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B2B warning: the pitfalls of exchanges

Specialists warn of problems surrounding e-procurement exchanges

Specialists warn of problems surrounding e-procurement exchanges

The string of e-commerce business-to-business exchanges (B2B) set up in the last week has led to fears that users may rush to set up exchanges without understanding the pitfalls or alternatives.

E-procurement exchanges for metals have been set up by Ispat and Commerce One, and for transportation by airline booking system Sabre. As a result, users are being driven to set up procurement exchanges in other vertical sectors of the economy.

But specialists such as Commerce One and Biomni have warned that setting up such exchanges in not easy, or necessary.

Commerce One, a partner of General Motors, which has recently agreed to merge a separate exchange driven by Ford with Oracle, has warned that exchanges cannot operate without respective buyers and sellers.

Chris Phillips, director of marketing in Europe for Commerce One, this week warned that for an exchange to succeed there has to be:

  • A good selection of buyers and sellers

  • The driving force of the particular market sector's top players. For example, in the energy sector, Shell, or in the car business, General Motors and Ford

  • Overlap between companies in the supply chain, or in other words, a number of participants all needing similar suppliers of spare parts.

    However, Beverley Burgess, marketing director of e-commerce specialist, Biomni, suggested that IT and e-commerce specialists should consider other options to going down the exchange route. Alternatives she suggested, are:

  • Adopting a "market portal" set up by organisations such as BT Marketsite which are not dominated by one major player such as Shell or GM.

  • Building your own bespoke system to cut your procurement costs

  • Adopting systems run by specialist suppliers, for example Dell for IT kit, or Ryman for office suppliers

  • Becoming part of a smaller-scale trading "community" enabled by a third party.

  • This was first published in March 2000

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