ARTICLE IN PRESS

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doi:10.1016/j.pu

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Journal of Purchasing & Supply Management 13 (2007) 113–126

www.elsevier.com/locate/pursup

Business-to-business collaboration through electronic marketplaces:An exploratory study$

Shan Wanga,�, Norm Archerb

aDepartment of Management Science, School of Business, Renmin University, 59 Zhong Guan Cun Avenue, Haidian District, Beijing, PR ChinabDeGroote School of Business, McMaster University, Hamilton, ON, Canada L8S 4M4

Received 8 May 2006; received in revised form 5 August 2006; accepted 1 May 2007

Abstract

Many business-to-business electronic marketplaces (EMs) are now offering collaboration functionalities, but the collaboration concept

in an EM context has not been studied systematically. This paper is a preliminary effort to explore and categorise the different types of

collaboration functionalities that may be offered by EMs. By surveying websites, we identified five types of horizontal collaboration

(buying groups) and four kinds of vertical supply chain collaboration in EMs. Our findings suggest that supply chain collaboration tends

to be supported more than buying groups by existing EMs, and a high percentage of EMs now offers supply chain coordination and

integration. Among online buying groups, the exchange-catalogue model is the most popular, possibly since it puts fewer burdens on

members and coordinators.

r 2007 Elsevier Ltd. All rights reserved.

Keywords: Collaboration; Electronic marketplaces; Supply chains; Buying groups

1. Introduction

Internet-based business-to-business electronic market-places (EMs) are ‘‘open electronic platforms facilitating

activities related to transactions and interactions between

multiple companies’’(Holzmuller and Schluchter, 2002).EMs have evolved from pure competitive markets thatsupport buyer/seller aggregation, to supporting transac-tions, and finally to support integration and collaborationamong firms with existing business relationships (Ganesh,2004). Nowadays, most EMs support a portfolio ofrelationships to cater to different purchasing strategies(Grieger and Kotzab, 2002; Skjot-Larsen et al., 2003;Bartezzaghi and Ronchi, 2004; Eng, 2004; Wang andArcher, 2005). For some EMs, supporting aggregation hasbecome a necessity, while supporting collaboration and

e front matter r 2007 Elsevier Ltd. All rights reserved.

rsup.2007.05.004

ch was supported by a grant from the Social Sciences and

search Council of Canada.

ing author. Tel.: +8610 65084286.

esses: wangshan@bfsu.edu.cn, wangs7@gmail.com

er@mcmaster.ca (N. Archer).

integration is their main source of revenue and competitiveadvantage.Although there is a vast literature from different

disciplines on inter-institutional collaboration, collabora-tion in the EM context has not been studied systematically.The purpose of this paper is to explore such collaboration,at different levels. In its broadest sense, joining an EM iscalled ‘‘collaborative commerce’’, regardless of whetherbusiness participants trade through arms-length marketrelationships or through long-term relationships (Barrattand Rosdahl, 2002). In this sense, all EMs are collaborativeinitiatives. Some EMs have been collaborative initiatives bybig industry players, such as Quadrem in the miningindustry. These collaborations have been limited to sharingan EM infrastructure, but not purchasing and sales. Wewill explore how firms can collaborate in purchasingthrough EMs; otherwise our conclusion would be that allEMs are collaborative initiatives. This conclusion isobvious and offers few implications. Our exploration hasthe objective of addressing the specific research question ofenumerating the existing forms of buyer/seller purchasingcollaboration through EMs, and constructing a categorisa-tion framework that reflects these forms of collaboration.

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126114

The paper is organised as follows. First, a literaturereview includes the concept of EMs, collaboration, andEM collaboration. Second, different forms of EM colla-boration offerings are identified, based on a survey of 134EM websites. The forms of collaboration identified willanswer our research question. Third, we compare andexplain our classifications in relation to the previousliterature, and finally we outline the potential for futureresearch on this topic.

2. Literature review

Collaboration in purchasing can occur either verticallyamong buyers, or horizontally between buyers and sellers.Huber et al. (2004) categorised online collaboration intohorizontal (pooled purchasing) and vertical (buyer–sellercooperation) collaboration. Following this line, wereviewed the literature on both vertical and horizontalcollaboration in purchasing. The literature highlights theimportance of supporting collaboration among buyers andsellers through EMs, but the types of collaboration havenot been studied systematically.

2.1. An introduction to electronic marketplaces

The most popular classification of EMs divides theminto public, consortia-based, and private EMs (Grieger etal., 2003). Public EMs are owned by a third party, servingmultiple buyers and sellers. Consortia-based EMs are thosethat have been established by several big industry players.For example, Covisint,1 is an EM that was built originallyfor the automotive industry by the big three American automanufacturers (Ford, GM, and Daimler Chrysler). PrivateEMs are established by single companies mainly to supporttheir own purchasing and selling activities. According tothe number of participants on both sides, the above EMsmay also be termed many-to-many, many-to-few andmany-to-one EMs, respectively (Paviou and El Sawy,2002). In this paper, we exclude private EMs and one-to-many EMs, and focus on public and consortia-based EMsand many (or few)-to-many EMs.

Both academics and practitioners have studied how EMscan attract enough customers to be viable, and the finalconclusion seems to be that supporting collaboration inEMs is appealing to both buyers and sellers. Based oninnovation diffusion theory, Joo and Kim (2004) andHadaya (2004) found that external pressure from tradingpartners plays an important role in adoption of EMs, butthat perceived benefits appear not to have significant effectson adoption. Although external pressure exerted by buyerson suppliers may encourage adoption of EMs, it may alsoresult in distrust that could dampen actual EM use. Leeand Clark (1997) found that the implementation of

1The web addresses of all the EMs mentioned in the paper can be found

in the appendix. Covisint was sold to Compuware in early 2005, and is no

longer owned by the big three automotive manufacturers.

electronic markets results in higher perception of risksdue to higher uncertainties; e.g. buyers face the risks ofincomplete and distorted information, whereas sellers facethe possibility that their price offers will be undercut due toinformation transparency. This result was also verified byLee (1997) who studied a used car EM. Supplier distrustand perceived buyer opportunism sometimes cause supplierdissatisfaction and resistance to the adoption of such EMs(Gulledge, 2002). This highlights the importance ofoffering collaboration functions through EMs, since thiscan result in a win–win strategy, where opportunism andprice cutting have been eliminated.

2.2. Vertical collaboration and strategic purchasing

Collaboration is an effort by two or more organisationsto achieve results that they cannot achieve by working inisolation. Collaboration has been widely discussed in avariety of disciplines, such as in transaction cost economics(TCE) (Williamson, 1975), relationship marketing (Ha-kansson, 1982; Jap, 2001), inter-organisational systems(Kuman and Dissel, 1996; Alstyne, 1997), strategicmanagement (Gulati et al., 2000), supply chain manage-ment (Cousins, 2002), and sociology (Winer and Ray,1994). Collaboration and its equivalent terms such asnetworks and long-term relationships are ‘‘everywhere—Iread about them everywhere—they are really fashionable’’(Harrison, 2005). The benefits of developing long-termrelationships can include reductions in transaction costs,and increases in resource sharing, learning, and sharingknowledge. Particularly, relevant to the purchasing func-tionalities offered by EMs is research in TCE and thesupply chain management literature.Based on human rationality assumptions, early TCE

research provided insights on the choice between twogovernance structures: markets and hierarchies (William-son, 1975). The contingent model of TCE suggested thathigh transaction uncertainty, transaction-specific invest-ment, and transaction frequency would result in hightransaction cost if products were procured through themarket, thus encouraging the adoption of hierarchicalrelationships. It was recognised later that markets andhierarchies were not the only possible governance struc-ture. Many intermediate forms of governance were foundto be more likely, and given names such as networkorganisations (Powell, 1990; Alstyne, 1997), relationalgovernance, and strategic alliances (Gulati and Maria,2000). Trust, collaboration, and resource interdependencyare important characteristics of these intermediate govern-ance structures. Supply chain management is an integrativeapproach for dealing with the planning and control ofmaterials flowing from suppliers to end users (Croom et al.,2000). Tan (2001) identified two perspectives of supplychains: a purchasing and supply perspective, and atransportation and logistics perspective. The objective ofthe first perspective is to reduce the supply base andinventory, and to increase customer satisfaction. The

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126 115

objective of the second perspective is to reduce transporta-tion costs, reduce demand uncertainty, and provide supplychain visibility. To achieve these goals, collaborationamong supply chain members is critical (Horvath, 2001;Skjoett-Larsen et al., 2003). In supply chain management,purchasing becomes strategic and tightly coupled withother functions of supply chains, such as inventorymanagement and product development. For example, invendor-managed inventory (VMI), inventory managementis tightly coupled with order placement, which is triggeredby inventory levels.

Strategic supply chain management is supported by e-commerce technologies such as electronic data interchange(EDI) and the Internet (Garcia-Dastugue and Lambert,2003; Lancioni et al., 2003; Medjahed et al., 2003). Ovalleand Marquez (2003) used a systematic approach to test theeffectiveness of using different e-collaboration tools toshare product information, inventory information, custo-mer demand, and transaction information. They concludedthat information sharing contributes to faster and moreflexible supply chain processes among supply chainpartners, and make the processes more responsive tomarket changes.

This review has shown that collaborative and stablebusiness relationships have dominated market-orientedand hierarchical governance structures in purchasing andsupply chain management. This raises an importantimplication for EM practitioners. ‘‘How much of all thepurchasing is generated outside existing relationships, andcan therefore be handled by (electronic) market sites? If amajority of the buying is done through existing collabora-tive partners, then that share of the market must bediscounted as potential transactional volume’’ (Barratt andRosdahl, 2002). This may be one of the reasons that manyEMs began to emphasise collaboration functionalityduring the 2000–2002 period.

2.3. Horizontal collaboration and buying groups

Collaboration through vertical relationships has beengiven due recognition, but collaboration through horizon-tal relationships (pooled purchasing) has been largelyignored in the private sector purchasing literature (Essigand Arnold, 2001). This situation persists despite the factthat buying groups and volume purchasing are used widelyby healthcare, school, and governmental organisations tokeep prices low and achieve other organisational objectives(Essig, 2000). Buying groups were projected to be one ofthe 10 purchasing trends in the period 2000–2010 by Carteret al., 2000. The benefits of purchasing through buyinggroups include (Ridgeway, 1988; Nollet and Beaulieu,2003, 2005; Huber et al., 2004 2005; Tella and Virolainen,2005; Hernandez-Espallardo, 2006; Schotanus and Telgen,2005): lower prices due to aggregated purchasing quan-tities, reduced supply risks, reduced administration costsdue to the centralisation of purchasing activities to buyinggroups, and networking benefits (since group members

communicate and interact with each other). This latterbenefit has been touted to be as important to groupmembers as price reductions (Ridgeway, 1988). However,buying groups also have disadvantages, including:

�

loss of flexibility, since products/services purchasedmust have a high similarity among group members, � loss of control by individual group members, � high coordination cost, especially if group members are

competitors,

� anti-trust problems, � potential consolidation of the supply market in the long

run, and

� success relies on the quality of leadership/coordination

in the group: the ability to negotiate contracts andcoordinate member interests is critical.

Nollet and Beaulieu (2005) suggested that, when joininga purchasing group, one should consider the potentialcosts/benefits, the size of the group, the potential impact ofthe buying group, and member characteristics. Nollet andBeaulieu (2003) analysed buying group trends and con-cluded that groups became larger, showed more adaptationto group member preferences, managed more partnership-style types of relationship with suppliers, and many haveimplemented electronic catalogues for their members.Based on collaboration intensity and number of purchasinginitiatives, Schotanus and Telgen (2005) classified buyinggroups in the healthcare industry into five categoriesthrough a highway travel analogy: Convoy, Hitchhiking,Carpool, F1-team, and Bus Rides. Hitchhiking involves thesharing of purchasing related information with otherorganisations, or small organisations hitchhike on con-tracts of large organisations under the same conditions.Bus rides involve long-term hitchhiking through a thirdparty. In carpooling, one of the members is in charge of theprocurement of goods in which this member has expertise.Convoy is a more intensive form of cooperative purchas-ing, involving much consultation between members tobring specifications to the same level. F1 team ofteninvolves representatives of the management teams of thecooperating organisations meeting regularly as a steeringcommittee to discuss cooperative projects. Of thesecategories, bus rides are often hosted by a third party thatprovides a supplier electronic catalogue through itswebsite, a form of EM that is biased towards buyers.

2.4. Collaboration through EMs

In EMs, collaboration in purchasing can happen eithervertically or horizontally. If it is a vertical collaborationbetween buyer and seller, then if strategic collaborationand supply chain management are offered through an EM,can it still be called an EM? There is no agreement on thisissue in the literature. Some researchers think EMs are onlytools that support non-strategic purchasing and short-termrelationships (Kuman and Dissel, 1996; Choudhury and

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2/http://www.forbes.com/bow/b2b/main.jhtmlS (accessed initially on

October 1, 2003).

S. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126116

Hartzel, 1998). For example, Choudhury and Hartzel(1998) studied Inventory Locator Service (ILS), an EM foraircraft parts, and suggested that aircraft parts boughtroutinely from long-term suppliers are not actuallyprocured through this EM but through other applications.McLaren et al.(2002) also developed a framework forsupply chain activities supported by e-business tools,among which third-party EMs only support non-strategicproduct procurement.

However, more researchers are beginning to think ofEMs supporting portfolios of sourcing strategies, includingstrategic supply chain management, through stable busi-ness relationships. For example, Rudberg et al. (2002)discussed the possibility of supporting supply chainplanning using EMs. Grieger et al. (2003) suggested thatthere were possibilities for managing multiple supplyrelationships through EMs. Alt and Casar (2002) discussedhow to manage collaborative planning, forecasting andreplenishment (CPFR) through EMs. Christiaanse andMarkus (2003) described Elemica as a pure collaborationEM that supports only existing business relationships inthe chemical industry. In this paper, we will adopt thebroader view—that EMs can offer a full range of supplychain management possibilities.

Buying groups on the Internet have not been studiedextensively. However, Kauffman and Wang (2002) eval-uated the earliest dot coms that offered innovative groupbuying business models, including Mercata.com andMobshops.com. Anand and Aron (2003) surveyed 50buying groups on the web and attempted to build aneconomic model that could address such phenomena.Perhaps, there are no viable economic models for suchinitiatives, because either the majority of the buying groupsstudied by these researchers do not exist anymore, or theyhave been modified to other more viable business models.

This literature review has shown that collaboration hasbeen given due recognition, both offline and online, but fewresearch papers have systematically identified the forms ofcollaboration in EMs. This paper will explore collabora-tion through EMs in a more systematic way. The literaturesuggests that two categories of collaboration may beoffered through EMs: vertical collaboration and horizontalcollaboration. We will call these categories supply chaincollaboration and buying groups, respectively. Our ex-ploration will address the research question of enumeratingthe existing forms of buyer/seller purchasing collaborationthrough EMs that fit within these categories.

3. Methodology

A website survey of EMs was conducted to identifydifferent forms of buying groups and supply chaincollaboration, including how collaboration is conductedin these EMs. Using online resources to do research hasbeen used extensively by many researchers (e.g. Allen et al.,2006). Information about available functionalities isnormally offered on these sites, allowing an interpretation

of how collaboration is conducted, making this approachsuitable for such a study. To study collaboration in EMs,the first step is to search the web for EMs. However, a largenumber of variations of EMs exists, so it is necessary tooperationalise the EM concept and confine the search toEMs that meet our predefined criteria.

3.1. Operationalising the concept of electronic marketplaces

We define EMs as open electronic platforms forfacilitating inter-company transaction activities and inter-actions between multiple participating companies. Thesubject EMs of interest met two criteria: (1) many (or few)-to-many EMs that are open to the public and (2) support aportfolio that includes both non-strategic and strategicsupply chain relationships.Fig. 1 is a framework that clarifies the types of EMs

included in the survey. Transaction activities can bedivided into an information searching stage where suppli-ers and buyers get to know each other, and later stagessuch as negotiation and fulfillment. A competitive marketis characterised by unknown trading partners and informa-tion searching, but transacting with existing tradingpartners lacks this stage. The framework has two dimen-sions: whether information search is done online andwhether resulting negotiation and fulfillment is at leastpartially done online. The gray area in Fig. 1 describes thefunctionalities of the surveyed subjects. One clarifying noteis that virtual private networks (in quadrant A of Fig. 1) inan EM environment differ from private networks thatconnect two companies with dyadic relationships in thetraditional world, due to the availability of many potentialtrading partners and lower switching costs in virtualprivate networks, where all the trading partners use thesame platform.An online buying group that satisfies the above two

criteria is also considered an EM. However, if a website’smain activity is to support buying groups, it is normallycalled a ‘‘biased’’ EM since it represents the interests ofbuyers more than sellers. Another difference between thetwo types of EMs is that buying groups normally targetsmall businesses, whereas EMs supporting vertical colla-boration mainly target large companies, or are establishedby large companies that normally do not engage in grouppurchasing activities, due to anti-trust considerations.

3.2. Identifying and screening EMs

To study supply chain collaboration, we began withForbes Best of the Web: B2B Directory.2 EMs supportingcollaboration were identified in a two-phase screeningprocess. First, adhering to the definition of EMs, wescreened the Forbes database, and identified a total of 108EMs in 18 industries. During screening, we eliminated

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Offline Online

Information searching

Online

(partia lly/fully)

Negotiation and

fulfillment

Offline

(A)Virtual private network

Invited reverse

auctions

(D) Information portal

Online product listing and

catalogueSearch engine

Bid and Ask

…

(B) Pure electronic

marketplaces

Relationship established

online through (D

(C)

Conventional Marketplaces

♦♦

♦

♦♦

♦

♦ E-ordering

♦ Vendor Managed

Inventory (VMI) Transaction (partially)

completed through (A)

Fig. 1. B2B electronic marketplace framework.

S. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126 117

private company Websites such as GE’s Polymerland, andsoftware companies and service providers, such as theadvertising Website Doubleclick. Since our focus was oncollaboration EMs, a second phase of screening wasconducted to identify all the remaining EMs that supportsupply chain collaboration. We were conservative inexcluding purely competitive EMs, to avoid missing EMssupporting collaboration, but retained those that offeredfunctionalities extending beyond pre-order informationsearching and contract negotiation transaction stages. Wealso included partly consumer-oriented EMs such as Ebay,explained in the next section. This resulted in a final list of61 EMs in 14 industries, each supporting supply chaincollaboration (vertical collaboration) to some degree (seethe Appendix A for the full list).

The preliminary list (108 EMs in 18 industries) was notsuitable for studying horizontal collaboration. We foundonly one EM in this list that supports buying groups; whichwas wwre; a retail em. Since there is little availableconsolidated em literature or directories on online buyinggroups, we established such a list by searching severalmajor databases such as abi/inform; Lexisnexis academic;Websphere; and the web search portals Google and Yahoo;using the keywords ‘‘demand aggregation’’; ‘‘buying/purchasing group/organisation/consortia’’; ‘‘volume pur-chasing’’ etc. Internal company purchasing or buyingcentres were excluded since our focus is on inter-organisa-tional collaboration. As a result, 26 ems supporting buyinggroups (horizontal collaboration) in 11 industries that fitour definition of ems were identified. This difficulty inidentifying em buying groups is an indication of the lowpopularity of such business models.

Among the 87 EMs identified as offering either supplychain or purchasing group solutions, there were 75 US andCanadian, and 11 European EMs. Forbes.com listed onlyone Asian EM (Alibaba). However, it was excluded since atthat time it supported only information searching.

EM selection for this study was biased in several ways.First, the Forbes B2B directory is not exhaustive and itseditor was probably subjective in deciding what B2B sites

to include. The supply chain sample is representative of thisdirectory. Second, the searching process to identify EMsthat support buying groups was subjective and some EMsmight have been missed, depending on the use of keywords.An attempt was made to overcome this bias, by checkingall the websites mentioned by Kauffman and Wang (2002)that were still viable. Although a limited bias is still presentin the survey, it is a worthwhile initial effort that otherresearchers may build on. However, readers should becautious when interpreting the percentages reported fromthe survey.

3.3. Website analysis

The information we studied on each website included:mission statements, company ‘‘about us’’ information,products/services/solutions, frequently asked questions,case studies, etc. Normally, the information we neededcould be found from the above sources. In a few cases, freeregistration was possible, allowing access to more informa-tion. Based on the evaluation criteria specified in Table 1,we coded each EM into a suitable category. A spreadsheetdatabase was built to facilitate coding and to maintainrecords of key information. In case of ambiguity, tworesearchers discussed and resolved the issues. The results(see Table 1) are reported in the following sections.

4. Overview of the results

Five categories of buying groups and four categories ofsupply chain collaboration were identified (see Table 1).These forms of collaboration answer the research question:‘‘What types of purchasing collaboration are supportedthrough these EM categories?’’

4.1. Horizontal collaboration: buying groups

Buying groups use several different business models. Thekey differences among them are: (1) who is the coordinatorand (2) how the coordinator manages purchasing activities.

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Table 1

Types of EM collaboration

Sample % Evaluation criteria

Horizontal collaboration: buying groups

Dealer type 5 19 EM is the coordinator of buying activities

EM takes ownership of the products

Exchange catalogue 15 58 EM is the coordinator of buying activities

EM does not take the ownership of products

EM organises purchasing by providing supplier product catalogue

Exchange negotiation 4 15 EM is the coordinator of buying activities

EM does not take ownership of products

EM organises purchasing by negotiating with suppliers after collecting

enough buyers.

Supplier initiated 3 12 A supplier is the coordinator of buying activities

Buyer initiated 1 4 A buyer is the coordinator of purchasing activities.

Total 26

Vertical collaboration: supply chain collaboration

Collaborative fulfillment 42 69 Must include information search and negotiation stage of the transaction

Must support one of the other stages of the transactions, such as order

placement, payment, transportation.

Private catalogue 24 39 Must offer product catalogue

Must support ordering from a single source or preferred supplier

Product life cycle management 12 20 Must include one of the following:

Document management

Product co-development

Project management

Collaborative R&D

Supply chain coordination and

integration

39 64 Supports certain forms of supply chain collaboration, such as private

logistics network, inventory management, production planning and

forecasting, supply chain integration, web-based EDIa, etc.

Total 61

aWeb-based EDI can transmit information about product design and project progress. However, since the application is not tailored specifically to

product design and project management, this type of support is limited. For simplicity, web-based EDI is classified as supply chain coordination and

integration.

S. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126118

There are three business models for the assignment of thecoordinator: (a) the EM, (b) a supplier, or (c) a buyer.When a supplier or buyer serves as the coordinator,coordination is limited. However, when the EM serves ascoordinator, there are three ways of coordinating: (a) theEM owns the products, (b) the EM provides a catalogueoffering with no product ownership, or (c) the EM has noproduct ownership and negotiates with suppliers dynami-cally. As a result, the first category where the EM is thecoordinator, can be divided into three sub-categories:dealer-type EMs, exchange-catalogue Ems, and exchange-negotiation EMs. This results in a total of five forms ofbuying group, as explained below.

When an EM serves as coordinator, buying groupmodels have three possible types:

(1)

Dealer-type EMs. Dealer-type EMs take ownership ofthe products. For these EMs, products are boughtbefore group members/buyers make any promise topurchase, and products are offered online for membersto order. The volume that these EMs purchase is basedon demand forecasting, which can be derived frombuyer suggestions and sales history. EM operators

purchasing products in large quantities may qualify forvolume discounts. Part of the discount is returned tobuyers, and the remainder is EM operator profit.Dealer-type EMs put minimum requirements onbuyers: they can purchase any quantity of whateverproducts are offered through the EM at any time, andlarger discounts may be offered to premium buyers.Most online distributors are examples of this type ofEM. For example, Grainger, a US-based EM, offers awide variety of industrial and business maintenance,repair, and operations (MRO) supplies. Other examplesinclude ChemPoint in the chemical industry andChumbo in the retail industry.

(2)

Exchange-catalogue EMs negotiate contracts withpreferred suppliers for their members, before membersmake any specific purchasing commitment, and offerthese contracted prices to members that sign up. Thedifference between exchange-catalogue and dealer-typeEMs is that exchange-catalogue EMs do not takeownership of products. They may publish selectedsupplier product catalogues online for member order-ing, or they may direct members to supplier websitesand let them order directly from contracted suppliers at

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any time they wish. Deliveries and returns of goods areusually arranged directly between suppliers and buyers.Most EMs that support buying groups use this model,since it puts less burden on both EM operators andbuyers. An example is Bath and Kitchen Buying Group.It negotiates pricing agreements and rebates withpreferred vendors for its buy-side clients, who are bathand kitchen product distributors. Distributors purchasedirectly from the manufacturer, and the bath andkitchen buying group does not own or operate centralwarehousing. According to aggregated group purchas-ing volume over an agreed time period, a rebate iscalculated by the EM and returned to distributors.Distributors pay an annual fee of $1000, and can placeorders anytime. Another example is Happy Many, autility purchasing group that negotiates favorablepricing with preferred utility and telephone companies,and then places these services online for its members toorder. Members can purchase these services from theHappy Many Website at any time.

(3)

Table 2

Comparison of forms of buying group in electronic marketplaces

Models Weakness Strength

Dealer High risk for EM High-profit for EM operators

are similar to exchange-catalogue EMs, as they do nottake title to the products. However, these EMsnegotiate pricing contracts with suppliers only afterthey have buyer commitments. EM operators collectorders from buyers, and then submit these orders tosuppliers. In order to build volumes that will bringbigger discounts, all of the products purchased must bethe same or similar. Negotiation can be offline, or itmay use EM dynamic pricing platforms. Petrosilicon issuch an example in the energy industry. Members arerequested to submit their requirements by grade for aparticular month. These are aggregated and forwardedto preferred suppliers who then contact membersdirectly with their best prices. Other examples includeUnistar in the food and hospitality industry, andBroadlane in the healthcare industry.

type operators due to

ownership of products Member can buy and receive

immediately any products offered

by the EM at any time

(immediacy)

Low price discount for

members

Exchange

catalogue

Low profit for EM

operators

Low risk for EM operators

Low price discount for

members

Members can buy any products

offered by the EM at any time

Exchange

negotiation

Low profit for EM

operators

Low risk for EM operators

Session-based purchase High price discount for members

Limited products

Long product lead time

Supplier

initiated

Session based purchase Easy to arrange production plans

for suppliers

Limited products

Require high similarity

among buyers

Long product lead time

Buyer

initiated

Session based purchase High price discount for members

Require high similarity

among buyers

Long product lead time

Both supplier- and buyer-initiated buying groups areinnovative models of the Internet age, which we refer to assupplier-initiated and buyer-initiated buying groups. Whena supplier is the coordinator, it publishes its productionschedule, price curve, and shipping date, and buyers submittheir orders according to the price curve and previouslysubmitted orders (Akman, 2002; Kauffman and Wang,2002). The price curve falls when the quantity purchased bythe group increases. EWinWin is a technology providerthat implements the supplier-initiated buying group model,utilising their patented Demand Aggregation System(DAS), and Shopmate and Letsbuyit.com are retail industryEMs that use this model. For example, in Letsbuyit, asupplier can initiate a purchasing session, specifying theprice curve and wait online for buyers to come. Supplier-initiated buying groups became popular around 2000. Anumber of such EMs were identified by Kauffman andWang (2002) in 2001, but most of these EMs can no longerbe found on the Web.

In our survey, buyer-initiated buying group functionalitywas found in only one EM, world wide retail exchange(WWRE), a retail industry EM. The WWRE model lets abuyer initiate a group purchase. Buyers nominate andapprove a leader among all the buyers. The leader takesresponsibility for harmonising different needs of all buyersin the group and organises negotiations with suppliers.Within the 26 EMs that supported buying groups, we

found that the majority of them adopted the exchange-catalogue model (Table 1). A comparison of the fivemodels explains the relative popularity of this model (seeTable 2), since it is a low risk, low-profit model for EMoperators, and it is a safer model for operators whentechnologies are uncertain. For buyers, although the pricediscounts they can get from an exchange-catalogue modelare lower than from supplier- and buyer-initiated models,they are willing to sacrifice price discounts for reducedproduct lead times. Lead times are often much longer insession-based buying groups, where members have to waituntil there are enough buyers. Liquidity appears to be thekey factor for EM success in this category. Because theexchange-catalogue model puts the least burden of all thebusiness models on buyers, it also makes it easier for EMoperators to attract more buyers.

4.2. Vertical collaboration: supply chain collaboration

EMs are now increasingly accommodating supply chainmanagement activities, usually conducted somewhere

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126120

along the continuum between arms-length market relation-ships and hierarchical relationships. According to thedepth of the collaboration intentions of supply chainparties, we classified supply chain collaboration into:collaborative fulfillment, pre-negotiated purchasing con-tract execution, product life cycle management, and supplychain coordination and integration. Among these, the firsttwo categories are transaction-oriented and the last two areinteraction oriented. We believe that collaboration inten-tion in the latter two categories is greater than in the firsttwo.

(1)

3O

Collaborative fulfillment: Collaborative fulfillment re-presents the lowest intended level of collaborationamong all the categories. There is no hard boundarybetween arms-length relationships and collaboration.After trading partners negotiate a deal, they maycollaborate on fulfillment, including payment, delivery,order tracking, and after-sales maintenance. In oursurvey, we included any EMs supporting negotiation ofcontracts as well as fulfillment of the contracts, nomatter how minor this support was. Support providedmight include payment, delivery, order tracking, etc. Bythese criteria, some purely competitive EMs were alsoincluded, such as ebay3 (other examples of such EMsare noted in the Appendix A). This is because ebay

supports payments. After an auction is over, bothparties continue to cooperate until the products aredelivered and payments are cleared. Some EMs offerorder tracking, requiring suppliers to cooperate tem-porarily in order to share certain information withbuyers.

(2)

Table 3

Examples of supply chain coordination and integration

Industry Examples of supply chain

coordination

Examples of EMs

Retail industry Collaborative planning,

forecasting, and

replenishment

GlobalNetXchange

www.globalnetxchange.com

Food and

beverage

industry

Vendor managed inventory; EFSNetwork

www.efsnetwork.com

Warehouse utilisation and

appointment scheduling;

Collaborative inventory

planning; forecasting and

replenishment

Electronics Vendor managed inventory Avnet www.avnet.com

Energy Vendor managed inventory Pantellos group

www.pantellos.com

Transportation Private logistic networks GT nexus

www.gtnexus.com

Auto industry Vendor managed inventory; Supplyon

Pre-negotiated purchasing contract execution: Usually,two kinds of purchasing contracts are supported byEMs: preferred supplier contracts and single sourcecontracts. Technically, supporting pre-negotiated pre-ferred suppliers in contract execution is no differentfrom supporting single-source contract execution. Bothmay involve installing bespoke private online catalo-gue(s) at the EM, and transferring transaction databetween partners, such as purchase orders, deliverynotices, and invoices. More and more EMs have beenproviding private e-catalogues within their publicsystems. A private e-catalogue includes pre-negotiatedterms, which are only accessible by a specific buyer andits recognised suppliers (Dai and Kauffman, 2000).However, except for pricing and other financial terms,the private catalogue still shares the same systems andentries as the public e-catalogue. Through these facil-ities, business partners can use the EM infrastructure tomanage and automate their business processes, whileavoiding open market negotiation. In our survey, EMsoffering product catalogues and supporting separateaccounts to accommodate preferred suppliers or singlesource contracts were also placed in this classification.

nly the Ebay B2B section was included in the survey.

(3)

Product life cycle management, including project man-

agement, document management, and collaborative

R&D: Product life cycle management concerns mostlythe development stage of the product. It is seen in anumber of industries, including construction, printing,aerospace, and the automotive industry. The commoncharacteristics of these industries are the large numberof parties involved in product development. Projectlifetimes can vary from weeks to years, depending onthe complexity and size of the project. For example,Supplyon is a European EM that connects first-tier anddeeper-tier suppliers in the automobile industry. Itsbusiness solutions include collaborative engineering,document management, and computer aided design(CAD) conversion. In the automotive industry, numer-ous component, subsystem, and system designs must begenerated by automakers and their suppliers whendeveloping new vehicles. These designs and relateddocumentation may be generated in different formatsby different software applications on differentsystems, so the conversion and transmission of thisdesign information among the business partners areimportant.

(4)

Supply chain coordination and integration: This con-cerns the transportation and logistics aspects of thesupply chain. The purpose of supply chain coordina-tion is to drive inefficiencies out of the supply chain.However, different industries have different industry-specific inefficiencies, so the details of the applicationdepend on the industry. Some examples are listed inTable 3.

Table 3 shows that the most popular supply chaincoordination functionality is vendor managed inventory

web EDI www.supplyon.com

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126 121

(VMI); its variants are seen in the retail and automotiveindustry. For example, the above-mentioned Supplyon alsooffers VMI to handle logistics problems. CollaborativePlanning, Forecasting, and Replenishment (CPFR) is anenhanced VMI service used in the retail industry(Alt and Casar, 2002). CPFR is used to ensure enoughquantity to meet consumer demand, while minimisinginventory costs. In order to achieve this goal, tradingpartners agree to mutual business objectives and measures,develop joint sales and operational plans, and colla-borate to generate and update sales forecasts and replen-ishment plans. A nine-step CPFR implementation guide-line was published by the Voluntary Industry CommerceStandards (VICS) Association4 in 1998, in order tofacilitate the adoption of such collaborative practices. Inthe transportation industry, a private logistics network(PLN) serves as an information ‘‘nerve centre’’ for theenterprise and its trading partners. This enables suppliers,third-party logistics operators, forwarders, carriers, bro-kers, and end customers to connect seamlessly with oneanother, in order to coordinate the movement of goods andinformation.

In our study, 61 EMs in 14 industries offered supplychain collaboration. Table 1 lists the percentage ofEMs offering each type of supply chain activity. Colla-borative fulfillment and supply chain coordinationand integration were the most frequently seen appli-cations, with 42 and 39 EMs supporting such applicationsrespectively. Fifteen pure collaboration EMs with mini-mum competitive elements were found. These EMsonly try to build connectivity between companies, the so-called ‘‘between the firewall’’ applications, which cansupport pre-negotiated contract execution, supply chaincoordination, and product life cycle management. Exam-ples of these pure collaborative EMs are noted in theAppendix A.

Among all types of ‘‘between the firewall’’ applications,pre-negotiated contract execution and supply chain co-ordination were often seen in EMs. Product life cyclemanagement was the least frequent form of colla-boration (in 12 EMs), since product life cycle managementpractices are less popular among all the industries, beingused mostly by large companies within their own privateportals. In our survey, we found that product life cyclemanagement usage was concentrated in the constructionand aerospace industries. Here, product developmentprojects involve multiple parties and complex coordinationactivities.

5. Discussion

5.1. Buying groups in electronic marketplaces

Fitting the forms of buying groups identified in thissurvey into Schotanus and Telgen’s (2005) work, further

4/www.cpfr.orgS

suggests that the number of purchasing activities initiatedin online purchasing groups is much more frequent thanthat of traditional offline buying groups. Compared withthe buying groups identified by Schotanus andTelgen, dealer type, exchange negotiation and supplier-initiated buying groups resemble Bus Rides, whereasbuyer-initiated and catalogue negotiation buying groupslook more like Carpool. Carpool and Bus Rides are allranked highly in one of Schotanus and Telgen’s classifica-tion dimensions: ‘‘the number of initiatives’’. This may bebecause online purchasing groups are facilitated by third-party intermediaries, which ‘‘continuously undertake dif-ferent activities with the same cooperative initiative’’. Theuse of the Internet also helps intermediaries to saveadministration time, and to focus on the core activities ofinitiating more purchasing sessions as well as trackingmore customers.Although the literature suggests several benefits of online

buying groups, such as global reach, electronic orderingand negotiation, and anonymity, both the literature andour survey also suggest that online buying groups may notbe very popular. The following suggests several potentialreasons:

(1)

Loss of networking benefits. Ridgeway (1988)suggested that sharing ideas with others within the‘‘family’’ and enjoying consulting services fromthe group-purchasing organisation are big benefits oftraditional groups. Networking is also importantfor coordinators, to encourage member commitment.In traditional group-purchasing organisations, onerecommended strategy for the coordinator is to net-work directly with member CEOs, CFOs, or CIOs.However, many online groups do not involve theserelationships. Most members remain anonymous, andnetworking benefits are lost to EM-buying groups.Furthermore, EMs support only routinised coordina-tion, while social networks tend to be charact-erised by richer face-to-face meetings. This suggeststhat there could be a misfit between EMs and buyinggroups.

(2)

Geographical dispersion. One benefit of theInternet is its ability to attract global member-ships. However, geographic closeness and groupcohesion facilitate group member commitment, whichin turn affects the coordinator’s ability to negotiateprices.

(3)

Price cutting feature of buying groups. Since net-working benefits may be largely lost in EMs, theintended benefit of an EM-buying group should belower prices. But most models of EM-buyinggroups have limited ability to force lower prices,probably due to a lack of commitment from members.Price-cutting behavior of buyers may result inbiased EMs, and could potentially cause supplierdissatisfaction.

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126122

5.2. Supply chain collaboration in electronic marketplaces

Unlike the small amount of online buying groupanalysis, supply chain collaboration in EMs has receiveda great deal of attention (Phillips and Meeker, 2000;Holzmuller and Schluchter, 2002; Christiaanse and Mar-kus, 2003; MacDuffie and Helper, 2003). For example,MacDuffie and Helper (2003) suggested two forms ofcollaboration in EMs: collaborative design and supplychain collaboration. Phillips and Meeker (2000) arguedthat industries with many players involved in the supplychain are suitable for collaboration functionalities, andoutlined several collaboration forms in the aerospace,construction, and printing industries.

Results from our survey of websites indicated thatmore than half of the EMs studied offered collaborationfunctionalities. Our classification results go beyondwhat other researchers have discussed, including: (1)collaborative fulfillment as a form of collaboration,although both buyers and sellers may not have astrategic intent to collaborate, (2) pre-negotiated pur-chasing contract execution, which has received littleattention in the literature, but our experience from thissurvey indicated that this could be an important form ofcollaboration, since more than one third of the EMsoffered this kind of collaboration, and (3) supply chaincoordination and product life cycle management func-tionalities found in our survey, which appear to beindustry specific.

Table 4

Collaboration levels of different forms of buying group and supply chain coll

Mutuality of

Goals

Resource Sharing Commitment

Buying group

Dealer type Pursuing own

best interests

No No min. purchase

required

Exchange catalogue Pursuing own

best interests

No No

Exchange negotiation Pursuing

group’s best

price

Human resources;

desired info

Willing to change

Supplier initiated Pursuing

group’s best

price

Human resources;

wanted info

Willing to change

Buyer initiated Pursuing

group’s best

price

Human resources;

desired info

Willing to change

Supply chain collaboration

Collaborative

fulfillment

Pursuing own

best interests

No No

Pre-negotiated

contract execution

Maximising

own interests

Shared private

catalogue

Depends

Product life cycle

management

Satisfying end

consumers

Human skill,

intelligence, etc

Willing to adapt

Supply chain

coordination and

integration

Satisfying end

consumers

Inventory, planning,

and customer info.

Special IT or prod

equipment investm

6. Summary and future research

6.1. Summary and conclusions

Our exploration of EMs has found five types of buyinggroups and four types of supply chain collaboration thatwere supported by existing EMs. Ordered from high to lowby their frequency in this survey, the five types of EM-buying groups were exchange-catalogue, dealer-type, ex-change-negotiation, supplier-initiated, and buyer-initiatedbuying groups. The exchange-catalogue model seems to bethe most popular because it puts fewer burdens onmembers and coordinators. Supply chain collaborationappears to be more fully supported by EMs than arebuying groups. Again, ordered from high to low by theirfrequency in this survey, the four types of supply chaincollaboration were collaborative fulfillment, supply chaincoordination and integration, private catalogue, andproduct life cycle management.This research contributes to the theory of collaboration

by providing a preliminary classification of EM collabora-tion, and by building a foundation for further empiricalexamination. EM operators should also consider thestrategic importance of offering value through collabora-tion functionality beyond simple aggregation, especially inexchange-catalogue type of online group purchasing,collaborative fulfillment, and supply chain coordinationand integration. Competition among operators may renderthe current popular collaboration functionalities strategic

aboration in EMs

Structure Agreement Trust Level of

Collaboration

Individual autonomy Definitive No Cooperative

sourcing

Individual autonomy Definitive No Cooperative

sourcing

Temporary group

formed

Definitive Moderate Coordinated

sourcing

Temporary group

formed

Definitive-

relational

Moderate Coordinated

sourcing

Temporary group

formed

Definitive-

relational

Moderate Coordinated

sourcing

Individual autonomy Definitive Low Supply chain

cooperation

Individual autonomy Definitive Low Supply chain

cooperation

Temporary joint

programmes formed

Relational

contracts (low

level)

Moderate-

high

Supply chain

coordination

uction

ent

Joint programmes

lasting contract life

time

Relational

contracts (Low

level)

Moderate-

high

Supply chain

coordination

ARTICLE IN PRESSS. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126 123

necessities. Operators should also focus on improvementsto other types of strategic collaboration offerings.

Due to the limitations of our research methods, whichrelied on secondary information drawn from EM websites,a more comprehensive primary data survey of both EMsand participants would be needed to develop morestatistically valid conclusions.

6.2. Future research

There are many potential areas of research into EMcollaboration, including: investigating the difficulties ofsupporting online collaboration, designing viable businessmodels for supporting EM buying groups, estimating theimpact of the Internet on group member behavior, using aninteraction approach (Hakansson, 1982) to study EMsupply chain collaboration, and developing a strategicframework that combines horizontal and vertical colla-boration together in a logical manner.

Evaluating the level of online collaboration is anotherpromising area of future research. The framework of Kagan,1991 and Winer and Ray, 1994 can be adapted to evaluatethe types of collaboration identified in this survey. In theirframework, cooperation, coordination, or true collaborationrepresent increasingly higher levels of collaboration, depend-ing on six criteria: mutuality of goals, resource sharing, trust,structure, commitment, and agreement. An example of usingthis framework to evaluate the level of EM collaboration isprovided in Table 4. By evaluating each type of horizontal

Table A.1

List pf EMs surveyeda

EMs supporting supply chain collaboration

Aerospace and defense

Exostar: www.exostar.com

Aeroxchange: www.aeroxchange.com

Agriculture

XSAg: www.xsag.com#

Agribuys: www.agribuys.com

CattleSale: www.cattlesale.com#

E-Markets: www.e-markets.com

ForTheFarm: www.forthefarm.com#

Chemicals

CC-Chemplorer: www.cc-chemplorer.com

ChemConnect: www.chemconnect.com

Elemica: www.elemica.com*

CambridgeSoft: www.cambridgesoft.com#

SciQuest: www.sciquest.com

DoveBid: www.dovebid.com#

Construction

BuildOnline: www.buildonline.com*

Construction.com: www.construction.com

Citadon: www.citadon.com*

BuildPoint: www.buildpoint.com*

and vertical collaboration using the above-mentionedcriteria, this framework suggests that EMs might be morelikely to support the lower levels of collaboration (coopera-tion and coordination). This is because first, due to lack ofmutual goals, information sharing, and trust, the dealer-typeand exchange-catalogue buying groups fit the cooperativesourcing category, which is the lowest level of collaboration.A simple mutual goal, simple information sharing, minormodifications in structure, and a dominant and definitivecontract suggest that exchange-type negotiation, supplier-initiated, and buyer-initiated buying groups fit more with thiscoordinated sourcing category. Second, collaborative fulfill-ment and pre-negotiated purchasing contract execution fitmore with the supply chain cooperation category, due to lackof mutual goals and commitment. Product life cyclemanagement and supply chain coordination and integrationcan span the spectrum of coordination and collaborationlevels, depending on the time frame and complexity ofproject and supply chain initiatives. We speculate that, in anEM environment, product life cycle management and supplychain coordination, and integration should be at the supplychain coordination level, since the EM environment does notfoster trust and commitment. However, these suggestedresults need to be validated empirically through a futuresurvey.

Appendix A

List pf EMs surveyed are given in Table A.1.

Logistics and transportation

GT Nexus: www.gtnexus.com*

Celarix: www.celarix.com*

Elogex: www.elogex.com*

Freightquote.com: www.freightquote.com#

Manhattan Associates: www.manh.com#

Nistevo: www.nistevo.com*

Shiplogix.com: www.shiplogix.com

Transplace: www.transplace.com

Metals

OnlineMetals.com: www.onlinemetals.com

Paper and forest products

ForestExpress: www.forestexpress.com

Paper2Print.com: http://paper2print.com/home.jhtml*

Noosh: www.noosh.com

PrintCafe Software: www.printcafe.com

Retailing

FurnishNet.com: www.furnishnet.com*

JCommerceRetail.com: www.jcommerceretail.com*

RetailersMarketXchange www.RetailersMarketXchange.com*

GlobalNetXchange: www.gnx.com

ARTICLE IN PRESS

Table A.1 (continued )

Construction Retailing

Hyphen Solutions: www.mh2.com* Transora: www.transora.com

Electronics UCCnet: www.uccnet.org*

Arrow Electronics: www.arrow.com Worldwide Retail: www.worldwideretailexchange.org

Avnet: www.avnet.com Automotive

E2open: www.e2open.com* Cobalt Group: www.cobaltgroup.com

FastParts.com: www.fastparts.com OEConnection: www.oeconnection.com

Energy Powerway: www.powerwayinc.com

Intercontinental Exchange: https://www.theice.com# Covisint by Compuware: www.covisint.com

Pantellos Group: www.pantellos.com SupplyOn: www.supplyon.com

Excess Inventory Hospitality and Travel

EBay business: http://www.ebaybusiness.com# Avendra: www.avendra.com

Visagent Surplus Goods Exchange www.visagent.com/

surplus_exchange.htm#

GetThere: www.getthere.com

Food and Beverage Sabre: www.sabre.com

EFSNetwork: www.efsnetwork.com* WorldRes: www.worldres.com

Sysco: www.sysco.com Industrial Equipment

Amphire Solutions: www.amphire.com* Camelot Technologies Group: www.camelottech.com

IronPlanet: www.ironplanet.com

PartMiner: www.partminer.com

EMs supporting buying groups

Name Address Industry

Letsbuyit www.letsbuyit.com Retailing

Sphere 1 http://www.sphere1.coop/default2.htm Industrial supplies

NetPlus alliance http://www.netplusalliance.com/ Industrial supplies

Retex http://www.retex.com/ Retailing

Online choice.com http://onlinechoice.com Business services such as insurance plans

WWRE www.RetailersMarketXchange.com Retailing

Broadlane www.broadlane Healthcare

Shopmate www.shopmate.com General

Unistar http://www.unistarllc.com/index2.html Food and hospitality

The buying group http://www.the-buying-group.com/ Retailing

IPCRX www.ipcrx.com Healthcare

Grainger www.grainger.com Office supplies

Charities group buying http://www.charitiesbuyinggroup.co.uk/ Not for profit

Hospitality Buying Group http://www.hospitality-buying-group.com/ Food and hospitality

Group Buy Centre http://www.groupbuycenter.com/ Automotive industry

Prime advantage http://www.primeadvantage.com/ Industrial supplies

Chem Point http://www.chempoint.com/companyoverview.asp Chemical

Chumbo http://www.chumbo.com/biz.aspx Retail

American Association of Microbusiness http://www.mnhomebiz.org/memberbenefits.html General

Vipar http://www.vipar.com/DesktopDefault.aspx Automotive industry

Hospice provider http://hospiceprovider.com/index.asp?topic=5 Healthcare

Happy Many http://www.happymany.be/index_en.asp Business services

Independent Restaurant Purchasing Group http://www.independentrestaurants.com/ Food and hospitality

HCIS Group Buying http://www.hcis.org/groupbuying.htm Healthcare

Bath and Kitchen Buying group http://www.bkbg.com/ Retailing

Petrosilicon www.petrosilicon.com Energy

Technology enabler

ewinwin http://www.ewinwin.com/corp/

*Pure collaboration Ems. #Pure competitive EMs with collaborative fulfillment functions.aThe last time we accessed these websites was June, 2005. Due to the fast changing nature of e-commerce companies, a few may no longer exist or may

have undergone significant changes.

S. Wang, N. Archer / Journal of Purchasing & Supply Management 13 (2007) 113–126124

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