B2B (Business-to-Business)
Although the business-to-consumer (B2C) sector is more familiar to retail customers,
the volume of business-to-business (B2B) transactions is many times greater. Industry
observers predict that B2B sales will increase sharply as more firms seek to improve
efficiency and reduce costs.
Initially, electronic commerce between two companies used a data sharing arrangement called electronic data interchange (EDI). EDI enabled computer-to-computer data
transfer, usually over private telecommunications lines. Firms used EDI to plan production, adjust inventory levels, or stock up on raw materials using data from another company’s information system. As B2B volume soared, the development of extensible markup
language (XML) enabled company-to-company traffic to migrate to the Internet, which
offered standard protocols, universal availability, and low communication costs. XML
is a flexible datadescription language that allows Web-based communication between
different hardware and software environments.
Because it allows companies to reach the global marketplace, B2B is especially
important to smaller suppliers and customers who need instant information about
market prices and availability. On an industry-wide scale, many B2B sites exist where
buyers, sellers, distributors, and manufacturers can offer products, submit specifications, and transact business. This popular form of online B2B interaction is called
supply chain management (SCM), or supplier relationship management (SRM).
Figure 1-17 shows a software vendor that offers SCM solutions designed to reduce
supply chain costs.