Will B2B marketplaces take over?

Of late, B2B marketplaces have become popular and there has been a great deal of hype about how they will reduce transaction...

Of late, B2B marketplaces have become popular and there has been a great deal of hype about how they will reduce transaction costs and bring business opportunities

Our company supplies components to the automobile industry. Of late, B2B marketplaces have become popular and there has been a great deal of hype about how they will reduce transaction costs and bring business opportunities. As yet, we have not signed up - in fact, we are not an e-business. Is it inevitable that B2B marketplaces are the future and how do you see this affecting the small supplier?

Invest or go under

Roger Marshall

IT director at the Corporation of London

The straight answer is yes, B2B trading is moving to the Internet, and the speed of change is dramatic. What form the marketplaces will eventually take is less clear, but you run the risk that you may soon not have a viable business at all if you cannot participate. It is as stark as that.

So what should you do? First and foremost, ensure that your top management understands the urgency and seriousness of the situation. Advise them that while choosing which exchange(s) to go for is a board-level decision, one that probably shouldn't be taken yet, there are other things you should be doing now.

In particular you need to ensure that your internal IT systems will be able to cope. There are probably some off-the-shelf software packages available, but will they suit your particular situation, is it required to replace your legacy systems, can the necessary interfaces be built? These are difficult questions and you may well need to get outside advice and be prepared to invest heavily in the solution. On top of this you may not get it right first time so prepare your board for a continuing re-investment in systems.

A final piece of advice. Get to know what's happening in your industry. Exchanges mean that market power moves to the buyer and there is much concern that small firms like yours could be seriously disadvantaged. Be prepared to join lobbying groups to ensure that your voice is heard.

The small will follow the herd

Robin Bloor

CEO, Bloor Research

Much of the B2B hype is rubbish. All that is happening is that some of the inefficiencies that exist in the B2B procurement process are being removed and, naturally, this is reducing costs. Additionally, Web sites are replacing product catalogues.

The idea that markets can be created by re-structuring in the supply chain is ludicrous. In the long run, it is likely that some markets will be successful, but for this to happen the majority of the buyers and sellers will have to choose the new market over whatever the current process is. If you are not large then simply follow the herd and if you need to invest in e-business technology to do so, then do it.

Equal your competitors

David Taylor

Certus

Sign up. As a small company you can appear equal to your competitors. Indeed, if you have a niche product you will have an active advantage. Transaction costs will be saved for everyone. To become an e-business takes a day: get a Web presence that allows you to communicate and trade,and do it right now. Yes, it is inevitable that B2B marketplaces are the future, however people will still buy from people, so it will be your perceived brand, the team behind you, and the people that are out there, that will still play a huge part in your success. So, stop being a small supplier right now, and go for it.

Integration with B2B exchanges

Paul Williams

Arthur Andersen

B2B exchanges are touted to offer many supply chain benefits including transaction savings, reduced inventory costs, reduced error and faster development times accruing to the manufacturers. With so many new exchanges springing up and an increased level of interest from suppliers and customers, it is hard to envisage a future where these virtual trading communities do not succeed to some extent. However, the impact they will ultimately have on the smaller supplier within the automotive industry is less obvious and depends on the products supplied and the structure of the B2B model.

B2B exchanges typically favour commoditised products where the purchasing decision is often made on the basis of a discrete number of quantifiable factors such as lead/delivery times, price and design specifications. If your products fits into this mould you are more likely to come under cost-pressures going forward as the market becomes increasingly transparent and applies downward pressure to prices.

Whilst any exchange will provide access to new markets, this will be somewhat tempered by the "reach" of your product, ie higher transport costs compared to those suppliers local to the new markets. To counter this threat, many suppliers plan to use their existing sales channels to increase the perceived value-added services and use the B2B exchange as an order management tool, hosted and managed by a third party. It is these additional services which will allow suppliers to differentiate themselves in a marketplace where margins are being eroded due to pricing pressures. Ultimately, these dual channel strategies may merge into a fully functional, value added channel through to the preferred B2B exchange.

The nature of small supplier relationships within the automotive industry is close integration characterised by preferred trusted relationships and product development partnerships. An exchange will not remove existing customer acquisition costs but it should increase the efficiency of the order management and fulfilment process and will have to facilitate low-cost implementation including the provision of a common gateway for accessibility and easy integration into different suppliers' systems. It is these characteristics that small suppliers should look for when considering which of the myriad of available B2B exchanges they should join.

Next week

My company has a good reputation for providing ITers with a high level of training. It is one reason why we are able to attract quality people in a market short of skills. However, everyone wants to learn new Web skills like Java and XML, whereas we still have a need for people to hone more tradition skill sets. My question is, can you offer advice on how to get the balance between offering training that caters for the skills I need and the skills they want.

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