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The News Ė 02/08/01

Buzz Word Alert: PTX

Well, somebodyís put a new name to a concept Iíve been talking about for a while: Private Exchanges are now PTXs. This coinage is apparently courtesy of AMR Research, which said:

SAP is betting, as is AMR Research, that the majority of SAP's enterprise-class customers will be putting tremendous amounts of energy and investment into PTXs [private trading exchanges] as a way to cement decades of building customer and supplier relationships."  

A private exchange is a company extranet on steroids. A company invites vendors and customers into a secure area to transact business. In this marketplace, a company may hold reverse auctions, post Requests For Proposals (RFPs), provide design specifications, and in general collaborate with its business partners. A PTX is somewhat misnamed, since the concept of an exchange is generally thought to indicate a many-to-many model, whereas a PTX is a one-to-many model. But I doubt that companies care. They want the control, and even more importantly, the privacy, of a secure marketplace.

Read more about PTXs (before the buzz) in my presentation at a recent Delphi Group conference. Iíve also got a supply chain white paper now in pre-production that Iíll link to when itís available.

 

Industry Week

 

Gorillas to Rule; No Room for the Little Guy?

At a recent Patricia Seybold Group/SPS Commerce discussion, Dr. Larry Smeltzer, professor of supply chain management at Arizona State University, argued that large firms which boast of electronically connecting their supply chains had done so by overlooking SMEs. An SME is a Small- to Medium-sized Enterprise, and such firms make up the majority, by number, of the companies in the US.

Smeltzer enumerated five immutable laws of universal supply chain connectivity:

       Enduring supply chain rules based on e-commerce between large companies are already in place in the form of Electronic Data Interchange (EDI). But these relationships do not embrace SMEs.

       Large firms are fundamentally different than SMEs (no IT staff, fewer resources of all kinds), and the daily struggle of keeping an SME afloat receives more focus than implementing supply-chain connectivity.

       Inertia and the status quo are obstacles to connectivity

       Targeted technology, a proven process, and dedicated resources are required to connect and support thousands of supply chain members

       Integrated technological advances would help optimize supply chain connectivity.

Where all this is heading is a new paradigm of business relationships. Rather than a linear relationship between a business and its supply chain members, businesses will eventually find themselves involved in a sea of value partners, with much lower vendor switching costs. Companies will have to find new ways to create value in this new networked environment. Supply chain efficiency will be accessible to all, not just the few who have emphasized operational excellence. This new value universe is described by Rafael Ramirez and Richard A. Normann in their 1993 book, From Value Chain to Value Constellation: Designing Interactive Strategy:

Successful companies do not just add value, they reinvent it...[they] are more than links on a value chain. They are the centers of constellations of services, goods, and design.

So where will the SMEs be in this new constellation? Well, unless the bigger players give them a hand, many could find themselves out in the cold, unless they quickly undertake the effort and expense of getting connected. As John Chambers, president of Cisco Systems said, "The big won't beat the small - the fast will beat the slow."

And as I always say, ďBe wired or retired.Ē

 

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