Boston May 23, 2001 Technology analysis and measurement firm Jupiter Media Metrix reported that 26 percent of B2B executives said they will add features to their private trading networks (PTN) within the next 12 months that will allow companies to facilitate collaborative online activities, including inventory level monitoring and product design.
The Jupiter B2B research report released today at the Ground Zero 5 Conference in Boston reveals that the addition of collaborative applications to PTNs will outpace those of transaction-focused enhancements, as only 20 percent of B2B executives indicated that they will focus on procurement features. According to Jupiter analysts, the shift from transaction models to collaborative PTNs will offer companies the best short-term return on investment (ROI) by allowing buyers and sellers to improve the quality and efficiency of their products and manufacturing before meeting longer-term goals for cost effective B2B transactions.
"Private trading networks represent a new tool to link the interests of buyers, suppliers and distribution partners. Initially they promise cost savings, but their ultimate value will come through effective cooperation that benefits all three parties," said Tim Clark, Jupiter senior analyst, at the Ground Zero 5 Conference. "Most B2B buyers view PTNs as an opportunity to gain closer relationships with suppliers, not to facilitate transactions. Closer relationships with suppliers will result in faster ramp-up to manufacturing for buyers and more efficient and predictable inventory levels for sellers."
Key findings and forward-looking analysis from the latest Jupiter B2B research include:
- A Jupiter B2B Executive Survey found that 17 percent of B2B leaders plan to use PTNs to monitor suppliers' inventory levels within the next 12 months. Other information-sharing uses included collaborative planning, forecasting and replenishment (15 percent) and product design (11 percent). Commodities buying (13 percent) and procurement management (13 percent) were the only transactional applications identified in the survey. Visibility of inventory is a key component to the success of original equipment manufacturers (OEMs) and contract manufacturers because it enables them to plan "just-in-time" manufacturing.
- According to the survey, 61 percent of B2B executives cited closer supplier relationships as a key function of PTNs. Forty-six percent indicated that faster times to market and closer links to channel partners were top value propositions of PTNs. Suppliers can benefit from closer relationships with their buyers by minimizing their inventory levels based on the manufacturing schedules of their customers.
- Despite benefits, Jupiter analysts have found that PTNs face resistance from corporate users who are concerned about the privacy of their data. The survey shows that 36 percent of respondents indicated that concerns over sharing sensitive data with business partners was the main barrier to using PTNs, while 24 percent consider integrating existing technology investments a barrier. Industry-sponsored marketplaces, major customers of PTN software, should take leading roles in setting industry-specific standards that protect companies during the exchange of proprietary information.
"PTNs offer many great benefits to the buyers and sellers who use them, but they will not reach their long-term potential if they are used as standalone applications," Clark said. "The most strategic connection exists between supply-side PTNs that monitor inventory levels and demand-side PTNs that connect manufacturers to sellers or end users. When combined, they can create visibility along the entire chain between buyers and producers and also have the potential to allow for sellers to anticipate demand."
Implementing PTNs
Companies that are building out PTNs must implement them in phases and should consider using independent marketplaces and industry-sponsored marketplaces to host some of the PTN functions. The sensitivity of the data being exchanged should be the chief criterion for deciding whether to keep an application in-house or to outsource it.
Jupiter analysts offer the following advice to companies that are planning to implement PTNs:
- Adopt a lifecycle view of PTN growth. Companies should first implement straight commerce capabilities before implementing collaborative applications for inventory visibility and product design. Next, they should build in capabilities that allow PTN users to make transactions on public or industry-sponsored marketplaces. Finally, companies should add the support of an industry resource-planning application that places all business processes on a single platform.
- Dedicate an executive to oversee PTN implementation and use. PTN adopters had more trouble getting their own employees to use the system than they did getting their suppliers to. Dedicated executives must be as proactive in motivating as they are in training both internally and externally.
