B2B E-Commerce Takes a Global View, Cautiously

While consumers tread lightly when it comes to conducting international e-commerce, businesses have begun to use the Web to erase borders and streamline their global operations.

Smart companies are using the Internet to shorten the time it takes to get materials from suppliers, to communicate with third-party manufacturers and, in some ways, to turn business culture on its head, Deloitte & Touche e-commerce consultant Aran Nathanson told the E-Commerce Times.

“It’s not always direct cost savings,” Nathanson said. “There are a host of motivations.”

For instance, when Daimler-Chrysler recently used an auto parts hub to place a massive order, it saved some money. But the automaker also found that what normally took a month of work by various employees could be conducted much faster online, according to Nathanson.

Turnaround Time

“Maybe it’s the time that can be saved by sending out one standard purchasing order, instead of 19 faxes to 19 factories,” he said. “Using the Web to cross borders and connect with other companies has many benefits.”

Nathanson cited the example of a Spain-based apparel maker that has used the Web to cut the time it takes to bring clothes to market from 90 days to 30 days, by connecting its far-flung suppliers and its retail network via the Web.

“They have really gained an advantage over their competitors,” he said.

High Hurdles

Despite the many benefits of Internet-based communications, businesses still face online the same set of obstacles they have always faced in buying and selling across borders — from taxation and currency exchange issues, to questions of legal authority, such as who will arbitrate or hear legal disputes.

But for many businesses, the motivation to overcome those hurdles is greater than the obstacles posed. Analysts have predicted that the fastest growing markets in coming years will be the overseas markets. For example, Gartner has estimated that B2B sales in the Asia-Pacific region will rise from US$9 billion in 1999 to $992 billion by 2004.

Prospects that China will open itself to widespread e-commerce has the potential to unlock an even larger gold mine.

Largest Piece

Even though the overseas markets are expected to boom, U.S. companies thus far still dominate the online B2B landscape, as they do in the business-to-consumer (B2C) e-commerce realm.

An Andersen survey of the B2B landscape last year found that U.S. companies generated 67 percent of global B2B e-commerce revenue, with Europe accounting for 14 percent.

That could be changing, as several of the largest B2B supply chain hubs, in industrial fields such as chemicals and raw materials, have sprung up in Europe or the Far East.

However, a shakeout has already begun in those fields as well.

Shakeout Redux

Forrester Research analyst Steven Kafka told the E-Commerce Times that there are already too many e-marketplaces, a fact that may be impeding some international e-commerce growth.

Forrester continues to predict the growth of international B2B, however. The firm says that by 2004, the U.S. will be exporting $1.4 trillion worth of goods through marketplaces.

“But right now, it’s daunting for companies to know where to place their allegiance, so some are just waiting it out,” Kafka said.

Room for Improvement

Deloitte’s Nathanson agrees that there is still a long way to go. One big step, he said, would be to set standards for how businesses communicate. Another is getting businesses to feel comfortable sharing at least some internal information with suppliers.

“The technology isn’t the big driving force,” he said. “That’s just a tool. The big changes are what happens inside businesses. And smart ones already recognize that and are moving accordingly.”