Online purchasing situations
Quality of information
Ensures access to comparable information whereas incomplete knowledge can cause confusion in human-based systems as parties may not have access to the same information.
Is potentially lower than for human systems. This means that in routine purchasing situations (at least) there is potential advantage in outsourcing the purchasing function. Potentially, removes some of the need for vertical integration.*
From a functional perspective risk can be reduced by improvement of buyer information. However, the risk of fraud is significantly increased when dealing with previously unknown buyers and suppliers.
Allows better management of ordering (automated grouping of small orders is practicable).
Rather than having networks only, coordination links existing trading partners in a tightly coupled arrangement. Such new electronic markets could conceivably include larger numbers of buyers and sellers (Malone et al., 1987). Additionally, coordination reduces the costs of searching for appropriate goods and services.
* Vertical Integration refers to the practice of supply chain activities being controlled within an organisation.
Application service provision
CommerceOne, SAP Portals, Hewlett-Packard and other organisations provide open portal solutions offering fully integrated packages that provide companies with complete end-to-end solutions. In other words, their promise is to unify disparate applications, information and services. However, the availability of high-performance solutions does not necessarily equate to high levels of uptake of such solutions. Many organisations are currently taking a piecemeal approach towards the adoption of Internet technologies. There are examples where the inbound logistical and e-procurement systems are completely integrated with the outbound systems: for example, POSCO, the world's largest steel manufacturer, uses Oracle's E-Business Suite in order to reduce budgeting time (by as much as 80 days in some instances), reducing costing time and sales planning lead time, and simplifying order processing for tens of thousands of daily orders. It should be remembered that not all organisations in B2B markets have fully integrated networked systems. Indeed POSCO had many disparate systems in each application area that could no longer meet the company's growing needs. Collaboration with Oracle helped to streamline operations and foster interoperability between strategic business units throughout the company. In cases where organisational use of Internet technologies is limited, levels of involvement with the online trading process will be reduced and the organisation may be using the web to merely establish an online presence to provide customers with company information.
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