Forgoing months of negotiations with potential suppliers, a high-tech company puts a request for bids on the Web. The result is a $14 million contract in just one month, down from $24 million for a similar contract the previous year.

These are just two examples of business-to-business cybertrade, which, according to analysts, last year was at least five times the volume of consumer retail business conducted on the Internet. So while the general press and typical consumers focus on the business-to-consumer side of the Internet phenomenon, with groups like Amazon. com receiving most of the ink, the more stable slice of cybercommerce—and, for technologists, the most significant—is the business-to-business side. The Internet is having a huge impact on companies' supply-chain management and, at least for the foreseeable future, shows no signs of slowing.

"The flow of [power] has reversed. Customers are dictating terms and conditions to suppliers," Dale Hayes, vice president of electronic commerce for United Parcel Service, said at a recent cybertrade conference held at Stanford University in California. "We are not in control of our supply chain any more. Whether we like it or not, our customers are," he said, adding that his transportation com-pany now has equipped its 157,000 trucks with cell phones and computers, so drivers can update the status of packages every 10 minutes.

The Internet intensifies competition in the marketplace, which increases volume, reasoned Jin Whang, a professor at Stanford's Graduate School of Business, during the same conference.

On the business-to-consumer side, e-commerce Web sites are capitalizing on the promise of conducting commerce on the Internet and serving customers. This is the goal of hundreds of companies that built their electronic businesses on a strategy that whatever money they lose today will be made up in volume. But this structure scares some Internet observers who wonder how a volume-driven Internet can survive when its native businesses cannot turn a profit.

It's no wonder that those leading the way in e-commerce are companies involved in high-tech, finance, aircraft, and auto manufacturing business-to-business. Analysts predict that business-to-business e-commerce will exceed $1.3 trillion by 2003.

On the technology side, getting different information systems to work among partnering companies is no small challenge. Systems must let each company add, change, or delete information, with or without first getting consensus from other partners.

The Internet takes an important role here, since it is the conduit by which this coordination and sharing of information occurs.

Thus, supporting the product development lifecycle was hot on the minds of suppliers and users at a recent product data management (PDM)conference in Atlanta sponsored by CIMdata. PDM is a critical tool that supports the integration of product definition, production, and business operations.

The debate over whether the Internet ought to be the foundation of PDM systems continues, with high-level executives split on the topic. The resolution, at least for the short term, will likely be partial adoption. In the long term, it will be difficult for companies to ignore the advantages of using a complete Internet infrastructure, particularly if they can see real improvements, especially to the bottom line.

Email your comments or questions to: falcionij@asme.org

home | features | news update | marketplace | departments | about ME | back issues | ASME | site search

© 1999 by The American Society of Mechanical Engineers