Magazine article Management Today

E-Marketplaces & Exchanges

Magazine article Management Today

E-Marketplaces & Exchanges

Article excerpt

Electronic trading forums have high potential for facilitating transactions and services and for pooling buying power and intelligence. But for some potential online traders, issues such as branding and confidentiality need to be addressed

Call them e-marketplaces, exchanges, net-markets or independent trading exchanges; it all adds up to the same thing: they are the places where buyers buy and sellers converge to trade and collaborate in the e-world. An exchange is a shared electronic platform that brings together multiple buyers and multiple sellers to facilitate transactions and services. Some are vertical, bringing together the participants in a particular industry, and some are horizontal, offering the opportunity to buy and sell a range of goods across multiple industries.

According to Simon Peters, lead manager in Accenture's European B2B e-procurement Centre of Excellence, e-marketplaces are the result of companies realising that there are just as great savings in time and effort to be had through automated buying online -- e-procurement -- as there are through selling. To automate order placement, companies had to acquire e-procurement software from vendors such as Ariba and CommerceOne; they in turn found themselves at the forefront of creating the exchanges or e-marketplaces where numerous buyers could search catalogues and place orders from many suppliers, all using common standards for communicating and transacting. Early exchanges were in industries as diverse as chemicals, retailing and aerospace.

Many of the early benefits for a buyer will come from using e-procurement rather than added value services. The initial service will consist of automating the procurement process and providing improved workflow control when a business consumer wishes to buy a product or service. Initial benefit will also come from the ability to adhere to preferred suppliers, by setting up electronic catalogue items that describe only those products provided by preselected suppliers. Exchanges offer the additional possibility of cost savings through access to a wider pool of suppliers, through price-driven mechanisms such as reverse auctions (where suppliers compete to provide the lowest price for a given requisition) and through aggregated purchasing.

For suppliers, the main benefit is access to a wider customer base. But Peters says: 'The pressure on suppliers is that they are being forced to become commoditised. A supplier may think: "I don't want to be compared just on price, because I give a better service." So there is a need for them to get branding information into the catalogue, and to invoke historic relationships.'

Another challenge, he says, is that suppliers might be unwilling to participate in exchanges if that means duplicating information, especially if they already maintain a catalogue on their own web site for direct sales. 'That's why companies like Dell are saying they would like to participate, but anybody who wants to view their catalogue has got to go to their web site,' he explains.

The effort of supporting and maintaining catalogue information is one of the biggest challenges for suppliers, and is often underestimated, says Peters. But companies that opt for the 'punch out' option, where these suppliers maintain their own web site catalogue and buyers reach out of the exchange to find a product, can still benefit from access to the exchange, and from other features such as transactional standards. …

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