have a chance to get orders they would otherwise not have found out about. Practically, since e-marketplaces are generally open to everybody who wants to join, SMEs have an opportunity to get in touch with the right persons within larger firms that were previously out of their reach. That way, they gain the possibility to compete very successfully for niche jobs, particularly when it happens that certain production run perfectly matches their production capacity. Large companies, on the other hand, because of the specialist skills they posses still get jobs through e-marketplaces as well.

4.4. Auctions

4.4.1. Standard (English) Auction

The standard or English auction is one in which bidders compete to buy something from a single seller. The bid price proceeds upwards and the highest bid wins the auction.

The first Web-based auctions appeared within B2C space. Internet technology lowered the costs of organizing an auction and of participating as bidder. Online auctions provide several advantages relative to traditional auctions. The most visible advantage is the increased convenience for buyers. In the traditional English auction with the bidders present in the same room, an auctioneer closes the auction using a typical “going, going, gone!” procedure. English auctions on the Internet are different, in the sense that bidding became typically asynchronous, lasting days or weeks with geographically diverse bidders participating. Bidders have more flexibility about when to submit the bids then in the case of the traditional auctions. Additionally, most of the e-auctions offer search engines and clickable hierarchies of categories, making it easier for the buyer to find a particular item within thousands of items on an e-catalogue than in a paper catalogue of an auction house.

Two of the earliest Web-based auctions, Onsale and eBay, started as different business models. Onsale started as a merchant site, while eBay chose to act as a listing agent site. A merchant site offers its own merchandise for sale, acting as a wholesaler/retailer who conducts its transactions through auctions. A listing site, such as eBay, acts as an agent for other sellers, allowing them to register their items and running transactions on their behalf. Today, it is possible to encounter auction sites, both within B2C and B2B space, that apply one of this two business models, but also others that combine both of them, auctioning their own merchandise while allowing others to list independent auctions on the same site.

The auctions fit best for situations where the goods are in limited supply and the demand is unknown to the seller, since those are the circumstances under which the flexible, market-determined price is likely to be the greatest. Within the B2B space, the auctions are most often used for brand new products. For instance, ChemConnect, a leading global e-marketplace for bulk chemicals, provides the access point for more than 4000 leading chemicals companies buying and selling their excess inventory. Farmbid, a leading agricultural e-marketplace, provides a market for 5000 farmers to buy and sell cattle, pharmaceuticals for cattle and used farm equipment machinery. Most of these e-marketplaces started as pure auction sites, using auctions as a way to enter into the e-marketplace, and are now developing either additional catalogue aggregation or more comprehensive sites that offer many services, including logistics, credit and content about the industry via news and research data. That makes a difference between B2C and B2B auctions. Consumer auctions typically end when the deal is reached and parties are often left to execute the transaction, including shipping and payment arrangements. Business auctions, on the other hand, often require supporting business services, such as logistics, financing, escrow and appraisal.

The participation of trading partners in an auction is more rigorous and regulated in B2B than in B2C auctions. While any user may sign up and sell and buy products on a consumer auction, new trading partners in B2B are mostly checked for their company background and credit history in order to ensure low-risk trading relationships. Most of the B2B e-marketplaces provide also a possibility to conduct a private auction. In a virtual private auction a seller invites only his own private community of known, established buyers to submit bids. An e-marketplace either helps to find qualified buyers or it allows sellers to upload their lists of private buyer communities onto the marketplace in advance. In the second case, upon initiation of any particular auction, the seller may click on a single button to invite either public bidders or his pre-loaded community of private buyers to participate. The private auctions typically last just a couple of hours, after which the highest bidder comes out as a winner.

Market rules defining business auctions are generally more sophisticated than the rules for consumer auctions. The service and item catalogues are as well more regulated and typically standardized. so that they can be retrieved and recognized easily by partners submitting offers and bids. In consumer auctions such as eBay, the sellers are left much more freedom in presenting their products.

Traditional ascending auctions provide little possibility to modify anything except the most basic auction parameters. Most e-marketplaces provide therefore a wide choice of auction designs that can support different individual and business trading requirements, such as Dutch auctions, Reverse auctions and Cherry Picking auctions.

4.4.2 Reverse Auction

A reverse auction is one in which bidders compete to sell products or services to a single buyer, so the bid price proceeds downwards rather than upwards.

As English auctions, reverse auctions may be organized as public or private auctions.

A public auction is open to qualified sellers that are pre-approved by the exchange and meet the parameters specified by the buyer for the particular auction. For instance, on FreeMarkets, which is one of the most famous e-marketplaces providing online reverse auctions, non-price items are strictly standardized, meaning that “…if the buyer says the minimum order quantity is 25, than that’s what it is. If the supplier say they can’t do less than 50, that’s their tough luck.” All suppliers that do not meet the criteria are automatically excluded. Other important qualification criteria for suppliers may be a solid management team, an adequate manufacturing facility, geographic proximity and ISO9000 quality assurance certificate. The buyer who offers the lowest price is not automatically the winner. Generally, the competition is high and prices go down significantly, but the final decision depends not only on the price reached, but also on other factors, such as quality of the product and the possibility to develop long term relationship.

A private reverse auction is a closed, invitation-only type of auction. The buyer invites only the companies with which he is prepared to do business, so the auction bid price becomes the final deciding factor. A seller’s pre-selection is generally done within the company organizing the auction, but there are also some e-marketplaces that provide this kind of support such as FreeMarkets which created a whole set of information and tools for buyers to make better purchasing decisions.

4.4.3 Dutch Auction

Traditionally, the Dutch were auctioning their flowers to wholesale distributors by grouping them in allotments or piles often aligned in long rows in the warehouses. The auctioneer would approach a pile and announce a price that was clearly too high, then quickly count down to progressively lower prices. Potential buyers, having previously examined the merchandise and decided on a price they were willing to pay, would crowd around, waiting for the auctioneer to arrive at their preferred price. The first buyer to declare would get that lot of flowers at the last price, whereupon the auctioneer and buyers would quickly advance to the next portion for auction.

Thus a "Dutch auction" is a selling arrangement where the seller starts at a high price for an item and over time reduces the price. Buyers wait until an acceptable price is reached, then make a "bid" that fixes the price. The first bidder takes the item. On the Internet, the whole process is automated. Auctions typically last a short period of time. For example, on the Klik-Klik Dutch Auction site, a limited amount of the merchandise is offered to interested buyers for a period of just a couple of minutes. Upon entering the auction buyers may see a description of the good, a listing of the total quantity available, the clock displaying the time remaining in the auction and the current price. As the auction progresses, the price automatically drops down from the starting price every few seconds. A registered buyer may buy the merchandise just by clicking on the price and the clock stops. In case multiple items are available, successful bids are automatically recorded with the time and price of the participant’s bids. A potential disadvantage of this type of auction is that, since it takes place so quickly, it does not allow asynchronous bidding.

4.5. Real time exchange

Real time (Liquid) exchange represents an e-marketplace where buyers and sellers may actively view and exchange bids and offers in near-real time. It resembles the traditional stock exchange model. The difference is that liquid exchange is Internet based .

Trade on the exchange is not limited to a certain period of time. Buyers may trade “at will” and be always sure that they will secure goods at the published price. Market liquidity is assured via constant supply. Besides the actual manufacturers, the traders and speculators that may or may not be interested in the physical use of the goods being traded are generally active on the market and contribute additionally to the total transaction volume. Prices are transparent and represent “true market prices”, since they reflect the balance between offer and demand at any moment 24/7. For the same reason, however, prices are as well highly volatile.

Products purchased on this kind of exchange are of a standard nature.. Exchanges have to be able to break up the product description into just a few parameters that represent the key determinates for the buying decision. Therefore, products that require long specifications cannot be considered.

Typical products purchased on the exchange are electricity, gas and telephone capacity. One of the biggest exchanges ever, although barely existent today, was EnronOnline, trading some 1500 commodity products in sectors as diverse as energy, petrochemicals and plastics, coal, bandwidth and credit derivatives. Last year this platform completed 5000 transactions per day representing an average of nearly $2,5 billion in reported daily transactions. Today, a month after Enron’s bankruptcy, EnronOnline conducts a rather modest number of transactions, mostly within the energy sector. The exchange was hit badly by Enron’s bankruptcy due to its rather specific business model. The trading platform was set up in the way that every transaction involved Enron as a central broker. Enron was buying and selling all commodities. The prices to buy and sell were more transparent than calling from broker to broker. That brought significant liquidity into the market, but a great risk as well. When Enron stumbled, all traders carrying trade on the books with Enron were faced with the possibility that Enron will fault on these obligations. The dependence on one company as Enron proved to be a very risky strategy for traders. It remains to be seen whether traders will except this risk or turn to other kind of energy exchanges, such as Intercontinental Exchange (ICE) or Houston Street, where they have the possibility to set up parameters for trading with other participants directly, based on the collateral of each participant. Whatever traders will decide, liquid exchanges in general are going to remain a serious channel to do business within the energy market. Outside this sector, it is still not easy to find an exchange operating successfully. One example might be Arbinet Communications, which is pioneering online trading in telecommunication capacity by developing a Web-based community, called the Arbinet Global Clearing Networktm.

To achieve the necessary liquidity, some exchanges are developing financial instruments to allow options, spread and futures to be traded over the system. Enron used to be one of the major players on the market for petrochemical futures and other financial derivatives, and its bankruptcy had a major impact on trade, particularly in the short term. The petrochemical market is recovering and it is likely that a fresh joint venture between CheMatch and Chicago Mercantile Exchange (CME) is developing a neutrally regulated future market, is going to take the lead soon. In November last year, New York Mercantile Exchange realized the new Internet version of NYMEX ACCESS to launch the first product intended to be traded on enymex. ’’The purpose behind the development of enymex, says Mr. Thomas Mallon, Vice President of Business Planning and development at NYMEX, is to introduce a product line designed to mirror those instruments currently traded in the energy-over-the counter (OTC) market. These products will be traded electronically and cleared through the NYMEX clearing house thereby eliminating counter party risk. The first OTC product launched was a NYMEX look-alike called the Henry Hub Natural Gas SWAP (it's basis for settlement is the Henry Hub Natural Gas futures contract actively traded on the trading floor). This product trades electronically during the day on NYMEX ACCESS concurrent with futures trading taking place on the trading floor. Other new products which are actively traded OTC are planned to be listed on NYMEX ACCESS in the very near future.’’ In December last year they also announced plans to open the NYMEX ACCESS system beyond only members of NYMEX and COMEX , therefore their trading screening base is expected to grow substantially.

Liquid exchanges allow immediate purchase of goods. They are therefore mostly used for time critical purchases and for frequent purchases of goods not covered by long-term contracts. Most of them provide different facilities to speed up and ease the trade. For example, APX, an energy exchange, offers to handle all complex back-office tasks, such as scheduling, settlements and supplier credits, on behalf of the buyers, while its competitor Houstonstreet provides credit rating customized to each individual company. On the base of the rating, the system simply blocks traders trying to close a deal with the seller that is not on his company’s approved list. Most of the exchanges arrange and execute delivery, particularly the ones working within the telecom and energy industry, since here delivery can be executed on the spot via digital networks.

Buyers and sellers trading on the exchange are frequently anonymous, meaning that the identity of the other party is usually not reviled until after the deal is concluded. Anonymity enables traders to put on or unwind their positions without disclosing their intentions or the problems they may encounter in certain moments.

4.6. Collaboration

Auctions, catalogues and other models described above have one thing in common: none of them support new processes. All of them just replicate the traditional processes over the Internet, in an effort to cut costs and accelerate the process. Collaboration e-marketplaces, on the other hand, are changing the nature of transactions between buyers and sellers and, hence, the nature of the relationship between them, by providing “a platform whereby business information (such as business plan, sales forecast, replenishment plan, promotion plan, product design etc.) is jointly derived, jointly affirmed, jointly planned, jointly executed and jointly measured against by all interested parties. ” Their value proposition is therefore different. Basically, they offer improved visibility throughout the value chain. Instead of waiting days or weeks for the information to flow backwards through the supply chain, with all potential potholes of erroneous or missing information, participating suppliers get an opportunity to react in near real-time to fluctuations in customers’ demand. Those e-marketplaces, whether public or private, are changing the structure of the value chain itself: it starts to resemble a network. Members of the network are not competing as single entities, but as entire value chains.

Collaboration platforms basically provide two types of support:

•  Unstructured collaboration, which includes document exchange and sharing, shared whiteboards, discussion forums and e-mail. For example, MarketingNet, an online library at Procter & Gamble lets P&G managers, marketing groups and executives view their proposed advertising videos, as well as their competitors adds and market news over the Internet. They also promote “collaboration rooms”, i.e. videoconferencing technology and Intranet as a platform for knowledge sharing and brainstorming sessions of geographically dispersed virtual teams. Members of product teams in different locations meet electronically and the company profits from an improved sharing of tacit knowledge, quicker business decisions and reduced travel expenses.

•  Structured collaboration, which involves shared participation in business processes. In this case two or more parties participate in an iterative, negotiated business process to achieve a common goal. They may use both generalized collaboration tools (such as joint diagnostic labs, sharing sessions, best practice analyses) and more specialized tools (such as eCAD-CAM for joint design work), or collaborative planning software. For instance, Cisco has designed its system and processes to enable the flow of information throughout its supply chain. Now the company exchanges real-time data with partners regarding demand forecasts, order backlog and inventory. Its business processes, as well as the processes their suppliers were relying on, have changed “from the root”. The specific tools that companies need for collaborative commerce differ from industry to industry. Enterprises from the manufacturing sector are usually implementing collaborative planning, forecasting and replenishment (CPFR solutions. Basically, the CPFR solution shares, compares and alerts trading partners to changes in forecasts or key supply chain metrics. It may also support the generation of demand forecasts and replenishment plans for trading partners. Wegmans grocery chain and a Nabisco distribution center conducted a pilot project during which they shared data on 22 items. The Nabisco sales forecasts were automatically compared with Wegman’s own forecast for its stores and, whenever any variance occurred, the software alerted both parties by an e-mail. The trading partners could promptly react and decide on the replenishment quantity to rectify such discrepancies, which diminished the need to build a large inventory base and decreased the risk of shortages. Except comparing one organization’s forecasts with another, the CPRF system may also be used to compare a plan with the actual results. For example, ADC’s and Dell’s suppliers are instantly notified of any intent to change the product component and they can respond immediately through Agile’s application commonly termed Engineering Change Order (ECO) management system. Suppliers no longer need to go through telephone, fax or e-mail, and this helps them manage their own requirements all the way up the supply chain to their own suppliers. In a word, the CPRF system manages by exception – it addresses variances, whether plan-to-plan or plan-to-actual. The latest CPRF systems may also support additional applications. For example, VICS CPRF state-of-art system identifies and negotiates planned promotions, new product introductions, inventory policy changes, and store and plants opening and closings. It forecasts demand, allocates demand to selected suppliers, calculates replenishment plans, authorizes shipment, selects roads and routes, and tracks shipments to delivery. The e-marketplace also captures historical data, such as actual sales, on-hand, orders and shipments throughout the supply chain to be used in future plans. Finally, the system uses exceptions and alerts to ensure continuous feedback and improvement. For the enterprises in the customer business, sales support applications, including CRM, configurations, catalogues, pricing and promotions are more relevant. Dell’s virtual supply chain is one of the most quoted examples of its industry leading B2B configure-to-order model. As another example, Cisco is well on the way to combine Web sites and traditional call centers into one single entity. The company implemented already a few years ago VisualTek’s Visual Rendezvous product. The product’s interactive chat and whiteboard tools allowed Cisco customers to dynamically interact with Cisco representatives. It enabled the exchange of drawings on-line with the aim to enhance communication and speed up the resolution of technical support issues. The WebLine Collaboration Server 2.5 and MediaBlender products enable customers now to simultaneously interact with the Cisco’s representatives via the telephone and the Web. As the customer and the representative speak on the phone, they can co-navigate the Web, share electronic documents and interactively complete shared Web-based forms.

As another example, within the automotive industry, Ford developed the “Build & Price your new Ford” option that allows a customer to customize his new vehicle. The Online system is directly connected to manufacturers, so that customer may compare on the Web site different vehicle option packages to see what comes as a standard, then select different options and see how they affect prices. At the end, customers may search for a dealer within a selected area and conclude the deal.

The collaboration features are still in the early development stage, but collaboration is steadily taking off. Jupiter B2B Executive survey found that more than 80% of B2B buyers will be strongly influenced to trade online with suppliers who offer more comprehensive services, including collaborative product design and supply chain inventory visibility. According to the survey, more than half (54%) of B2B buyers would treat suppliers as “preferred vendors” if they would provide such value-added services.

On the other hand, there are still two major barriers that need to be overcome, so that collaboration could fully take off: companies are concerned over sharing sensitive data with business partners, particularly over private e-marketplaces. In addition, the investments necessary to integrate existing technologies are a barrier.. The biggest problem is the integration of relatively small companies deep in the lower tiers of the supply chain. Those companies are expensive to serve, but still necessary as a part of the network, in order to reach the full potential of collaboration. Most of them do not have sophisticated IT systems needed to support real-time information sharing. E-marketplaces have no other choice but to connect them through simple Web interfaces, which in turn restrict the extent of real-time or dynamic services offered throughout the entire e-marketplace. Additionally, due to their huge number particularly in the lower levels of an industry supply chain, they require enormous investments in sales force and customer support, while there is a strict limit on how much they could be charged.

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