IT chiefs reject e-marketplaces

IT directors are rejecting the use of electronic marketplaces to improve supplier management, despite the idea being aggressively promoted by software giants.

At the Computer Weekly 500 Club meeting for UK IT directors held last week in London, a number of attendees discussing supply chain management warned that electronic marketplaces are no panacea for solving business problems.

Many believed the recent spate of new marketplaces and exchanges in almost every business sector were merely "smoke and mirrors", and claimed that beyond the broad announcements "the devil is in the detail".

Many of the directors, representing companies in the energy, hotels, construction, and manufacturing sectors, claimed that they were unwilling to upset existing business relationships forged on years of experience, simply to use exchanges.

"If the product I get from an exchange is not right, the whole manufacturing process could grind to a halt," said one IT director.

Although electronic exchanges promise to improve product delivery times, this may not translate into a business advantage, according to another senior IT manager. "We could go to an organisation and say, 'If we can supply product or component X in five days, how much will you pay to get it in one day?' But they can say, 'Nothing at all, because five days is fine'," he said.

Users were warned by Simon Bragg, of consultancy ARC, that when it came to delivering logistics for their e-commerce supply chain, they had three choices - all of which had drawbacks:

• Build your own fulfilment system. This can be very expensive

• Outsource. This presents the problem of defining service levels

• Buy fulfilment services in a spot market. But are exchanges overhyped and overvalued?

One user warned that a move towards commoditisation would be a problem for companies that have built up a familiar one-to-one relationship with suppliers.

"Exchanges are moving towards commoditisation, and our business-to-business customers are unlikely to all want to jump in the same canoe," said one sceptic.