Automated Product Information Exchange in the Industrial Supply Market

by Fastwater Staff

Introduction

The Web is causing fundamental changes in business relationships: it brings the bulk of the business to business economy into the realm of electronic commerce. In the past, EDI enabled large companies to automate the exchange of transaction documents, but EDI did not affect business relationships outside of the global 2000. The Web brings electronic commerce to many more buyers and suppliers, more parts of the distribution chain, and more product categories. In this process, businesses will develop new relationships and will need to find new ways to support existing distribution relationships. The lifeblood of these relationships is information exchange, and in particular exchange of product information.

Companies at all points in the distribution chain need to use the Web to meet their customers' needs. Manufacturers can provide direct purchasing and personalized service for key customers, distributors can offer broad selection, availability, and services; new internet intermediaries can help buyers and sellers find each other and find information; corporate buyers can leverage intranet procurement systems to automate the internal purchase process.

In order to fulfill these opportunities, companies at every point in the distribution chain need access to accurate, up-to-date product information. Companies need to automate the process of exchanging product information in order to keep up with the rapid growth of business-to-business e-commerce, and the increasing complexity of the industrial supply value network.

There are three primary requirements for automated product information exchange in the industrial supply market: scalability, automated setup, and support for classification schemas. Manufacturers, distributors, internet intermediaries, and buyers each have different requirements and priorities for the exchange of product information.

Electronic Commerce and Industrial Supply

For the last three decades, large corporations have used EDI to automate their purchase processes for repeat orders of high-volume, high-value production goods. Because of its high cost and complexity, however, EDI left large swaths of the industrial supply chain untouched. Small buyers and suppliers could not participate. And non-production goods were still purchased through paper catalogs, phone calls, and faxes.

EDI helps companies reduce the cost of executing frequent transactions by automating the exchange of common transaction documents such as purchase orders and invoices. However, EDI does little or nothing to support the purchase decision process. Buyers are able to select a product code from a list of contracted products and re-order that product.

Because it addresses a much wider range of needs, the Web will enable electronic commerce to penetrate much more deeply through the economy, and much more deeply through the purchase process. Forrester Research estimates that U.S.-based Internet commerce between companies will grow from $109 billion in 1999 to $1.3 trillion in 2003.

Web-based commerce is taking hold among small companies as well as larger ones, for non-production goods as well as production goods, and for small quantities of goods as well as high-volume purchases. The Web also helps buyers and sellers to automate much more of the buying and selling process, including product evaluation and selection, purchasing review and approval, marketing and promotion, and post-sales support.



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