Marketplaces driven out of business by 'price cut' focus

15 November 2001
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15 November 2001 | David Arminas

Many of the business-to-business trading exchanges that have failed in the past year have done so because they destroyed supply chain relationships by focusing only on driving down prices, according to the executive chairman of Deutsche Telekom UK.

The failed exchanges did nothing to foster long-term relationships based on "old-fashioned values such as serving the customer, creating value, co-operating, partnerships, commitment and logistics", said Jim Norton.

He told the audience at the fourth annual lecture by the non-profit-making Partnership Sourcing (PSL) organisation that he is now a believer in private marketplaces rather than sector-wide marketplaces. Norton was at first suspicious that automotive industry e-marketplace Covisint was purely concerned with squeezing margins of second and third-tier suppliers.

"But it has more recently discovered supply chain integration and creating value through relationships down the chain. It is now my touchstone to what is happening."

He believes there are still many "lumbering white elephants" that were set up as collaborative projects. And he warned that companies should choose carefully among them in the spirit of partnering.

"E-business is simply about moving information. Don't be afraid of it," said Norton, whose lecture launched the latest update to PSL's Vision 2010.

The update focuses on the growing importance of information and knowledge management as the competitive advantage of the future.

But the next decade will also see a greater need for risk management in all areas of business operations, from Internet security to environmental issues. High litigation awards are no longer a US-only phenomenon and there are likely to be higher payouts to companies in European courts, PSL believes.

SMnov2001

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