Online marketplaces have raised a great deal of fanfare in the business-to-business space, but these new models face a number of challenges, said executives and analysts last week at the Online Exchanges 2000 conference held in San Francisco.
The most pressing issues revolve around reaching critical mass, operating in multiple languages and currencies, tackling direct- materials procurement, and integrating with back-end systems like ERP and financial databases, according to a number of the conference participants.
Part of the problem is that Internet-based b2b e-commerce is experimental, and the practices are significantly different than the business-to-consumer operations that initially poured through the Web's flood gates, said David P. Perry, president and chief executive of e-commerce company Ventro Corp. and co-founder of the widely watched scientific-supplies exchange, Chemdex.
"What we realized is that this is very hard; b2b is not like b2c," he said. "The customers in these models are very different. The Amazon.com customer is an individual with a credit card. That customer is limited by what he is able to charge on that card. . . . Our customer is an employee of an organization. That company has all sorts of constraints on how goods can be bought, such as limits on how much that person can spend and what supplier can be used."For the last year, online marketplaces, which aggregate many buyers and sellers, have proliferated, with hundreds of sites being created to serve all market sectors.
The electronic-component industry has its share of up-and-running and proposed exchanges as well. Many of the dot-com sites in the component arena focus on spot- market and excess-inventory purchases, but bricks-and-mortar companies like Compaq, Hewlett-Packard, and IBM are heading other PC-related exchanges designed to ultimately streamline the supply chain and improve pipeline efficiency.
Many observers expect those numbers to swell to the thousands worldwide in the next few years, with trillions of dollars worth of transactions passing though these outlets.
Although panel participants cited various reasons for buyers and sellers to use an exchange-including sourcing new vendors, driving down costs, and securing hard-to-find parts-most agreed these are just starting points. The true value, they said, rests in being able to foster greater collaboration among partners, develop a content-rich environment that enhances buying decisions, expand international boundaries, and integrate with data systems to promote better information-sharing practices.
"We're in the value business," said Mike Shultz, president and chief executive of QuestLink Technology Inc., which targets engineers and supports prototyping purchasing. "We have to provide enough value so people want to use the site."
But given the complexities associated with the BTO and JIT requirements of production materials, finding ways to break from the MRO functions that have dominated the exchange model is a big step for many, said James M. Wejman, associate partner at Andersen Consulting, Chicago.
"The vision is to move to the direct-materials side," he said. "But that means not only looking at the velocity at which the extended enterprise moves. It means making sure that everyone in the supply chain can respond. If there is a disconnection, the extended chain won't work."
To keep the supply-chain connection strong, what eventually may happen is different exchanges will be linked to provide the broadest range of services and information accessibility. "Groups will get together to collaborate in many e-hubs. They will join to create 'superhubs,'" Wejman said.