Intel is forging ahead with making purchases and selling its products through the RosettaNet Internet exchange standard. More than 10 percent of its customer and supplier transactions were executed through RosettaNet in 2002, a total of about $5 billion, Intel said Tuesday.
RosettaNet is a standard based on XML (Extensible Markup Language) for business-to-business e-commerce transactions within the semiconductor industry. It allows a company's suppliers and customers to electronically buy and sell products without the need to set up EDI (electronic data interchange) links or depend on paper orders, said Chris Thomas, chief strategist for Intel's solutions markets development group.
By using RosettaNet, Intel can receive electronic orders from smaller suppliers that previously couldn't afford to set up EDI links, Thomas said. Over 90 companies are now trading with Intel through RosettaNet, which resulted in 10 times the number of customer orders and five times the number of supplier transactions in 2002 as compared to 2001, he said.
EDI links are the current standard for electronic document transfers, but they have limitations, said Jon Derome, senior analyst at market researcher firm Yankee Group in Boston. XML-based systems allow companies to use standard methods to integrate their systems, rather than just exchange data, he said.
"EDI defines a document, its an electronic representation of a purchase order or invoice. It's very effective for sending documents, but you can't add process intelligence," he said. With the XML-based RosettaNet system, Intel can send an inventory request to one of its suppliers, and set responses based on the result of that inventory request.
For example, if Intel needs 500 units, and the supplier only has 300 units in stock, RosettaNet can define how quickly Intel needs to fill its request, and how long it can wait until the supplier gets more units in stock. EDI links can just send the data back and forth, while the XML-based process can determine the best course of action through predetermined variables.
"You can send demand signals down the supply chain faster, and receive supply answers faster. Companies are trying to avoid having to make huge inventory corrections," such as the one that affected Cisco Systems Inc. in early 2001, when the company was hit with a significant drop in demand, Derome said.
Companies can purchase RosettaNet gateway software from about 13 vendors, such as Tibco Software Inc. or Iona Technologies PLC, among others. The software can range from about US$10,000 to several hundreds of thousands of dollars depending on the size of the company, Thomas said.
RosettaNet reduces the time to process orders from a day for paper orders to less than an hour, Thomas said.
Intel was an original member of the RosettaNet consortium, which was formed in 1998. Over the last five years the consortium has slowly grown from its first connection between Intel and Arrow Electronics Inc., a electronic component manufacturer, to the 90 partner companies currently connected. About 30,000 transactions per month are now executed over the RosettaNet standard.
Other large industry consortiums trying out similar processes include CIDX, a chemical industry consortium, and UCCnet in the retail industry, Derome said.
RosettaNet is in its early stages, and the EDI standard remains the choice of most businesses for electronic transactions between suppliers and producers, Derome said. But RosettaNet is the pre-eminent standard for XML-based electronic business, he said.