Exchange Evolution Points to Higher Savings

SAN MATEO (06/23/2000) - In a significant move to de-liver on its promise of building trading exchanges that reduce operating and financing costs, rather than just giving companies access to commodities, Commerce One Inc. inked a deal this week with XMLSolutions Corp.

XML Solutions technology provides EDI (electronic data interchange)-to-XML and XML-to-EDI translations for all industry-standard X12 and Edifact documents, according to a company representative.

Among Commerce One's first customers for the technology will be General Motors Co. TradeExchange as well as the forthcoming Covisint auto exchange, which also includes Ford Motor Co. and DaimlerChrysler AG.

"Commerce One is taking a big leap forward in establishing a common business library beyond standard EDI business models," said Ron Shelby, general director of systems engineering at GM, in Detroit.

According to Shelby, GM's standard operating procedure for procurement of direct materials is built around EDI, with broadcasts of schedules and required products given to suppliers, who then map them into their ERP (enterprise resource planning) systems. Final procurement schedules are released based on that result.

"To rewrite [EDI] takes a long time. If Commerce One and XML Solutions can generate it in days, it will make us more nimble," Shelby said.

Reducing the cost of transactions is one of the major goals of the trading exchanges, according to one industry analyst.

"Exchanges reduce the cost of processing by pulling them out of their legacy environments and putting them in the Web cloud," said John Macauley, a vice president at A.T. Kearney, in San Francisco.

The cost of a purchase order, from its issuance through fulfillment, validating the materials, processing the payments, and collecting, is estimated at more than $100. Exchanges can drive that cost down to about $1, Macauley said.

"Exchanges will drive it to credit card-like cost: ... pennies," he said.

Other industrial exchanges are also looking at technology for supply-chain collaboration.

The WorldWide Retail Exchange, a global consortium that includes major retailers, and the new online exchange for 48 of the leading packaged goods companies, are each taking steps to incorporate into their exchanges a standard adopted by the Voluntary Interindustry Commerce Standards Association. That standard is Collaborative Planning, Forecasting, and Replenishment (CPFR) Guidelines.

"CPFR is a guideline of how to conduct collaboration for forecasting and replenishment and facilitates using decision support tools," said Christopher Sellers, president of Syncra Systems, in Boston.

Syncra Systems Inc. launched this week SyncraXt, one of the first supply-chain collaboration tools designed around the CPFR guidelines.

The so-called "nirvana state" in decision support, according to Macauley, is giving companies visibility of the whole supply chain.

But many industry analysts doubt companies will be willing to reveal their business processes or procurement schedules.

GM's Shelby agrees. "It is the interface standards we want to make common -- not GM's internal processes that we want to expose," he said. "What happens internally is our competitive advantage."

XML linking specifications due

The World Wide Web Consortium (W3C) is moving ahead with two specifications, XLink and XPointer, aimed at linking together information within and between documents.

XPointer, built on top of XPath, a base pointing language used in XSL (Extensible Style Language), lets users point to and identify items and attach links to them.

XLink goes a step further, "connecting anything to anything and describing the meaning of the connection," said Steven DeRose, co-editor of the specifications. "[They] let you do workflow or collaborative review and authoring."

The two specifications would allow links to be made between, for example, a movie Web site and a critic's commentary, so that viewing the site would automatically link it to the movie review. Users could subscribe to a link database.

"That makes annotation and commentary on other people's information information in its own right that you can give away or sell," DeRose said. "It makes linking and commentary salable, and that is going to be the most revolutionary effect."

XPointer is currently in the candidate recommendation stage, with XLink to follow.

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More about A.T. Kearney AustraliaCommerce OneCovisintDaimlerChryslerFord MotorHolden- General MotorsSyncra SystemsW3CWorldWide Retail ExchangeWorld Wide Web ConsortiumXMLSolutions

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