Editorial: The chain is the key

Much ballyhoo abounds about supply chain efficiency gains. Twenty, how about twenty-five, thirty per cent off costs.

When the talk covers the automation and opening up of supply chain information between you and your everyday suppliers I'm prepared to ignore the chequered history of IT and take these grand figures on board. Well, Dell has proven it hasn't it? You're adding speed and visibility to stable, proven relationships for the benefit of both you and your suppliers. You have a common goal.

When the ballyhoo is about e-procurement of indirect supplies, I can also see there are, albeit smaller, real savings to be made. However, let's hope we don't all end up sitting on the same lowest-cost chairs, using the same lowest-cost office supplies, and drinking the same lowest-cost beer at office parties. That wouldn't be good for productivity!

Where the most sceptical feelings arise within me is when the talk turns to B2B marketplaces and exchanges that deal in supplies crucial to your product creation.

Dedicated to the gods of efficiency, some crazy things are going on out there and they're using buckets of venture capital. There has been a desperate surge of money and marketing effort going into marketplaces and exchanges.

But there's trouble already in the perfect marketplace, where human motivations and political realities are forgotten in the surreal glow of economic dogma and technological wizardry.

The first to get cold water on their faces have been the independent marketplace operators who have tried to bring competing buyers and competing sellers together and make their money by 'clipping the ticket'. Unfortunately for these folks good business is not, and has never been, just about price. Why would you pay a marketplace to have the relationships you should have with your supplier? And why would a dominant buyer help make smaller competitors' prices lower?

In the US, many such marketplace operators are now trying to morph into solutions suppliers or consultants, or find obscure areas where dominant players will find them useful.

Next to find trouble will be industry consortiums where competitors work together to start the marketplace. Talk about waving a red flag to regulators. These companies seem willing to accommodate local competitors in a consortium, either because they fear being 'left out' or because it allows them to more easily take on their international competitors. They will face scrutiny for years to come, and there will be many ups and downs in their working relationships.

So be wary of 'marketplace' hype. Even in so-called commodity markets, a good business opportunity derives from doing something different and as exclusive as possible. Creating that successful, different product and service requires working with suppliers who are on track with you. It's not you vs your competitor, it's you and your supply chain vs them and theirs.

E-mail your thoughts now to richard_wood@idg.com.au. For publication unless otherwise marked.

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