CHICAGO -- Private and public business-to-business exchanges will coexist as they develop, according to a panel conducted at the Food Marketing Institute Show last month.
"This is not an either-or scenario," said Stephen David, chief information officer, Procter & Gamble, Cincinnati, a member of the board of Transora, Chicago. "This is about 'and.' The companies that are going to be the most successful in the future are going to have both public and private exchanges."
He averred that judging by news reports, the public exchanges are all but buried. "They would say the public exchanges are dead, but just don't know it yet. Most of us here don't feel that way."
Many companies will start private exchanges because they need capabilities that the public exchanges do not offer yet, David said. There also will be occasions where trading partners have unique needs.
For example, he pointed to Latin America where Web-order management is in great demand. "Most of our exchanges do not offer those kinds of services in those geographies, so companies are starting private exchanges to do some of that work.
"The smart companies are going to build private exchanges based on standards, and then they are going to think about rolling them into the public exchanges as those service offerings become available. So I think this is an 'and' get strategy that is built on standards, and then working with public exchanges for scale," David said.
Mike Heschel, executive vice president, information systems and services, Kroger Co., Cincinnati, a board member of the GlobalNetXchange, San Francisco, said, "I don't think you should think about public or private, you should think about exchange-exchange, because these exchanges are going to be open.
"We are going to have standards that we are all agreeing to, as we speak. You should be thinking about what is best for your company, and worry about public or private after you decide how you are going to use them. They can be very beneficial."
Linda Nordgren, corporate director, supply chain management and B-to-B e-commerce, Safeway, Pleasanton, Calif., and a board member of the WorldWide Retail Exchange, Alexandria, Va., said, "If you look at the industry, a lot of the large retailers and large manufacturers can afford to develop private exchanges and follow standards, and they have an option to use the public exchange as an extension of the business. But if you look at the hundreds of thousands of small retailers and suppliers, private exchanges are probably not an option."
For example, private exchanges would be impractical for dealing with the tens of thousands of growers and shippers, she said. "That's why in adding value to the WorldWide Retail Exchange by the alliance with Agribuys, we are looking to create a single standard and a single exchange that we can really get the critical mass and drive efficiencies from the smaller and the medium-sized suppliers as well as retailers. "Standards are critical and Safeway is very much involved in those standards," Nordgren said.
UCCnet, Lawrenceville, N.J., is playing an important role in setting standards for the exchanges, and doing it fast, Heschel said. "These standards have to be developed reasonably quickly, because speed to market is key in these trading exchanges. There's a lot of pressure on that and both UCC and EAN have agreed to work together. They are coming up with a process whereby the standards will be developed much quicker."
"In a relatively short period of time -- in the last six months or so -- there's been more work done on standards by UCC and EAN than certainly I have experienced over the last 10 or 15 years," David said. "That's the good news. The problem is that we need more standards set. We have a much greater need for standards today, and so, quite frankly, even the results that we have seen over the last six to nine months aren't going to be sufficient for us to make the kind of progress that we need to in our exchanges.
"The fact that anybody, anyplace, anytime, anywhere can get on these exchanges, and their capabilities are just exploding," Heschel said. "So you've got to have standards behind them, and the standards bodies have recognized that. I am encouraged, and I think that we will be able to get the proper standards in place."
