Tectonic Shift

Mar 15, 2000 -- The explosion of e-marketplaces in sectors from aerospace to food ingredients has made outsourcing and strategic partnering -- sometimes with competitors -- the rule, not the exception. Consider:

* General Motors partnered with Ford and DaimlerChrysler to start a supply-chain network.

* Agribusiness firm Cargill and Ariba will form an Internet B2B exchange for food and beverage manufacturers and their suppliers.

* Six U.S. trucking firms will merge their logistics units and form a web-based market.

* MetalSite, e-Steel and PlasticsNet.com are lively global e-marketplaces for standard processed materials such as steel, chemicals and plastics.

* The National Association of Manufacturers and Unibex built a manufacturing supply and sales Internet-based exchange called Manufacturing Central to provide members with a low-cost, bare-bones technology method of plugging into e-commerce.

* A group of leading U.S. and European investment banks and energy firms launched Intercontinental Exchange, an e-marketplace to trade over-the-counter energy, metals and other commodities.

* B2B exchange giant VerticalNet partnered with chemical manufacturer Eastman to build an online marketplace for the paint and coating industry.

* Commerce One and Concert, the joint venture that merged AT&T and British Telecom's international businesses, have signed a deal allowing Concert to create and host goods and services exchange sites.

* SAP AG formed SAPMarkets, a new company that will build online marketplaces for B2B net transactions.

E-marketplaces or virtual trading communities add a higher level of efficiency by bringing together thousands of buyers and sellers in one place. They also stamp out unwanted and costly inventory and help identify new buyers more quickly. By using software to link purchasing processes and systems, vendors and manufacturers are slashing overhead costs.

A few sectors have as many as four to eight competing exchanges. Instead of signing up with one exchange, some companies have to revamp their systems to link up with several, each with its own proprietary system.

How might this tectonic shift affect your industry? Analyze the parts, materials and services you purchase most often, because that is where you'll find the electronic marketplace in your company's future. I foresee online marketplaces for printing, media advertising, apparel, textiles, construction...

Another trend to watch: Web auctions, where suppliers compete for manufacturers' orders in live, open electronic auctions. Say good-bye to Requests For Quotations and hello to open bidding wars. Fortune magazine's March 20 issue says this is the rise of the Auction Economy and that this B2B tool really is changing the world. Web auctions will have a "seismic impact" on industry in the 21st century, according to Fortune. It's already revolutionized the $5 trillion market for industrial parts. On a smaller scale, an auction on your site would be a smart way to move excess inventory.

Questions or comments? feedback@i-genuity.com

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About The Author

Mary A. Sicard is president of i-Genuity, the Click-Here Strategy and Services firm in Augusta, Georgia.

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