As businesses bring their product and service offerings online in an effort to capture more customers and lower costs, an interesting byproduct is emerging: the connected supply chain. For example, Cisco Systems, the networking equipment giant, turned its extranet into a platform for distributors, resellers, and customers—the supply chain—to gain visibility into product information, pricing, and availability. Cisco did this with the help of Comergent, a developer of a new class of enterprise software leveraging the Web and attribute-based cataloging protocols like XML (extensible markup language) to facilitate data exchange among trading partners.

Companies such as Asera, which offers demand-chain management solutions, Comergent, and others are rapidly deploying similar strategies for companies across multiple verticals. As vertical trading exchanges have begun to take shape, the companies that extract the data in these vertical supply chains are realizing they own some pretty important content. Case in point: Trade Services recently launched a subsidiary called ec-Content, which plans to make money by extracting a percentage of revenue from transactions generated on ecommerce sites that utilize their content.

Most of these companies didn’t realize their content would become this valuable. They woke up to the opportunity only after being approached by countless business-to-business Internet companies seeking their content. While companies such as ec-Content are likely to be successful extracting a percentage of revenue from transactions in the near term, the long-term proposition for these companies is less lucrative than one might think. Just look at the offline world to recognize that publishers of manufacturers’ product specifications don’t typically get paid on a per-transaction basis. Further, as companies like Comergent enable manufacturers to deliver their product content over the Web across multiple trading partners, the uniqueness and, therefore, the value of this kind of content is likely to diminish dramatically.

Beyond matchmaking
Most of the attention in business-to-business ecommerce has come from vertical exchanges. These marketplaces face the challenge of extracting data from the supply chain in order to enable the buy and sell decision between their customers. But as a number of exchanges have begun to realize, it’s more than just matching buyers and sellers. Vertical trading exchanges such as e-Steel, FastParts.com, and Chemdex have begun to manage data across larger and larger pieces of the supply chain. These “exchanges” may one day find themselves looking much more like pcOrder, a company that manages data exchange among trading partners in the PC business, and less like automated matchmakers.

The lessons these “exchanges” have learned is an old one: Customers don’t want a portion of the solution, they want a complete solution. And that is where we are heading; toward a completely connected supply chain. The work being done by companies like Cisco to connect members of their supply chain online, coupled with the hard work being done by exchanges to connect buyers and sellers online, represents the stitching that will complete the emerging ecommerce quilt.

True plug-and-play
What these efforts represent from a customer’s perspective is quite profound. Today, buyers of industrial parts source components from multiple manufacturers and distributors. This requires poring over several published catalogs and double-checking with the manufacturer’s Website to ensure product information is up-to-date.

Tomorrow, manufacturers and distributors will plug their supply chains into multiple portals and exchanges that address the needs of demographically distinct buyers. Think Yahoo! for dentists.

Companies such as testmart.com, PartMiner.com, and Neoforma.com are working hard to own demographically segmented buyers in the engineering, electronic components, and medical verticals, respectively.

As these companies work to embed their Web offerings deeply into the business processes of their customers, the connected supply chain will become even more powerful—as manufacturers and distributors gain greater visibility into their customers’ needs. For example, Buzzsaw.com, a spinoff of software giant Autodesk that is targeting the commercial construction buyer, is offering a project management and communication platform that will facilitate ecommerce by connecting specific project information to procurement needs.

Imagine a day when buyers of plastics can view product, pricing, and availability information from multiple suppliers on a single Website designed to deliver content and services that address the specific needs of plastics buyers. Because procurement decisions are driven by not just price, but availability, performance, and myriad other factors, visibility into the supply chain is critical. This emerging framework seems to be how the connected supply chain will invade and restructure every piece of the ecommerce landscape in the coming years.

ADAM DELL (ADAM@IMPACTV.COM) IS THE MANAGING GENERAL PARTNER OF IMPACT VENTURE PARTNERS. HE IS ALSO AN ADJUNCT PROFESSOR AT COLUMBIA BUSINESS SCHOOL. IMPACT VENTURE PARTNERS HOLDS AN EQUITY INTEREST IN BUZZSAW.COM

Posted with permission from BUSINESS 2.0
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