THREE good reads. ALLEN:
Savings via Centralized Purchasing
Extranet-based system builds electronic trading communities
By Kathleen Murphy
A natural evolution of a corporate Web is into a procurement system that links buyers and suppliers--and TPN Register's pitch is that it can manage procurement more cheaply than if a company tries to build its own solution.
TPN Register, a 50-50 joint venture between GE Information Services and Thomas Publishing Co., publisher of the Thomas Register of American Manufacturers, promises its systems can cut procurement costs by as much as 30 percent.
The company, based in Rockville, Md., operates an extranet-based marketplace that manages content and transactions, and which incorporates Thomas Register's classification system--considered by some to be the standard for industrial products.
TPN Register is responding to the trend for self-service in Web requisitions and the tendency of companies to outsource the creation of their electronic catalogs, said manager of product development Cynthia Cruzado. But much time is still spent educating potential customers, she noted.
TPN Register is targeting Fortune 500 companies, and is currently building electronic trading communities with customers on the buy side, such as Boeing, GE Lighting, and 3M, and with suppliers such as Pitney Bowes.
Suppliers distribute catalogs with customer-specific pricing and contract terms, while buyers get a comprehensive procurement channel that's intended to cut costs and improve productivity.
SAVINGS VIA CENTRALIZATION
"Wherever there's a heavy shop floor" is where TPN Register's trading services could be useful, said Gary Hare, vice president of product development and commercial operations for TPN Register. "Suppliers can't afford to sell a different way for each buyer." Large process manufacturers such as those in the petrochemicals industry or automotive industry could use the procurement system, he said.
Analysts said that centralizing the purchasing system for non-production resources on intranet-based systems can help companies realize huge cost savings, because such non-production resources (indirect goods or items not necessary for making what a company produces, but central to its operations nonetheless--such as office supplies for an auto manufacturer) represent between 25 percent and 60 percent of a company's operating expenses.
Benefits include being able to track purchases precisely, prevent maverick buying, and integrate with existing purchasing processes.
At this point, most companies are still using Web-based procurement systems for non-production goods, but TPN Register's model is based on the hope that companies eventually will decide to use the systems for operational goods as well.
TPN Register's roots hark back to 1995, when GE Information Services' Rockville, Md., division created an Internet version of its EDI services and called it Trading Process Network (TPN).
GE Lighting used the system for purchasing machine parts instead of using its traditional paper-based system. It worked so well that GEIS decided to offer the service to outside companies.
But TPN Register's predecessors haven't yet succeeded in finding a way to lure companies seeking necessary supplies for maintenance, repair, and operations (MRO) needs.
TPN Register's claim is that it can leverage the sales force and global reach of GE Information Services with the customers of Thomas Register. The company has about 100 customers of its trading-partner services and about 500,000 line items.
TPN Register has just 50 employees and relies on its parent, GEIS, said Raymond Schiavone, president of TPN Register. "I want to keep the place small and nimble," he explained, "so we can react faster, with the speed of a startup."
A COLLABORATIVE MARKETPLACE
On the buy side, Web-based purchasing systems can cut the cost of processing a purchase order, which is sometimes $100 per transaction.
From the seller's perspective, Schiavone said, suppliers get multiple purchase orders from a broad buying community in a standard format.
One of the greatest challenges TPN Register has faced is managing content on both sides--buyer and seller. But the chief obstacle to success has been getting the market to understand the value of a collective electronic marketplace vs. building a sell-side or buy-side catalog, Schiavone said.
Too often, companies have only thought about themselves instead of their clients or partners, Schiavone said, adding that TPN Register is striving to be "where supply meets demand."
--------------------------------------------------------------------------------Buying Into ECommerce
Web Is Reshaping How Firms Deal With Each Other. While buying books and music on the Web may be a great convenience for consumers, the biggest impact of electronic commerce will be on business-to-business trade, where the Internet is already revolutionizing the way companies deal with one another, industry experts say. Forrester Research estimates that business-to-business Internet commerce will rocket to $1.3 trillion by 2003 from just $43 billion last year, accounting for 90% of all commerce conducted over the Internet. "In the past, companies have focused on improving productivity internally," says Steve Bell, researcher at Forrester. "Electronic commerce is a way of organizing external relationships. There will be huge productivity gains."--------------------------------------------------------------------
Internet Predicted To Double Overseas Trade
A major trade report predicts the number of Australian businesses doing trade with customers outside Australia could double or even triple in coming years because of the Internet. The latest research confirms Australia as a world leader in the early adoption of electronic commerce. The report from the Department of Foreign Affairs and Trade paints a generally rosy picture of Australia's online future, suggesting that by 2001, the global value of Internet commerce could equal the size of our entire national economy.
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