In the networked world of e-commerce, collaboration is the name of the game for retail buyers and their suppliers, by Penelope Ody

Whether they're termed "B2B portals", "trading networks", "procurement hubs" or whatever, the new generation of web-based product sourcing and buying associations that have mushroomed in recent weeks is set to transform retail supply chains.

The traditional adversarial relationship between retail buyers and their suppliers - with each trying to squeeze the other on price or delivery times - has been transformed in the recent years by "collaborative planning, forecasting and replenishment" schemes where suppliers have access, via the internet, to the retailer's database to check on promotional progress, branch sales, or forecasts in demand.

Now, this degree of co-operation is extending to inter-retail relationships, with the new web-based trading networks actually set up to automatically aggregate orders from a number of retailers and negotiate the best price and terms from suppliers for the larger volumes involved.

"It's a sort of reverse auction," says David Stephenson, UK-based, regional director for retail and services with Oracle. "Retailers input details of their needs and the system automatically aggregates the orders and invites tenders from suppliers. It also forecasts demand and, eventually, could also be involved in planning distribution."

Oracle has set up two retail-focused exchanges: GlobalNetXchange which is a separate legal entity rapidly attracting equity investment from leading retailers worldwide, and RetailMarketXchange which is targeted at the convenience store sector. Sears Roebuck, Carrefour [France], Metro [Germany] and J. Sainsbury are already committed to GlobalNetXchange with Royal Ahold [Netherlands] expected to sign shortly. Suppliers are, in theory, welcome to become equity partners as well - although retailers have been the first to participate.

"This is a revolution in retail," says Arthur C. Martinez, chief executive of Sears Roebuck. "It will forever redefine supply-chain processes, increase collaboration with suppliers and reduce supply-chain costs."

r Stephenson believes that the network will initially be used for "goods not for resale" - such as stationery and shopfitting - where procurement tends to be disorganised and costly in many retail businesses, although eventually non-competing retailers may well join together to use the network for sourcing consumer goods. "The system allows the retail members to issue 'private' needs which suppliers can tender for, rather than joining with others to create a large aggregated order," he explains.

The exchanges were launched in March, so the schemes are still in their infancy, but in the long-term the RetailMarketXchange could certainly present a competitive challenge to the traditional voluntary buying groups in this sector, such as Spar.

This sort of multi-retail trading network is still a little unusual, with earlier ones tending to be developed by a single retailer before being expanded to others in the same sector. Petsmart in the US has developed a web-based sourcing system with SourcingLink.Net. The technology is based on an established Lotus Notes desktop product, although Steven Pulver, vice-president for sales and services at SourcingLink.Net maintains that the company has "reinvented itself as an internet company in the past 14 months".

The Petsmart B2B scheme was introduced last year with the aim of cutting lead times in product development as well as trimming inventory levels. "Our emphasis is on own label to give a unique product offer," says Marcia Meyer, the company president, "so we work closely with suppliers. Our Phoenix buying office has to work with Asian companies with a 15-hour time difference - and European ones with an eight-hour time difference - and we cannot be efficient with just phone or fax."

rs Meyer maintains that while there are many net-based B2B products emerging, few of them are based on real retail needs, accurately mirroring the traditional retail sourcing and supply model electronically.

"SourcingLink.Net is one of the few that does," she says. "With a web-based procurement system we are now finding new vendors and we're heavily committed to digital imagery to share product development ideas."

As with GlobalNetXchange, Petsmart buyers can now "broadcast" their product requirements over the network and receive offers and suggestions from suppliers worldwide. Over the past year Mrs Meyer's team has sourced more than 900 new product lines electronically and decreased time to market by 50 per cent.

Inventory is down by 20 per cent while the total number of lines on offer has increased by 40 per cent.

SourcingLink.Net hosts the Petsmart network and will be opening it to other pet products retailers worldwide in coming months. It is has also been working on a similar scheme with Promodes in France - although since this is now merged with Carrefour (committed to GlobalNetXchange), long-term development may be in doubt.

any of the new trading networks are hosted, as with Petsmart, by the IT companies providing the software and are similarly highly product specific.

Retek, for example, has retail.com, launched last year with early users - including companies such as Selfridges and Storehouse - tending to come from the clothing sector; i2 Technologies similarly owns SoftgoodsMatrix for the clothing and furnishings sector. This has already attracted companies such as VF Corporation - the world's largest clothing producer - Lee, Wrangler and Bestform.

While some of these networks are predominantly retail driven, others clearly have the initiative coming from suppliers.

"Closed trading communities are limiting, because they benefit the buyer or the seller - but never both," argues Yanir Aharonson, general manager, of the Israel-based supply chain specialist, Paragon.

"The buyer-orientated trading community restricts access to business processes and restricts suppliers' access outside the buyers' own communities."

For buyers accessing supplier-based portals there are the same limitations on integrating valuable marketing data and sales information into existing IT systems. Early data-sharing ventures certainly suffered from this lack of integration and there are also problems about "ownership" of the data which is being shared.

Paragon has set up RetailTrade.net as a semi-independent trading community, arguing that it is more comprehensive by linking a greater diversity of companies into one trading portal. The site is set up by a community co-host or market maker, which creates and maintains the web trading communities by region and by industry-specific markets or groups of markets.

Suppliers and buyers register at the site, and then gain access to services and modules worldwide 24 hours a day. The hosts earn income through monthly fees or on a commission basis per transaction.

Rapidly expanding these new trading hubs may be, but they do not solve all supply chain problems. "These portals can only arrange dates and deals," says Gilles Serpry, global head of supply chain at Cap Gemini. "They cannot get the goods from A to B. To do this, retailers will need to take advantage of the newest business models enabled by the internet."

Waterstone's

new  services

Payment over the web


looking ahead
Future FTIT coverage

steve  luczo

View from the top


previous surveys
April 2000
March 2000
February 2000
January 2000
December '99
November '99

special reports
US Elections
World Trade
FT Telecoms
Connectis
FT-IT
FT Euro
FT500
FT Surveys