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Major manufacturers and retailers have launched two types of collaboration initiatives in the past year. First, they have collaborated with trading partners to im­prove supply chain efficiency, using a process called Collaborative Planning, Forecasting and Replenish­ment (CPFR®). (Collaborative Planning, Forecasting and Replenishment and CPFR are registered trade­marks of the Voluntary Interindustry Commerce Stan­dards [VICS] Association.) Second, they have joined with competitors to form business-to-business (B2B) trading exchanges that increase procurement econo­mies of scale. Now market forces are bringing trading partner and competitor collaboration activities to­gether, as trading exchanges transform into collabora­tive trading communities. Collaboration is becoming a dominant means of doing business, which has a pro­found impact on customers, suppliers, and the infor­mation technology that supports trading relationships. This article examines trading exchanges and CPFR, and describes how they are being integrated in collabo­rative trading communities.

B2B TRADING EXCHANGES

B2B trading exchanges began as independent start-up companies, backed by venture capitalists or application software firms. Leveraging the increasing maturity of the Internet, these firms offer online vendor product catalogs, industry news, discussion, and auctions of ex­cess inventory and commodities. The early success and staggering market capitalization of companies such as VerticalNet, Chemdex (now Ventro), Commerce One, and Ariba got the attention of established companies in the automotive, retail, CPG, and other industries.

Starting with the big three automotive firms, major players in several industries decided to form their own B2B trading ex­change joint ventures. Now there are several "competitor" exchanges, including the Global Net Exchange (Sears, Carrefour, Sainsbury, and others), the Worldwide Retail Exchange (Kmart, Target, Walgreens, Tesco, Auchan, Casino, and others), and the Grocery Manufacturers' Association's eCPG (P&G, Unilever, Kraft Foods, and almost SO other food manufacturers).

Competitor exchanges have the advantage of lever­aging the high volume of business transactions needed to support their core businesses. Rather than having to attract customers to their network, they simply reroute their own transactions, creating instant "liquidity" and pricing power.

Currently, trading exchanges focus on spot purchases of indirect materials and commodities. They do not typi­cally handle delivery, and may not even handle the ac­tual purchasing transaction.

Figure 1 illustrates the lifecycle and channel dimen­sions of a B2B trading exchange, highlighting the areas exploited to date. For spot-purchased commodities or MRO products, a B2B trading exchange identifies quali­fied vendors, products, and terms of sale. It aggregates the needs of many buyers into a buying pool, resulting in larger purchasing transactions. It sets up an auction (or reverse auction) to arrive at a winning bid, or sources supply from multiple vendors.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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