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The broker role in agricultural electronic commerce

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THE BROKER ROLE IN AGRICULTURAL ELECTRONIC COMMERCE
C. I. COSTOPOULOU
Informatics Laboratory, Agricultural University of Athens, GREECE.
E-mail: tina@aua.gr
S. T. KARETSOS
Dept. of Electrical and Computer Engineering, National Technical University of Athens,
GREECE.
E-mail:skaret@telecom.ntua.gr
ABSTRACT
This paper analyzes the brokerage role in business-to-business electronic commerce for
agricultural products. Brokerage is regarded as the core concept to overcome some of the
current limitations of Internet electronic commerce. A number of research projects have been
developed or are still developing relevant to the electronic brokerage. Some key projects
addressing this topic are ABS, OFFER, and GAIA. In this paper, firstly, an overview of the
electronic brokerage is given. Secondly, the electronic brokerage models proposed by the
aforementioned projects adapted according to a specific scenario from the agricultural market.
The scope of this paper is to offer a global, secure and open agricultural electronic market.
INTRODUCTION
The cutting edge for business today is electronic commerce (e-commerce). E-commerce
stands poised to make a momentous contribution to the way government, business, and
individuals conduct business. It has become one of the major factors that will determine the
future success of businesses. The agricultural industry has started to recognize the importance
of e-commerce in business transactions. There are many agricultural applications that have
been developed in business-to-consumer (e.g. Peapod.com) or business-to-business (e.g.
ProduceOnline.com, FoodTrader.com) e-commerce. The most financially promising
agricultural applications are found in the business-to-business environment where brokers
play an important role (Costopoulou and Passam, 2000). A broker is a party, which mediates
between buyers and sellers in a marketplace (e.g. Chircu and Kauffman, 2000). Brokers
provide services that may include searching for a business partner, negotiating the terms of
the deal providing letters of credit or banking/payment services, and ensuring delivery of
goods. They are important in markets, because search costs, lack of privacy, incomplete
information, contracting risk, and pricing are better managed through a broker (e.g. Bailey
and Bakos 1997). In recent years, a lot of effort and attention have been put into the
specification, the development and deployment of brokerage in the context of e-commerce.
Electronic brokers (e-brokers) are needed to provide secure means of exchanging information
quickly and effectively between buyers and sellers. They can reduce costs of co-ordination
across space and time through the creation of a virtual marketplace adding value by
centralizing the search, product matching and transaction functions. An e-broker can search
for products, retrieving information to help a customer to determine what to buy, and can also
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look for merchant with the best product price, to help a customer to decide from whom to buy
etc.
Many agricultural commodities are distributed through an industry value chain, which links
producers and consumers through wholesalers and retailers. Wholesaling is a vital linkage in
the market process of agricultural products. Agricultural wholesale markets have long been as
brokers or intermediaries which bridge the gap between producers and consumers. It is clear
that the success of the e-commerce applications for agricultural commodities depends on the
right use of wholesalers in order to have more efficiently transactions (Matsuda, 1997). The
core benefits from an electronic wholesaler (e-wholesaler) establishment are: producers easy
to find customers, customers easy to find producers, cost and time savings, complete selection
and qualified information, better pricing and privacy protection.
BUSINESS MODELS
A number of research projects have been developed or are still developing relevant to
electronic brokerage. Some key projects addressing this topic are: Architecture for
Information Brokerage Service (ABS), Object Framework for Electronic Requisitioning
(OFFER), and Generic Architecture for Information Availability (GAIA). In this section, the
business models of these projects are studied and applied to a real life scenario. This scenario
concerns the grape producers of a small Greek village in Korinthos, (located in Peloponnese),
who want to increase and improve their existing grape exports in European countries and
mainly in U.K. and Germany. The buyers of their grape produce are supermarkets (e.g. Marks
& Spencer). In this village, market research was carried out through a questionnaire by the
Informatics Laboratory of the Agricultural University of Athens (A.U.A) in order to estimate
the needs of the local grape producers. All of them offer their grapes through domestic or
foreign wholesalers (a big part or all of their produce). All of them desire faster distribution,
88% of them better grape promotion, and 94% of them access to new markets.
The business partners who are involved in the traditional supply chain of grapes in Korinthos
are:
Producers (or agricultural cooperatives) who sell a specific type of a white, table grape
called "soultanina" between August and September. They wish to sell immediately their
grape produce (because it is perishable) at the best market price but usually they do not
have enough information and time to compare prices and finally to select the best offer.
Usually, they depend on the fairness of the wholesaler.
Wholesalers (domestic or foreign wholesalers, wholesaling companies, agricultural
cooperatives) who collect the grape produces from the producers and then distribute them
to buyers through the supply chain which is limited by the wholesalers' ability to reach the
buyers.
Buyers (supermarkets, retail shops, food companies) who purchase grapes from the
wholesaler.
There is no clear definition about who plays the one or another role because everyone could
be on the others’ side. For example an agricultural cooperative could be both wholesaler and
producer.
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ABS
The ABS model is focusing on the design, specification, implementation and validation of an
open information brokerage service architecture to permit the efficient provision of online
information services in the context of e-commerce (ACTS, 1998). It describes an intelligent
information brokerage service, which facilitates the symmetrical matching process of the
demand and supply processes, as both parties are enabled to reach each other.
The ABS model is applied to the aforementioned scenario in order to establish for
wholesalers, a new communication channel between grape producers and buyers and offer
more efficiently services both of them. The actors of the ABS model are (Fig.1):
Users of e-wholesale service: Grape producers, agricultural cooperatives, wholesalers,
wholesaling companies, supermarkets, food companies, retailers etc. using the e-
wholesale service for satisfying their own requirements (i.e. buying or selling).
E-wholesale service provider: The Informatics Laboratory of the A.U.A. or an
information technology company or a wholesaling company. This actor is responsible for
the diffusion of information about grape demand and supply and the overall system
services. It is the intermediary of the users of e-wholesale service.
Service provider: The Informatics Laboratory of the A.U.A. or an information technology
company providing telecommunication, information, application (e.g. video conferences)
or supporting services (e.g. security, payment, certificate).
Content provider: Grape producers, agricultural cooperatives, wholesalers and
supermarkets who express their demand or supply for grape produce.
Network provider: The Hellenic Telecommunications Organization (OTE) and an Internet
Service Provider such as Forthnet, OTEnet providing networking functions to other
actors.
FIGURE 1. The ABS model for Greek grape exports
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OFFER
The OFFER model proposes a business model for an Internet brokerage service. It specifies
and designs components of an open brokerage system capable to supporting various business
areas (Bichler and Segev, 1999). The brokerage service provides a trusted conjunction of
supply and demand processes. The core components of the OFFER brokerage service are
various kinds of matchmaking mechanisms, supporting the matching between buyer interests
against seller abilities. As brokers provide a central marketplace, where many buyers and
many sellers meet, they are in a key position many value added services (e.g. ratings and
statistics, decision support for product comparisons and product selection, notary services like
non-repudiation of offers, support for billing and accounting, advanced payment services,
certification of liability, reliability of participants), which are vital interest to the business
partners.
A high level business model of the grape e-wholesale service for the above scenario is given.
According to the OFFER model, the actors are (Fig. 2):
Grape producers: can offer information about their grape produce to buyers by the means
of the e-wholesale service. They can use the system services to provide an electronic
catalogue including lists of the offered grape produces, produce information (quantity,
quality), price information etc.
E-wholesale service provider: offers various kinds of matchmaking mechanisms between
grape producers and buyers. More specifically, it provides: (1) Mechanisms for
registration of grape producers and buyers. (2) Mechanisms through which a producer can
offer information about his/her grape produce. (3) Mechanisms through which a buyer can
express his/her interest for the purchase of grapes. (4) Mechanisms to dynamically
aggregate information of registered electronic catalogues. (5) Mechanisms supporting
notification capabilities, i.e. a producer can offer a grape produce to the e-wholesaler in
order to promote his/her produce to registered buyers who have, maybe in the past,
expressed an interest in this kind of produce or vice versa. (6) Mechanisms for bi-lateral
and multi-lateral negotiations on grape produce.
Grape buyers: have contract relationships with the e-wholesale service provider in order to
satisfy their demand for grapes. They can search for grape produces and locate producers
through the electronic catalogue.
FIGURE 2. The OFFER match making mechanisms for Greek grape exports
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GAIA
The GAIA architecture facilitates location and delivery of information and content through a
scaleable brokerage model broadly applicable to distributed information supply chains and
networks (Hands et al., 2000). The core concepts promoted by the GAIA are the roles of
customer, broker and supplier, and the actions of search, locate, order and deliver. The GAIA
broker can inter-operate with non-GAIA systems, where compatible technologies have been
implemented. A GAIA transaction is composed of a number of actions. Each transaction is
initiated by the customer who makes a request to the broker. In the event that the broker is
able to fulfil the request, the transaction involves no other actors. In the event that the broker
is not able to fulfil a request, the action may be propagated on the other brokers, with the
original broker playing the customer role. The supply chain is thus, made up of a single
customer, one or more suppliers, and one or more brokers.
The GAIA model is adapted in order to have a broker by means of a e-wholesaler who can
search for information which will be related to grape produces in order to help producers and
buyers to contact one each other (Fig. 3).
Grape producers: can register information related to their products such as grape
characteristics (quality, quantity), price etc. They can also give information about the
delivery of the grape produce in case of a positive request.
E-wholesaler: provides a path whereby a grape buyer may find and obtain grape produce.
If the e-wholesaler knows where such produce can be found, he supplies the buyer with
the location information. If the e-wholesaler does not know the location of a produce he
requests a search on his behalf from other e-wholesalers (inter-wholesaler connection)
thus widening the search.
Grape buyers: can search for information related to the grape produce that they want to
buy. Through the inter-wholesaler connection the grape buyers’ requests propagating in a
widen market, thus the buyers can collect extensive information in order to compare
prices and to choose the grape producers that fit to their needs.
FIGURE 3. The GAIA model for Greek grape exports
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CONCLUSION
The present paper describes three business models for brokerage services in e-commerce
environment. In order to identify the best one for the agricultural e-wholesaling needs, a case
study of a real life scenario is presented. Each of the aforementioned business models covers a
specific and individual area of brokerage: The OFFER model developed in order to cover
both discovery and negotiation but it has limitations due to the used programming language.
The GAIA model can obtain width of information through the inter-broker connection but it is
mostly applied for digital products in e-commerce environment. ABS model seems to be more
flexible and efficient for the agricultural sector than the others, and covers the most
wholesalers’ requirements. Furthermore, it can also cooperate with GAIA model in order to
ensure the inter-broker connection.
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Published by the ACTS Multimedia Information Window
Advanced Communications Technologies & Services (ACTS) Information Brokerage (1998) Published by the ACTS Multimedia Information Window, Deutsche Telekom Berkom GmbH.