2.1 Capital invesment
Capital committed has been under $40 million for some
consortia serving narrow industry segments or with focused functionality.
Investment has totaled $200 million or more at consortia addressing larger
industry segments with functionality addressing several value chain processes
(e.g.Covisint). With regard to the number of employees hired, six consortia out
of nine employ 60 or more full-time staff.
2.2 Participant volume
It seems that the infusion of capital from new industry
investors can be interpreted as a strong sign of industry confidence in a given
consortia. In the past years, 10 consortia gained new equity members in the
past year. In addition, many consortia have increased their base of non-equity
members and participants, or users within member companies.
We must keep in mind that non-equity members are key to the
success of a consortia as they ensure that buyers and suppliers want to use the
exchange. In addition, it is highly valuable to give more breadth in the types
of products and services traded. The transaction volume can rise as well as the
number of trading participants. For instance, Covisint's
member list is over 1,700.
Transaction volume varies from an industrial sector to
another, but at least 15 consortia have transacted over $100 million. Among
these, Covisint has transacted over $150 billion. This volume includes both
indirect products like office supplies and parts that will go directly into end
products. For instance, DaimlerChrysler has procured $3 billion worth of highly
engineered parts for future models via Covisint reverse auctions.
2.3 Industry-sponsored marketplace
functionalities
With regard to functionalities deployment, auction
functionality and on-line catalogs has been launched by many consortia. The
on-line catalogs took more time to bet put in place. As a matter of fact, you
first need to establish product hierarchies, to clean and standardize product
information. Then, you must load hundreds of thousands of stock keeping units
(SKUs) for each catalog. For instance, 200 catalogs have been rolled out by
Covisint.
In addition, tailor made functionalities meeting unique
industry needs has been rolled out by many consortia. These tailor made
functionalities include product development functionality for the auto industry
or spare parts inventory visibility for the airline industry.
Industry-sponsored marketplace functionalities mainly focus on
purchasing applications and on the architecture supporting the cross-enterprise
collaboration. Consequently, most of the consortia provide purchasing tools
such as on-line purchase order generation and routing, reverse auctions,
on-line catalogs, and e-requests for proposal or e-request for
qualification (e-RFx).
In addition, buyer-led consortia provide broader strategic
sourcing services through industry purchasing experts. These purchasing experts
help in the sourcing process from the beginning to the end. It means that they
identify commodities to source, recommend and conduct an auction, an e-RFx or
another sourcing event.
From the buyers perspective, Purchasing tools are creating
value in three main ways. Firstly, catalogs or strategic sourcing service
reduce search costs for suppliers of specific goods. Secondly, on-line purchase
order generation and routing as well as e-RFx reduce the administrative costs
of purchasing goods and services. Thirdly, auctions reduce time to complete
price negotiations.
It seems that the purchasing tools available allow the
leveraging of the aggregated volumeof purchases among multiple buyers. It
allows to improvement of the purchase price. However, some consortia did not
offer this service and privilege single-buyer sourcing events in order to
prevent anti-trust issues.
From the supplier perspective, purchasing tools enable
worldwide access to new buyers and increasing penetration with existing
accounts. As a matter of fact, suppliers noted that they are enabled to win
business from a new client through a consortia auction. Furthermore they often
receive orders from this customer for another part. However, we must keep in
mind that the benefit of increased revenues is frequently offset by reduced
margins on the business won via reverse auctions.
In several industries, suppliers gain access to purchasing
tools as well as the buying tools. For instance, Covisint market its auction
and other purchasing tools to the automotive industry players so that they
reduce their costs through reverse auctions.
From the industry perspective, the value of architecture is
created through shared systems development and management costs such as
portals. It also reduced communications costs such has data and communications
standards. In addition, system integration helps to reduce purchasing and value
chain processes administrative costs.
Some consortia went beyond procurement and architecture
functionality. For instance, Aeroxchange developed a tool,
which allows to share inventory visibility among airline industry players. This
"visible inventory" reduces both administrative costs and the time required to
find parts dedicated to maintenance. Therefore it helps to decrease flight
delays and helps to identify spare parts required for routine repair and
maintenance. With regard to internal inventory, Aeroxchange enhances inventory
management through the reduction of holding and obsolescence costs. In
addition, companies are enabled to sign agreements related to the sharing of
their inventories.
It seems that Industry-sponsored marketplaces development
plans are mainly focused on the key industry pain points. Industry pain points
can be described as the processes, which have significant impact on costs,
quality, or value of the product. As a matter of fact, these specific pain
points should be solved efficiently through industry collaboration.
