Up until now the flow of information between companies has been strongly aligned with the linear flows of goods and services in the supply chain.

Supply chain challenges

As trading partners in today's supply chains communicate through hard-wire private networks, it's difficult and therefore expensive for companies to adapt rapidly to the constant changes in customers' demands.

In the world where the supply chain reflects linear processes, based on supply (rather than demand) it is often difficult to even get the information from the end consumer side to ripple smoothly back through the supply chain. Initiatives like efficient consumer response (ECR) have addressed this problem without fully solving it due to the relatively static and proprietary infrastructure found in most supply chains.

Even if end user information was available to the entire supply chain, it would be difficult, expensive and time consuming to adapt the supply chain's information system to changes in customers' demands. For example, it would be difficult to rapidly add more raw material manufacturers in order to adapt to a sudden increase in demand or to change to other transporters if an increased demand suddenly appears in a new market.  Moreover, a company's IT system might not at all fit the structure of the supply chain.  This would result in the need for costly adaptations in order to plug in new trading partners in the supply chain. As these ad hoc adaptations would be so expensive and time-consuming not worth the effort.

At present most supply chain infrastructures are not optimised for information exchange over the Web as the information flow must follow very much the same linear flows as physical goods and services.

What is changing?

Entirely new players (e-companies) have been emerging, however, whose focus is the transfer of information.  Indeed they are now able to use the Internet as a ubiquitous medium. Such independent trading exchanges or e-markets act as intermediaries for information exchange among traditional bricks-and-mortar companies. So far, companies involved in what could be termed the 'hype phase' have not had to care too much about the physical flow of goods and services.

Well known B2C companies such as Amazon and eBay and newer outfits such as MetalSite or PlasticsNet.Com, have invented new business models. These models are tailored specifically for the Web and are optimised mainly for one purpose: to transfer information between different parties over the Web in order to satisfy customers' needs. The keyword here is information.

B2B startups have shown the importance of acquiring knowledge on customers' requirements in order to use the information to find a suppliers to meet their needs. As one industry analyst puts it: "Customers' information is king".

A good example of this demand-driven information flow is a reverse auctioning scenario. In reverse auctioning, potential customers can register their request for quotation (RFQs), and the trading exchange can then match these with the proposed offerings that their suppliers have registered. For most traditional companies, the ability to get hold of that kind of information form a broad base of customers has just been a dream.

Unfortunately for these Web startups, especially in the B2C arena, customers have started to demand more. Online access to basic information on products and services and order placement are no longer enough. Customers now also expect proper fulfilment capabilities and more extensive information about prices and availability. When the B2C landscape became more crowded, venture capital became more scarce and customers' demands increased. This led to the shakeout that is occurring now.

Where does this leave the B2B arena? Lawson believes that we will see a second part to the "Great Internet Shakeout". Total B2B ecommerce will expand to USD5.7 trillion by 2004. Of that 52 per cent or US3 trillion will go through trading exchanges.

According to some analysts, that total number of independent trading exchanges will peak at around 10 000 and will eventually decrease to about two per industy (today's figure is between 800 and 1400. In addition, the B2B trading exchange stock index is going down dramatically, and private venture capital is drying up, in line with what happened in the B2C arena.

B2B Challenges

As competition becomes harder, B2B startups therefore must be able to extend their functional footprints in order to appeal to participants. Their focus has to turn away from today's point solutions such as aggregated catalogues, auctions and reverse auctions. They have to provide more complete end-to-end solutions, eventually to support things like collaborative planning, reverse logistics and so on.

In order to present a unified view to the user, B2B companies will have to become more seamlessly  integrated with their associated trading partners' systems. This includes their customers, suppliers, distributors and other trading exchanges.

As AMR recognised "Only a handful of independent trading exchanges understand the need for integration and even fewer offer any integration capability." In another report AMR states "Most current electronics trading exchanges will fail… Integrating multi-billion dollar trading communities will involve considerable complexity and heavy lifting."

Enter e-Collaboration

The answer to the problems surrounding the efficient transfer of information in today's supply chain is to bring the two world together. Innovative companies would actually be able to gain a dramatic competitive advantage in this area. Companies who leverage their huge advantages through their current supply chain infrastructure and build a collaborate environment on top of that will be the winners in this battle.

How can this be done?

XML is one of the key cornerstones in the e-collaboration infrastructure. To succeed, companies must leverage their investments in current IT systems by XML-enabling them. This will allow them to automate the collaborative processes, both with current trading partners and with players like trading exchanges and e-markeplaces in the new collaborative environment. With the emergence of two major phenomena - the Internet in conjunction with XML – we are finally ready to leverage the Internet as the perfect ubiquitous medium for transferring information. In parallel supply chain infrastructure optimised for goods and services will continue to yield advantages.

However, there are still some questions left to answer before an organisation enters the e-collaboration world, for which a structured response must be formulated:

• Which are the dominant e-marketplaces I need to be collaborating within my industry or territory?
• Should my company open its own private trading exchange instead?
• If so, should we do that within the current organisation or within a separate company?
• Should we offer our products to our Web-based customers under a different brand name?
• Is there a potential channel conflict?

Do we need to revise our compensation models?

Bottomline

The e-collaboration landscape is about to be shaped. Lawson believes the synergy between the physical world of supply chains and the digital world of the Internet and 'bricks and mortar' companies will be able to take a smooth ride into the future of e-collaboration. They can do this by apply new, collaborative business models, catalysed by independent trading exchanges, while exploiting the huge advantage of having control over the physical flow of goods and services throughout their supply chains.

For further information on Lawson visit the Lawson exhibit in the ERP pavilion of iStart.