Private exchanges have one buyer and many sellers. Electronic marketplaces (e-marketplaces), called public exchanges or just exchanges, are independently owned by a third party, and they connect many sellers and many buyers.

Public exchanges are open to all business organizations. They frequently are owned and operated by a third party. Public exchange managers provide all of the necessary information systems to the participants.

Thus, buyers and sellers merely have to “plug in” in order to trade. B2B public exchanges are often the initial point for contacts between business partners. Once the partners make contact, they may move to a private exchange or to private trading rooms provided by many public exchanges to conduct their subsequent trading activities.

Electronic exchanges deal in direct materials and indirect materials. Direct materials are inputs to the manufacturing process, such as safety glass used in automobile windshields and windows. Indirect materials are those items, such as office supplies, that are needed for maintenance, operations, and repairs (MRO).

There are three basic types of public exchanges: vertical, horizontal, and functional. All three types offer diversified support services, ranging from payments to logistics.

Vertical exchanges connect buyers and sellers in a given industry. Examples of vertical exchanges are www.plasticsnet.com in the plastics industry and www.papersite.com in the paper industry. The vertical e-marketplaces offer services that are particularly suited to the community they serve. Vertical exchanges are frequently owned and managed by a consortium, a term for a group of major players in an industry. For example, Marriott and Hyatt own a procurement consortium for the hotel industry, and Chevron owns an energy e-marketplace.

Horizontal exchanges connect buyers and sellers across many industries. They are used primarily for MRO materials. Examples of horizontal exchanges are TradersCity, Globalsources, and Alibaba.

Finally, in functional exchanges, needed services such as temporary help or extra office space are traded on an “as-needed” basis. For example, Employease (www.employease.com) can find temporary labor by searching employers in its Employease Network.