The prelude to Internet-based B2B marketplaces

B2B transactions have been automated through EDIs for over a decade, but the
high cost of establishing these networks made them prohibitive for small- and
medium-sized companies.
For more than a decade, large firms have realized tremendous savings by linking with
their major suppliers through private electronic communications networks commonly
referred to as electronic data interchanges, or EDIs. According to the U.S. Department
of Commerce, EDI will support $3 trillion in economic activity between 250,000 U.S.
companies in 2000. These systems automate the procurement process, support automatic
inventory replenishment, and tighten the relationship between buyers and their primary
suppliers. Major EDI vendors include Sterling Commerce, Harbinger, and General
Electric Information Services. Because EDI was originally based on private networks,
it required large capital outlays to implement, and adding incremental suppliers was
costly. Smaller firms unable to afford these costs are prevented from establishing EDI
connections as either buyers or suppliers. Thus, the economic savings accrued from
implementing EDIs has been limited primarily to large firms.

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Tags: - B2B, B2B, electronic_communications_networks, electronic_data_interchanges, medium_sized_companies

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