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1
Case Studies
© 2014 Devry University
Industrial Marketing Management 33 (2004) 97–105
The role of e-marketplaces in supply chain management
Teck-Yong Eng*
Aston Business School, Aston University, Aston Triangle,
Birmingham B4 7ET, UK
Received 1 October 2002; received in revised form 1 December
2002; accepted 1 January 2003
Abstract
Electronic marketplaces (e-marketplaces) have a profound
influence on the way in which organizations manage their
supply chains.
Proponents of the e-marketplace concept suggest that web-based
trading systems, such as World Wide Retail Exchange (WWRE)
and
GlobalNetXchange (GNX), would enable companies to more

efficiently buy, sell, and manage their supply chain processes
on a global scale.
This study investigates the extent to which e-business tools of
the e-marketplace are used by channel members in the retail
sector for
business-to-business supply chain management (SCM). The
study is based on a survey involving food service companies,
retailers, and
wholesalers in the UK. It is shown that the e-marketplace
supply chain applications enable the majority of companies to
automate transaction-
based activities and procurement-related processes rather than
strategic supply chain activities. The results also indicate that
full participation
in e-marketplaces requires companies to integrate their internal
and external supply chain activities and share strategic
information.
D 2003 Elsevier Science Inc. All rights reserved.
Keywords: E-marketplace; Supply chain management; Business-
to-business
1. Introduction
The economic impact of electronic commerce in the
business-to-business sector has been estimated to be approx-
imately six times larger than the business-to-consumer
sector, and to reach US$1.3 trillion by 2003 (Business Week,
2000). The total market size of the Internet’s commercial

potential in business-to-business markets is expected to grow
and rival well-established sectors such as energy, car man-
ufacturing, and telecommunications (Internet Indicators,
1999). In particular, business-to-business electronic market-
places (e-marketplace) that use Internet protocols as com-
munication standards have gained widespread application in
supply chain management (SCM). For example, World Wide
Retail Exchange (WWRE) attracts more than 50 retailers
(including Kmart, Gap, Jusco Japan, and Marks and Spen-
cer) to improve efficiency of supply chain activities; and the
alliance of GlobalNetXchange (GNX) and Transora in the
retail sector created a megahub for members to share value
chain services through a single connection point. In addition,
electronic markets are emerging in various fragmented
0019-8501/$ – see front matter D 2003 Elsevier Science Inc. All
rights reserved.
doi:10.1016/S0019-8501(03)00032-4
* Tel.: +44-121-359-3011; fax: +44-121-333-4313.
E-mail address: [email protected] (T.-Y. Eng).

industries and more than 750 were in existence at the
beginning of the year 2000 (The Economist, 2000).
Despite the growth in application of e-marketplaces
(Boston Consulting Group, 1999), little research attention
has been devoted to understand the role of these markets in
supply chain management. Prior research mainly focused on
the effect of new technologies on organizational processes
(Glazer, 1991; Heidi & Weiss, 1995), but did not examine
the contribution of e-marketplaces to strategic supply chain
activities such as efficient consumer response and collab-
orative planning, forecasting, and replenishment. The
advantages of using the Internet for exchange and com-
munication purposes, such as the ability to source for
supplies on a global scale, would need to be considered
in light of the potential to automate supply chain processes.
It remains unclear whether participant organizations derive
strategic benefits of supply chain management by interact-
ing with other participant organizations in the market.

Moreover, the recent collapse of many exchanges (e.g.,
Efdex, Fyffes, and Just2Clicks) begins to question the long-
term existence of existing e-marketplaces. The success of
electronic markets, however, depends not only on the
critical mass and active participation but also on the
functionality and practicality of the applications for busi-
ness-to-business trading especially for managing supply
chain processes.
T.-Y. Eng / Industrial Marketing Management 33 (2004) 97–
10598
The main purpose of this research is to investigate the
extent to which e-business tools of the e-marketplace are
used by channel members in the retail sector for business-to-
business supply chain management. In doing so, the use-
fulness of the e-business tools and the perceived benefits of
e-marketplace are identified. Also, research on the particip-
ant organizations’ perspective could help Internet exchanges
to reconcile technological innovations with functional

requirements of businesses. The context of the study com-
prised channel members of retail companies based in the
UK (e.g., food service companies, retailers, and whole-
salers). This is because they constantly source, buy, and
sell in the marketplace, and there are many e-marketplaces
(Internet exchanges) that represent retailers and food service
companies (Counsell, 2001).
These objectives are accomplished by, first, defining the
concept of e-marketplace and identifying the main proposi-
tions put forward by Internet exchanges. This is followed by
an overview of the literature on supply chain activities
related to the use of Internet or participation in e-market-
places. The methodology section describes the survey
method used in the research. Data were collected from
companies in the retail industry and then analyzed by using
cross-tabulation to examine the extent of the application of
e-business tools or problems concerning the role of an e-
marketplace in supply chain management. The findings are

presented and discussed in relation to theoretical devel-
opment and managerial implications.
2. Supply chain management and e-marketplaces: an
overview
The literature is replete with various terms such as
integrated purchasing strategy, integrated logistics, supplier
integration, buyer–supplier partnerships, supply chain syn-
chronization, and supply chain management (La Londe &
Masters, 1994; New, 1997; Tan, Handfield, & Krause,
1998), all of which are addressed under the study of supply
chain management. While there is no explicit description of
supply chain management or its activities (New, 1997), it
can be described as the chain linking each element of the
manufacturing and supply process from raw materials to the
end user, encompassing several organizational boundaries
(New & Payne, 1995; Scott & Westbrook, 1991). This broad
definition includes the entire value chain, and addresses
materials and supply chain management from the extraction
of raw materials to its end of useful life.

Ballou, Gilbert, and Mukherjee (2000) divide supply
chain activities into three main areas: (1) intrafunctional
coordination (administration of the activities and processes
within the logistics function of a firm); (2) coordination of
interfunctional activities, such as between logistics and
finance, logistics and production, and logistics and market-
ing, as they take place among the functional areas of the
firm; and (3) coordination of interorganizational supply
chain activities that take place between legally separate
firms and its suppliers. This perspective reflects the concept
of e-marketplace, in that supply chain activities span organ-
izational boundary through upstream and downstream link-
ages, and the integration of supply chain activities extends
beyond the product flow function within the same firm to
external functional areas. Christopher (1998) also notes that
the goal of supply chain management is to link the market-
place, the distribution network, the manufacturing process,
and the procurement activity in such a way that customers

are serviced at higher levels and yet at a lower total cost.
The Internet technology has enabled companies to create
a new marketspace that facilitates electronic interactions
among multiple buyers and sellers (Bakos, 1991; Choud-
hury, Hartzel, & Konsynski, 1998). At a basic level, e-
marketplaces can be viewed as information technology (IT)-
facilitated markets (Bakos, 1998). In a whitepaper published
by IBM, i2, and Ariba (2000), an e-marketplace is defined
as a many-to-many, web-based trading and collaboration
solution that enables companies to more efficiently buy, sell,
and collaborate on a global scale. An e-marketplace effec-
tively brings players together in a real-time marketspace to
perform basic exchange transactions, such as price and
production specifications, and strategic supply chain collab-
oration, such as forecasting demand and new product
development. The primary objectives are to streamline
complex business processes and gain efficiencies. It is based
on the notion of aggregating buyers and sellers in a single

contact point to allow participant organizations to enjoy
greater economies of scale and liquidity; and to buy or sell
anything easily, quickly and cost effectively. E-marketplaces
also enable companies to eliminate geographical barriers,
and expand globally to reap profits in new markets that were
once out of reach.
E-marketplaces can be categorized as hierarchical (biased)
or market-driven (third party) (Malone, Yates, & Benjamin,
1994). In a hierarchical e-marketplace, the market maker is
also a buyer or seller (e.g., Sabre, initially sponsored by
American Airlines) and biased toward the sponsor or market
maker because of the advantages over competitors that
conduct business in that market. In contrast, a third party
(neither a buyer nor a seller) sponsors an unbiased market-
driven electronic market and the market marker does not
carry out transactions in the market. Examples include
WWRE, PaperExchange, and SportsNet. They are fore-
casted to dominate fragmented industries and help consol-

idate the fragmented supply base (Business Week, 1999;
Krantz, 1999). The present study focuses on third-party
sponsors that support supply chain applications in the retail
industry.
Although the e-marketplace concept seems to provide the
opportunity for firms to coordinate complex and multifunc-
tional activities of supply chain processes through web-
based applications, there is little research on the role of e-
marketplaces in supply chain management except studies on
online reverse auctions of Emiliani (2000) and Emiliani and
T.-Y. Eng / Industrial Marketing Management 33 (2004) 97–105
99
Stec (2001, 2002a, 2002b). The latter have shown that the
downward pricing of online reverse auction process will
likely delay the adoption of modern supply chain manage-
ment. As Leenders and Fearon (1997) note, the new
challenges for supply chain managers are: (1) the ability
of the product flow manager to handle a job encompassing

multiple enterprises and crossing many traditional lines of
organizational authority and responsibility; and (2) the state
of computer software systems to support the system-wide
approach. Technically, e-marketplaces are more strategic by
enabling firms to interact with other firms in a market
setting than Electronic Data Interchange (EDI) systems in
a relational setting (Grewal, Comer, & Mehta, 2001). The
EDI systems have been used in the exchange of purchase
orders and invoices electronically for better inventory man-
agement and demand forecasting.
2.1. Functions in supply chains
Although the functions of an e-marketplace may vary
depending on individual market makers (or Internet
exchanges), e-marketplaces built upon a shared Internet-
based infrastructure could provide firms with a platform for
(IBM et al., 2000):
1. Core commerce transactions that automate and stream-
line the entire requisition-to-payment process online,

including procurement, customer management, and sell-
ing;
2. A collaborative network for product design, supply chain
planning, optimization, and fulfillment processes;
3. Industry-wide product information that is aggregated into
a common classification and catalogue structure;
4. An environment where sourcing, negotiations, and other
trading processes such as auctions can take place online
and in real time; and
5. An online community for publishing and exchanging
industry news, information, and events.
These capabilities seem to change traditional supply
chain management processes by lowering costs and increas-
ing speed to respond to supply and demand needs. Specif-
ically, buyers can reduce purchasing costs and achieve
higher volume contract terms with preferred suppliers by
aggregating purchasing across divisions and companies. It
provides a single point of contact and minimizes off-

contract buying and lowering selection costs through access
to multiple suppliers.
E-marketplaces may, under certain circumstances, be
beneficial to suppliers; for example, they can increase sales
channels to geographies at lower selling costs through lower
inventory requirements, improved order accuracy, and
streamlined electronic processes (IBM et al., 2000). Suppli-
ers can also anonymously post and liquidate excess invent-
ory without jeopardizing price and terms, and they can
receive payments faster through electronic payments. In
general, the benefits to buyers usually exceed those to
suppliers—particularly when it comes to reverse auctions.
As Emiliani and Stec (2001) noted, the purchasing contracts
of online reverse auction are written to ensure that all of the
benefits accrue to the buyer and virtually none of the
benefits accrues to the supplier.
2.2. Change in managing supply chain processes
Conceptually, the e-marketplace concept offers many
advantages compared to traditional supply chain processes

with real-time access to data, and reaches global markets.
The self-reliant model of maximizing one’s ownership of
supply chain activities is becoming increasingly untenable,
not only because faster decisions and information can be
made available, but also because firms are increasingly
embedded in networks of relationships in a global business
environment. Lancioni, Smith, and Oliva (2000) point out
that the new view of supply chain management in the 21st
century is the interorganizational approach. In this view,
supply chain activities involve the coordination of product
flows that span multiple enterprises (Ballou et al., 2000).
Ideally, the benefit of the entire supply chain should flow to
all members of the supply chain, including customers who
will be the driving force. Although this is conceptually
appealing, there is little research evidence on the application
of various e-business tools to supply chain management. In
a study by Emiliani and Stec (2002a), they found that online
reverse auctions are simply a new and more effective means

of operationalizing a zero-sum purchasing game, where the
gains of the buyer are derived from the losses of the seller.
The function of e-marketplaces based on the Internet has
the advantage over enterprise resource planning (ERP)
systems on the communication links across geographical
boundaries and with external enterprises. Unlike the EDI
and ERP systems, which typically run proprietary software,
and many organizations that are not totally committed to the
technology because of high operating costs (Chaston, 2001),
an e-marketplace is usually sponsored by a third party with
nonproprietary software enabling every business to use and
share data. This creates a more level playing field as small
and large firms are able to participate in electronic markets.
As a result of this, many firms using EDI or traditional
systems for managing supply chain processes are gradually
transferring to Internet-based e-marketplace systems.
However, the initial reaction among firms with well-
developed EDI systems was that the Internet was unreliable

and open to risk as databases could be accessed by hackers.
They argued against the move to an Internet-based supply
chain system because of their belief that the technology was
totally unsuitable for commercial operations and, even if the
Internet was accepted, it will be a possible communications
system; the core of the supply chain management would
continue to be based around EDI (Dyck, 1997). The
development of virtual private networks (VPNs), which
only permit access to approved users on the Internet, can
T.-Y. Eng / Industrial Marketing Ma100
be seen as an improvement in security measures. Chaston
(2001) notes that the advent of web-based trading and the
move away from EDI to more open systems become
increasingly apparent as small firms are challenging tra-
ditional systems and as security issues are improving. Also,
the standards-setting body of Internet exchange members,
known as Global Commerce Initiative (GCI), provides a

common technical infrastructure shared by many Internet
exchanges (Progressive Grocer, 2002).
In addition, few businesses know the actual costs of
operating their business, let alone the cost of supply chain
management (Emiliani & Stec, 2002a, 2002b). Although
there is significant short-term potential of reducing unit cost
from online reverse auctions and search costs, the total costs
to the business are likely to be higher due to qualification
and maintenance of a large number of suppliers, and indirect
losses (e.g., overproduction and recurring defects) (Emi-
liani, 2000; Reekers & Smithson, 1994). In this instance, the
cost of goods sold will be maintained or may even increase.
Added to this, fragmented purchasing volumes can contrib-
ute to a higher unit cost. In practice, the savings advertised
by all market makers are the gross savings rather than net
savings (Emiliani & Stec, 2002b). By and large, this is due
to the short-term focus on financial performance and impli-
cit integration among stakeholders—without a comprehens-

ive analysis of system-wide performance. This means that
the savings from unit cost do not account for the total costs
of participating in e-marketplaces.
Fig. 1. Schematic representation
2.3. Application of e-marketplaces in supply chain manage-
ment
As the above descriptions of an e-marketplace indicate,
there are three operational components that determine the
functionality of an e-marketplace: (1) a platform of software
applications for trading on the Internet; (2) a firewall for
handling security and connectivity management; and (3) a
framework for user interfaces and business services. The
main interest of the present study is the third operational
component dealing with application of e-business tools that
would render supply chain efficiencies. The framework of
user interfaces and business services can be divided into
two types of supply chain services: transaction-based and
strategic supply chain services (see Fig. 1). A transaction-
type service includes transactions that do not rely on

relationship and technical development such as catalogues,
auctions, reverse auctions, and exchange of information on
public domain. In contrast, strategic services are character-
ized by long-term orientation and exchange of strategic
information among participant organizations (e.g., collab-
oration between firms on demand and inventory manage-
ment to achieve efficient consumer response). As noted
earlier, an efficient supply chain does not only help com-
panies to reduce costs but also to deliver better services to
consumers. Thus, the functionality of an e-marketplace
would be expected to deliver a strategic type of supply
chain services.
nagement 33 (2004) 97–105
of e-marketplace services.
101
The use of e-marketplaces in business practice has
mostly been based on anecdotal descriptions rather than
empirical studies. Roberts and Mackay (1998) point out that

most of the initiatives on using the Internet in supply chain
have not undergone a formal cost–benefit analysis. While it
can be argued that the benefits are largely self-evident, the
costs of setting up systems for full participation in e-market-
places should be balanced by benefits from both commodity
and strategic services. A study by Lancioni et al. (2000)
noted that Internet usage in supply chains is mainly confined
to internal supply chain processes such as ordering, process-
ing of customer, and tracking of shipments, which contrib-
ute to cost reductions. While the impact on profitability is
not guaranteed (Emiliani & Stec, 2002b), the application of
Internet to supply chain activities enables firms to exploit
opportunities beyond traditional ownership of supply chains
and maintains a constant flow of corporate and customer
information. In this respect, the concept of e-marketplace
could facilitate the collaboration with external firms to reach
new markets and synchronize product planning and pro-
motional activities. Also, costs and revenues of business-to-

business transaction could appear in different time periods
(Johanson & Wootz, 1986).
The primary benefits that could be derived from a
transaction-based type of supply chain services concentrate
on automation of processing orders, payments and deliv-
eries, reverse auctions, inventory clearance, scheduling,
online catalogues, negotiations, and 24-hours availability.
The main components of strategic services focus on collab-
orative planning, forecasting, and replenishment (CPFR) for
efficient consumer response. A recent survey by grocery
manufacturers of America shows that an e-marketplace
would be expected to derive the benefits of CPFR, which
include improved relationship with trading partners,
increased service levels, reduced stock outages, increased
sales, decreased inventory, forecast accuracy, improved
internal communications, and better asset utilization (Sliwa,
2002). These benefits that relate to the function of an e-
marketplace set the agenda for the empirical survey.

Table 1
Functionality of e-marketplace ranked on degree of usage
Functions Percent using Rate of usage
Auctions/reverse auctions 51.6 2.85
Processing 47.3 2.68
Catalogues 35.0 2.43
Buyers/sellers search 32.5 2.31
Communication and exchanges 24.8 1.81
Demand and inventory management 21.7 1.57
Forecasting and replenishment 17.2 2.15
Interfirm relationship management 14.1 1.46
Collaborative project 13.9 1.31
Technical exchange and development 11.3 1.87
3. Methodology
The sample of this study was drawn from the Dun and
Bradstreet’s Key British Enterprises (2000) based on sector
standard industrial classification (SIC) codes of principal
business activities. The sample was restricted to one indus-
try to avoid any potential interindustry differences or

idiosyncrasies that might confound the results. A prelim-
inary telephone screening of respondents was performed
randomly. This is to ensure that the organizations selected
in the sample are members of an e-marketplace or particip-
ate in e-marketplaces, and relevant individuals can be
identified for the mail survey. The final sample for the
survey consists of 500 organizations that operate in the
retail sector.
The research questionnaire was pretested in a small pilot
study involving supply chain managers of 12 companies,
and modifications were made accordingly. The issues cov-
ered in the questionnaire are shown in the tables. The final
questionnaire was sent to the supply chain director or
manager of the sample population, together with a cover
letter explaining the purpose of the study and assurance of
anonymity, and a prepaid return envelope. The resulting
sample consisted of 104 usable questionnaires or about 21%
response rate, after sending a reminder letter and question-

naire to late or nonrespondents.
All items were measured on a five-point semantic dif-
ferential scale (e.g., 1 = disagree or not very important;
5 = agree or very important). The questionnaire also
includes an open-ended question to address further com-
ments on the implementation of the e-marketplace. The
items were derived from propositions put forward by
sponsors of e-marketplaces (IBM et al., 2000) and previous
studies on supply chains and electronic markets (Eng &
Spickett-Jones, 2002; Grewal et al., 2001; Lancioni et al.,
2000), which emphasized efficiency, unit cost reduction,
and streamlined supply chain processes. Since the study
attempts to examine the extent of the application of e-
business tools or problems concerning the implementation
and functionality of an e-marketplace, the data collected
were analyzed using multiple response and cross-tabulation
analyses. In addition, the answers from the open-ended
question provided some insights about application of e-

marketplaces to supply chain management. However, read-
ers should exercise caution in interpreting the results due to
the selection bias inherent in this type of survey.
4. Findings
4.1. Functions of e-marketplace in SCM
As shown in Table 1, the most popular use of the e-
marketplace for SCM is in auctions and reverse auctions
(52%), followed next by processing as regards online order-
ing, payment, nontechnical negotiations, and customer or
supplier information management (47%). The e-marketplace
aggregates sellers and buyers in a single location or contact
Table 3
Perceived benefits of strategic supply chain services in e-
marketplaces
Percent times
selected
Rank
Improved internal and external communications 56.7 1

Efficient product introduction 53.9 2
Streamlined electronic processes 43.5 3
Increased customer satisfaction 38.4 4
Forecast accuracy 32.9 5
Increased profitability 30.6 6
Improved store assortment 23.8 7
Improved replenishment 20.8 8
Efficient promotion 16.9 9
Improved relationship with trading partners 16.2 10
105102
point, where sourcing and negotiations such as online
bidding and auctions can take place in real time. The
Internet-based infrastructure of an e-marketplace provides
constant communication line regardless of different time
zones; particularly, retailers sell and buy products from all
over the world. The amount of processing performed
through online trading has been noted as the second most
popular function used by the participant organizations in e-

marketplace. This enables the reduction of paper work flows
and order cycle times between buyers and sellers. For
example, negotiations on price and term agreements can
be conducted through the e-marketplace.
The e-marketplace has also been used for listing products
or making purchases from catalogues (35%), searching for
buyers or sellers (33%), and an improved online communi-
cations and exchanges of information (25%). These func-
tions are procurement-related activities such as checking
product availability and exchanging information on product
specification. However, technical exchange and devel-
opment (11%) is the least subscribed function of the e-
marketplace. Similarly, interfirm relationship management
(14%), ranked in terms of developing long-term relationship
with other participant organizations through the e-market-
place, has a low percentage of usage. This reflects the result
of the extent to which the e-marketplace is used for
collaborative project (14%). It seems rather clear that the

e-marketplace is more popular for transaction-based
exchange than the strategic type of exchange.
4.2. Perceived benefits—transaction-based supply chain
services
The most notable perceived benefit from participating in
the e-marketplace is lower unit cost of procurement (see
Table 2). As mentioned above, a reduction in the unit cost
can be destructive in the long run and focuses on short-term
gross savings (Emiliani & Stec, 2002b). The savings do not
account for indirect costs and the bids may not include other
factors of pricing such as quality and delivery. As a result of
this, there may be an increase in total costs.
Table 2
Perceived benefits of transaction-based supply chain services in
e-
marketplaces
Percent times
selected
Rank

Lower procurement costs 62.4 1
Dynamic and global sourcing 59.7 2
Reduced time between billing and payment 47.8 3
Efficient exchange of information 44.0 4
Improved order accuracy 30.1 5
Unloading excess inventory 23.6 6
Faster time to market 21.4 7
Reducing stockouts 13.6 8
Improving service levels 12.0 9
Improving consumer information 8.3 10
An important function to the e-marketplace participants
in the survey is the benefit of dynamic and global sourcing
(60%). The main factor underlying the benefit of dynamic
and global sourcing is the opportunity to unload excess
inventories, as well as to source for competitive bargains.
The e-marketplace seemed to be contributing to greater
efficiency in SCM; for example, the research showed that
e-marketplaces lead to reduced time between billing and
payment (48%) and efficient exchange of information

(44%). While the results indicate that there are process
and communication improvements, the short-term orienta-
tion of online reverse auctions would need to integrate
strategic issues, such as creating new value-added capabil-
ities and reducing total costs.
However, it is surprising that the benefit of improving
consumer information received the lowest ranking (8%). It
is also surprising to note that the benefit of improving
service levels (12%) has not been highly placed. Perhaps,
this is partly due to the focus of e-marketplaces on business-
to-business rather than business-to-consumer activities. This
implies that the e-marketplace is mostly concerned with the
benefits for organizations rather than consumers, although
the present research focused on business-to-business appli-
cations.
4.3. Perceived benefits—strategic supply chain services
The research revealed that the benefits of strategic supply
chain services are primarily centred on communications and

efficient exchange processes (see Table 3). Specifically, the
most beneficial strategic supply chain services are improved
internal and external communications (57%). The e-market-
place provides a shared Internet-based infrastructure that
enables participant organizations to communicate with one
another effortlessly. Another notable benefit is efficient
product introduction (54%), where it is possible for organ-
izations to work together with different partners and cus-
tomers simultaneously to reduce the time and cost of
developing and introducing new products. There is also
the advantage of gaining faster product acceptance in the
market because of the initial involvement of various external
participants. As noted in Table 3, this is likely to lead to
103
streamlined electronic processes (44%) and increased cus-
tomer satisfaction (38%).
The ability to improve relationship with trading partners

(16%) has not been noted as one of the key benefits of
strategic supply chain services in e-marketplaces. Equally
low is the ranking for the benefit of efficient promotion
(17%). It seems that the benefits of interactive aspects of the
relationship (e.g., coordination and management of joint
promotion) among participant organizations are less appar-
ent than benefits based on operational efficiency. The
absence of the benefit of an improved relationship manage-
ment in e-marketplaces may add to the difficulty of bal-
ancing the marketing mix and of integrating supply chain
processes for activities such as synchronized productions
and joint promotion assortments.
4.4. Contributions of e-marketplace to SCM
The perceived contributions of e-marketplace to SCM are
examined in three dimensions: unit cost reduction, increased
efficiency, and streamlined operations (see Table 4). The
auctions facility of the e-marketplace has the most signific-
ant contribution to unit cost reduction (48%). By compar-

ison, the most significant contribution of e-marketplace to
streamlined operations is improved communications and
exchanges (44%). In a sense, the e-marketplace facilitates
the procurement process of SCM by using the Internet as a
platform for communications. The e-marketplace provides
the basis for one–off transaction such as auctions and
reverse auctions without requiring long-term commitment,
or affecting supply chain processes in a significant manner.
Although there is significant impact of auctions facility
on increased efficiency (45%), the time it takes to execute
the entire online auction process can be similar to the time it
Table 4
Perceived contributions of e-marketplace to supply chain
management
Functions Unit cost
reduction
a
Increased
efficiency

Streamlined
operations
Processing 2.11 (27.4) 2.96 (31.6) 2.81 (37.5)
Auctions/reverse
auctions
3.21 (48.2) 3.04 (44.7) 2.75 (27.1)
Communications and
exchanges
2.89 (36.1) 2.86 (32.2) 3.18 (44.1)
Catalogues 2.21 (31.0) 3.13 (40.5) 2.70 (28.8)
Buyers/sellers search 1.90 (21.5) 2.41 (18.2) 1.63 (15.3)
Interfirm relationship
management
1.88 (18.9) 2.72 (23.6) 2.64 (21.5)
Collaborative project
management
1.71 (16.3) 2.19 (17.0) 2.75 (25.4)
Demand and inventory

management
1.65 (15.2) 1.74 (14.9) 3.04 (32.6)
Forecasting and
replenishment
1.59 (11.7) 1.56 (15.4) 2.83 (28.4)
Technical exchange and
development
1.48 (9.6) 1.31 (13.7) 1.43 (14.9)
a
Note: Ranked on a five-point scale: 1 = disagree and 5 = agree.
Number in parentheses indicates percent selected.
takes to perform face-to-face negotiations for certain types
of components (Emiliani, 2000). The latter is more acute in
fragmented buying, which involves numerous suppliers.
The dynamic process of auctions conducted in real time
over the Internet provides the flexibility of dealing with
multiple suppliers compared to traditional static and closed
bidding process. The main concerns as noted earlier are that
suppliers rarely benefit from the process and gross savings

from the cost of goods sold may be significantly higher than
net savings. A short-term view of supplier relationship
management not only increases the likelihood of opportun-
istic actions by buyers and sellers (Goodman, 2001; Green,
2001), but also compromises the opportunity to integrate
supply chain activities with exchange partners (e.g., new
product development, quality control, and logistics).
The use of the e-marketplace for catalogues and process-
ing transactions is noted to contribute quite significantly to
SCM based on the facility for efficient communications and
exchange of information. There is also notable contribution
to streamlined operations from demand and inventory man-
agement (33%). This reflects the constant flow of timely
information and ease of ordering products via the e-market-
place. It enables participant organizations to source and
purchase online from multiple suppliers compared to tra-
ditional systems. This could result in shorter response time
to market demand. For instance, lead times can be reduced

by process improvements (Emiliani & Stec, 2001).
The e-marketplace provides a mechanism for companies
to control, coordinate, and economise on transaction costs,
as it improves information flows and helps reduce uncer-
tainty (Reekers & Smithson, 1994). For instance, the Inter-
net can reach large number of buyers and suppliers with a
minimum cost. Buyers are able to browse online catalogues,
solicit bids, place orders, and make electronic payments.
Suppliers will be able to respond to bids, schedule produc-
tion, and coordinate deliveries (Roberts & Mackay, 1998).
The network forms of the e-marketplace may increase firms’
capabilities to coordinate their strategies and compete effec-
tively against competitors. At the strategic level of SCM,
such capabilities have not been identified and could be
under development. D’Cruz and Rugman (1994) have noted
that coordination of strategic capabilities depends upon
achieving mutually beneficial relationships, which embraces
the dimensions of trust, relationship stability, relationship

longevity, and shared interorganizational purpose. As indi-
cated in Tables 2 and 3, these dimensions are likely to
involve longer-term strategic SCM activities than trans-
action-based types of SCM activities. The lack of strategic
involvement could lead to delay in processing purchasing
requirements and, in turn, reduce the timeliness of an
exchange (Emiliani, 2000).
Interestingly, the overall contribution of strategic supply
chain services to SCM has not been rated highly. There
seemed to be a consensus from the research that the
opportunities for streamlining strategic supply chain serv-
ices had not been fully exploited, or the focus tends to be on
105104
the transaction type of supply chain services. As noted in
Table 4, the contribution of technical exchange and devel-
opment to SCM is low across the three dimensions used to
examine the functions of the e-marketplace.

4.5. Implementation of the e-marketplace systems
This subsection summarizes the comments made by
respondents on the implementation of the e-marketplace
systems. The findings highlight specific issues related to
participant organizations in the retail sector. The study has
noted two main barriers to implementing strategic collab-
orative supply chain processes, which involve various
functional areas within a company and with various external
firms. They include: (1) technical uncertainty on reliability
of e-marketplaces in that migration from EDI to an e-
marketplace system requires technical support and integ-
ration of various supply chain activities in a company; and
(2) sharing of strategic information with other participant
organizations is not a common practice. This hinders the
extent of the types of collaborative and strategic SCM
activities that can be carried out in the e-marketplace.
In addition, the study identified several common ob-
stacles that contribute to the difficulty to implementing

online relationship management and technical exchange.
The first is the differing communication standards between
the technologies of the e-marketplace, and internal systems
and processes of the participant organizations. For example,
the e-marketplace focused on front–end technology rather
than internal business processes. Another concern is the
notion of creating a transparent supply chain for efficient
collaboration and forecasting demand through the e-market-
place. This obstacle is related to the first in that differing
technologies limit the potential for creating a transparent
supply chain. Also, there are risks of exchanging strategic
information with other companies where most of the e-
marketplace activities are driven by short-term gains. Fi-
nally, the security and reliability of the Internet are two
of the major concerns expressed by participant organiza-
tions.
4.6. Managerial implications
Firms that intend to reap the strategic advantage of their

participation in e-marketplaces should be aware that their
interaction with other firms requires an integration of
various functional areas within an organization and coor-
dination with external participant organizations. If manag-
ers play a proactive role in engaging market makers to
develop technologies that are compatible with internal
business processes, they are more likely to succeed in
implementing strategic supply chain processes in the e-
marketplace. In this instance, firms would need to expend
resources on changing and integrating internal business
systems with a common platform used in the e-market-
place.
While the e-marketplace provides many benefits for
supply chain management, firms must not overlook the
time-consuming process of relationship development. As
noted in this study, activities that involve technical exchange
and relationship development have not yet been fully
developed in the e-marketplace. For instance, it takes time
to develop trust for sharing strategic information, which is

more likely to occur through face-to-face contact. Since the
supply chain is a network of multiple businesses and
relationships, the ultimate success of firms will depend on
management’s ability to integrate the company’s intricate
network of business relationships (Lambert & Cooper,
2000).
Although the e-marketplace has clear benefits for ex-
change of transaction-based supply chain services, firms
must weigh the costs and benefits associated with the
implementation of an e-marketplace system. A distinction
between gross and net savings must be made from using
various e-business tools for SCM. There are strategic
implications for integrating different supply chain processes
within and outside the firm. For example, strategic initia-
tives such as efficient consumer response rely on seamless
coordination and integration of supply chain activities. This
can be particularly crucial for large firms as the findings in
this study show that the obstacles of implementation are not

only related to the need to invest in technologies but also to
train people and acquire the know-how of online collabora-
tion with multiple firms. The latter would depend on the
degree of participation in e-marketplaces.
As shown in this study, the proportion of strategic supply
chain services conducted on e-marketplace is rather small
compared to transaction-based supply chain activities. It
seems reasonable to argue that firms would gradually adopt
the strategic capabilities of the e-marketplace such as the
ability to synchronize supply chain activities simultaneously
with different participants all at the same time. As such,
managers must account for the actual costs and benefits
involved vis-à-vis the extent of participation in an e-market-
place. In addition, managers would need to find ways to
measure and report costs and other performance data as
more trading activities are conducted on the e-marketplace.
This includes measurement of the costs and benefits across
functional areas within an organization and beyond organ-

izational boundaries.
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Teck-Yong Eng is a Lecturer in Marketing at Aston Business
School, Aston
University, Birmingham, UK. He obtained a PhD in Business-
to-Business
Marketing from the Manchester School of Management, UMIST.
His
teaching and research interests include business-to-business
marketing,
Internet marketing, and supply chain management. He has
served as a
Consultant for various retail and food service organizations on
issues in
supply chain management.

http:www.ibm-i2-ariba.com
http:www.internetindicators.comfeatures.html
http:www.GroceryNetwork.com The role of e-marketplaces in
supply chain managementIntroductionSupply chain management
and e-marketplaces: an overviewFunctions in supply
chainsChange in managing supply chain processesApplication
of e-marketplaces in supply chain
managementMethodologyFindingsFunctions of e-marketplace in
SCMPerceived benefits-transaction-based supply chain
servicesPerceived benefits-strategic supply chain
servicesContributions of e-marketplace to SCMImplementation
of the e-marketplace systemsManagerial implicationsReferences

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