Growth of B2B Exchanges

Decades ago the introduction of MRP and ERP system revolutionized the concept of manufacturing across all industries. All aspects of business including procurement, production, inventory management, logistics, sales and marketing as well as finance were touched or rather integrated by the ERP systems. ERP systems aligned all business functions into a seamless process and the entire organization as well as the operations began to be driven by the systems replacing hereto prevalent system of people driven processes. Over the next few decades, the business processes and systems enabled Organizations to define their business models as well as establish global setup thanks to system driven business processes.

ERP systems and system driven Business Processes enabled Organizations to streamline the entire supply chain functions as well, leading to greater efficiencies in procurement, supplier management, inbound supply chain as well as outbound logistics functions etc.

The next biggest thing that happened to business organizations was the introduction of EDI. Once again, it succeeded in delivering business to another level altogether at global level. Organizations could easily source materials and have them shipped from any part of the globe. American companies could outsource all of the manufacturing to China and expect seamless visibility as well as real time exchange of information, data, documents etc over the internet. Logistics sector reinvented itself and the value addition provided by logistics and transportation on global scale helped global organizations scale up their business using technology.

In recent times we have seen yet another revolutionary change in the business environment thanks to internet once again. We now have online selling and buying happening in real time. While most people are familiar with Business to Consumer transactions, there is a bigger market out there known as B2B market place. On the internet today, hundreds of Business to Business marketplaces exist catering to every type of business segment.

Simply put, B2B exchange is nothing but online market place where buyers and sellers get to meet and look for mutual business opportunities. Though not documented, generally it is believed that B2B exchanges were born out of the effort of large business organizations investing on building web based systems to manage their vendor base, streamline procurement and supplier management processes. Companies like GE, Boeing etc having to deal with hundreds of vendors spread across the globe have developed system based approach to managing procurement function. Thus emerged the web based procurement systems largely limited to private players.

Taking cue from the systems driven approach to procurement as adopted by some of the businesses and in line with the trend of globalization, the IT system developers were quick enough to introduce third party managed B2B exchanges that bring together suppliers and buyers on to the same platform and work as real market places.

Today we find B2B exchanges being embraced by the market cautiously but definitely. There are B2B exchanges that are largely private or owned by specific industry consortia such as automotive industry or global food exchange where the leading vendors have come together to form a B2B exchange. We have innumerable public or third party B2B exchanges that exist in almost all sectors including content development, web development to IT services, Textile and garment industry etc and these are open to suppliers and buyers of all size and all products. Yet another kind of B2B exchange that exist belong to specific buyer driven exchanges like the ones promoted by Wal mart and Dell Etc.

Dell’s sales and delivery module is driven by e commerce. Therefore it is only natural that the IT company embraces B2B Exchange as its tool to fecilitate procurement functions as well. Dealing with hundreds of IT Parts vendors spread across the globe, sourcing supplies for multiple manufacturing facilities across the world and having to deal with global scale logistics and delivery services is not possible without the help of B2B exchange driven processes. Besides, Dell has always believed in just in time procurement and manufacturing system. Dell does not believe in building stocks rather manufactures against orders. By adopting Online selling as well as using B2B exchange for procurement and logistics services, Dell is able not only to automate its business process, rope in efficiencies but ensure cost control as well.