14 February 2002 | Geraint John
The idea that companies should focus on trading electronically with only their key suppliers is being overturned, according to the boss of General Electric's e-commerce arm.
Getting the full benefits of an electronic supply chain means aiming for 100 per cent take-up among suppliers, not settling for those with the greatest volume, said Harvey Seegers, president and chief executive of GE Global eXchange Services (GXS).
"Accepted wisdom has been that you get 80 per cent of the benefits with 20 per cent of your suppliers. But a lot of companies have found that the remaining 80 per cent actually pose a fairly significant administrative inconvenience. So that 80:20 rule is breaking down."
In an interview with SM, Seegers said a growing number of big firms in recent months seemed to be following retired GE boss Jack Welch's dictum and insisting that suppliers do business electronically or not at all.
British supermarket giant Tesco, a GXS customer, was one company that had moved in this direction, he said.
"Retailers as a community seem to have come together and are insisting on it. I'm not seeing any big retailer right now that is not going down the path of 100 per cent digitisation."
Frustration at the slow adoption of e-commerce among their supply base was one reason, Seegers acknowledged. But a bigger reason, he said, was that "the technology is now available to bring small suppliers online at a cost that is less onerous than before".
In return, buying organisations were beginning to see the benefits of paying suppliers quicker, he added. E-commerce software that automates the settlement process was coming on to the market, and finance directors were realising that the typical 2 per cent discount gained by paying bills within 10 days, rather than 45, outweighed having the extra cashflow.
Of the billion electronic transactions handled by GXS last year, only 10 per cent were settled electronically. GE was taking a lead in raising this proportion, Seegers said. A project now up and running aims to pay all suppliers to the company's corporate headquarters with an electronic cheque.