Buyers and supply-chain managers may be running at full throttle to keep up with the dizzying pace of e-collaboration, e-procurement, and e-sourcing. But the ride is only just beginning.
Next-generation Internet activity is starting to take root in direct-materials purchasing, and is likely to keep buyers hopping as they look to glean greater efficiencies from the supply chain, industry observers said.
Online trading exchanges, marketplaces, portals, and other hubs that bring suppliers, distributors, and OEMs together in real time through a common platform and foster dynamic pricing, negotiations, and open-market competition are the new buzzwords.
"The new element of e-business will be what we call c-commerce, or collaborative commerce," said Bruce Bond, a Gartner Group Inc. analyst based in Stamford, Conn. "That has been the missing element of e-business so far. Exchanges provide the gateway that's needed between a company's back-end system and the cybermarket."
In the last few weeks, there has been a considerable amount of activity surrounding this trend.
Commerce One Inc. last month teamed with the likes of software vendors Adexa, Aspect Development, and Extricity and consulting firms Andersen Consulting and Pittiglio Rabin Todd & McGrath to develop a direct-materials portal by the second quarter.
Leveraging a solution that Commerce One provides for MRO, the Walnut Creek, Calif., company's new take will enable integrated sourcing, collaborative planning, and real-time business-transaction management-support services in various industries and across the entire supply chain.
Also last month, Commerce One, Compaq Computer Corp.'s Taiwan unit, and other Taiwanese companies announced a nonbinding letter of intent to establish Com2. The joint venture, which would create a portal for exchanging goods and services worldwide, will target the retail, telecom, automotive, computer, semiconductor, cable, stainless-steel, and mechanical sectors and support direct and indirect spending, Commerce One said.
"With a portal, you'll have a better platform to manage the intersection between supply-chain partners," said Lane Kato, Commerce One's director of product marketing for direct materials. "The three major services we'll be able to deliver to the direct-materials market are automating the procurement transaction, sourcing integration, and collaborative planning."
The Chinese government last week unveiled ChinaTradeWorld.com, a portal that will allow foreign businesses to import goods directly to more than 180,000 production facilities and other entities in China. The site enables users to access production centers in 20 industries, including electronic-component manufacturers.
There was also a surprise announcement on Feb. 25 by DaimlerChrysler, Ford Motor Co., and General Motors Corp. to jointly form a one-stop, integrated, online supplier exchange via a single Web site. This virtual marketplace will offer open participation to all auto makers and their respective suppliers, partners, and dealers. The move represents an about-face in some ways, particularly for Ford and GM, which have been aggressively developing their own exchanges for procurement, capacity planning, online sourcing, and quoting.
For the electronics industry, the model represents a change from traditional ways of conducting business via phone, fax, and e-mail. And it could take time before a true, open, no-one-player-rules exchange evolves in the sector, analysts said.
The problem still lies in the in-depth and instantaneous information-sharing that is required to run an exchange. Many in the industry are getting their feet wet in real-time collaboration and what data is necessary to share to facilitate that activity.
Additionally, unlike in MRO procurement or other markets such as oil and chemical, where online exchanges have become dominant in e-procurement practices, many of the portals that have surfaced in electronics are relegated to spot-market activity. Much of the concern stems from the risk of not getting adequate supply during volume production.
The dynamic, though, seems destined to change, especially as companies gain better information flow and figure out the inner workings of these exchanges, said Lisa Williams, an analyst at the Yankee Group, Boston.
"There has been a natural progression of these exchanges," she said. "MRO came first for a reason. Products that can be bought with a credit card and can be shipped by FedEx were likely to be the first successes on an exchange. Now, companies that were involved in that area are using their experiences in the field and are investing a significant amount of money in expanding these exchanges' services."
Companies like the American IC Exchange and NECX Global Electronics Exchange, which operate spot-market portals, are already noticing some of those efforts coming to fruition.
"We don't know exactly what the trading-exchange entity will look like or how it will evolve," said AICE president Jim Binford in Aliso Viejo, Calif. "But buyers will come to the open market more and more."
While some of the shift will rely on purchasers getting more comfortable in a Web world, the evolution will require vendor-neutral historical pricing information and other data that will allow buyers to make quicker decisions or improve operational velocity, added Robert Kramich, vice president of marketing at NECX, Peabody, Mass. The emerging communication tool also mandates better logistics and IT infrastructure spending, he said.