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Are e-Commerce Exchanges the Solution to all Supply Chain Problems or Simply a Waste of Inventor's Capital?

FOR RELEASE: June 3, 2002

CONTACT: Kristen Kioa
  ISM Media Relations
  800/888-6276 ext. 3015
  kkioa@ism.ws

(Tempe, AZ) — Over the past few years, there has been a significant amount of hype in the press and investment community about the important role that e-commerce exchanges would have in reshaping purchasing and, more broadly, supply chain activities. The hype began with B2B markets, was refocused as consortia emerged as the e-commerce vehicle of choice, and again shifted as private exchanges received most of the favorable media coverage.

In a recently released white paper by McKinsey & Company and CAPS Research titled, "E-Commerce Exchanges: Making Informed Decisions. Applying Best Practices," interview questions probed the value created by these e-commerce exchanges through improvements in efficiency and effectiveness of several operational processes — including purchasing, product development, and overall supply chain management. These questions aid in answering the question: Are e-commerce exchanges the solution to all supply chain problems or simply a waste of inventor's capital?

Sixteen companies, ten consortia and six private exchanges, were interviewed as part of the McKinsey/CAPS Research project, and three e-commerce exchange models were examined. The study concludes that public e-marketplaces, industry-sponsored marketplaces (consortia), and private exchanges have emerged to leverage the opportunities presented by collaborative e-business. It was also determined that the challenges faced by all three models are real and similar. These exchanges must not only build out new and valuable technology quickly, but they must also convince key marketplace members to change the way they do business in order to leverage exchange technology.

Other issues covered extensively in this paper include the status, functionality, and value created by each exchange model. A comparison of each model that considers when to use one model over another, and what makes a model sustainable is also highlighted. In addition, DaimlerChrysler, Patellos, Aeroxchange, and Dow Chemical provided McKinsey and CAPS Research real examples to illustrate the value created by each exchange model.

Throughout the paper, McKinsey and CAPS Research provide valuable tools for organizations embarking on a quest to leverage consortia, private exchanges, and other e-value chain tools. For a complete copy of the white paper, please go to www.capsresearch.org. For questions regarding this white paper, contact Trish Mosconi at 203/977-6797 or Rebecca Smith-Allen at 312/795-7045 at McKinsey & Company, or Dr. Phillip Carter at 480/752-2277 or Dr. Robert Monczka at 517/432-3503 at CAPS Research.

CAPS Research is affiliated with Arizona State University and the Institute for Supply Management™ (formerly the National Association of Purchasing Management). CAPS Research was founded to help organizations achieve competitive advantage by providing them with leading-edge research to support the evolution of strategic purchasing and supply management.



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