Let's face it. Internet trading exchanges are not sexy. They're not exactly user friendly and even the more techie types in the grocery trade are still struggling to get to grips with exactly what they are offering. But the big boys in the b2b arena are still here, they're still sitting on plenty of cash and they're still promising to harness the power of the world wide web to save millions for their members. Two years after the birth of GNX, WWRE, Transora and CPGmarket, however, the parameters of the debate surrounding the big e-marketplaces have barely shifted. Exchange bosses huddled into a conference room at ECR Europe last month for a Q&A session faced a depressingly familiar barrage of questions from a largely sceptical audience. "When will you break even? Why are you offering the same tools? Will you still be here next year? Why has take-up of your services been so slow?" And their responses were equally predictable: "You have to be patient­ it's an evolution that will happen over five years­ true collaboration requires cultural change as well as systems change­" All four have now moved well beyond reverse auctions and offer a raft of whizzy tools that range from online collaborative product development and one-stop perishables procurement packages to transport optimisation services. And, very slowly, companies are starting to use them. What remains to be seen is whether GNX et al can convince members that the core, collaborative planning, forecasting and replenishment (cpfr) tools available on exchanges would serve them better than a highly customised private solution. Likewise, the exchanges have so far proved incapable of brokering a truce in the transatlantic squabble over data standards that continues to thwart progress towards supply chain Nirvana: the seamless flow of data between retailers, manufacturers and suppliers. If the exchanges are to make a serious impact, all sides agree they must make substantial progress on supply chain services this year. Ironically however, with a couple of small scale trials of cpfr ­ a fancy name for sharing data and jointly managing forecasts to improve service levels and reduce stock ­ under their belts and their initial investments recouped several times over from auctions and other procurement tools on the exchanges, members are not under any great pressure to make a more serious commitment. Meanwhile some of the biggest retailers are busily pursuing private projects that could ultimately relegate the industry consortia into hi-tech procurement centres rather than the hub of all supply chain activity. The exchanges' claims that members are "well beyond the pilot phase" with cpfr is refuted by the most up-to-date research by Accenture. This reveals the bulk of cpfr involves only a handful of SKUs, a couple of trading partners and a single product category. Typically, it has involved perhaps one manufacturing plant and one retailer regional distribution centre, and could probably be done over the phone. As soon as you add more SKUs, more trading partners and more depots, or you agree to exchange data more frequently, the complexity intensifies and the process has to be automated. This requires major changes to processes, systems and IT infrastructure and hi-tech tools that can generate exceptions and alert supply chain partners when data moves outside pre-set boundaries. And not everyone is convinced this process is best handled by an exchange.Sainsbury's well publicised cpfr trial with Lever Fabergé on GNX last year did not lead to further collaborations. And Sainsbury is now working with software solutions provider Eqos to build collaborative applications into its private exchange, independently of GNX. Likewise, Tesco appears equally non-committal when it comes to cpfr on an exchange. Supply chain development director Barry Knichel says: "We did a trial at the back end of last year. But we have no immediate plans to implement WWRE's tool across the business. At the moment we're deciding whether to build more collaborative functions into TIE [Tesco's private exchange]." Mike Quinn, md of Eqos, says: "Retailers are beginning to realise that a customised, highly flexible home-grown solution will deliver more value than an off-the-peg application from the exchanges, and they will continue to look for competitive advantage in certain areas, which you can't commoditise through a marketplace. "Ironically," says Quinn, "the value of marketplaces has been to allow retailers to validate their private exchange strategies." This, of course, is hotly disputed by bosses at the two retailer-led exchanges, who both claim to have secured substantial commitments from key members to their cpfr packages this year. For GNX ceo Joe Laughlin, it's a question of simple economics: "If you want to make cpfr a scalable process then you need a tool. And we're offering world class tools at a fraction of the price you'd pay for setting up cpfr privately from scratch." WWRE's ceo Colin Dyer says it's more a question of standards: "The benefit of cpfr via an exchange is that you're operating with one set of processes with all your trading partners, not with a different tool, different dial-in number, and a different approach to each one." But framing the debate into a battle between public and private exchanges is missing the point, says Accenture partner Jon Bumstead. "It's a question of defining which data and processes are strategic and which are not ­ what really gives you a competitive advantage. "And people are still trying to work out where the exchanges fit into all this," he says. Roland Berger partner Chris Sellers agrees the public vs private issue is overplayed: "I don't believe that cpfr requires a highly customised private solution. The exchanges have fallen down because they have been too slow to get tools to market, and members have grown impatient and decided to do their own thing." The fact that the exchanges have adopted different technology partners (i2, Syncra, Manugistics) to host their cpfr solutions hasn't helped, adds Sellers. They might be compatible on the tin, but in practice, no one knows. Meanwhile Transora ­ the exchange set up to connect the chain both up and downstream ­ could struggle to make headway in the space between retailers and manufacturers if it doesn't allow its members to talk to their retail customers in the same language as their own retail exchanges. In many respects, the space between manufacturers and suppliers ­ many of whom do not have sophisticated systems ­ is the most fertile ground for an exchange offering supply chain services like cpfr because they are starting from scratch. But while Transora and CPGmarket have both made substantial progress on procurement, they are only just starting to tackle more collaborative work upstream. CPGmarket business development and strategy VP Jan Putzeys says all available time and resources are now being pumped into e-supply chain offerings. "We're basically automating the process of data transfer from one ERP [a company's internal information management system] to another, and developing standards to facilitate the exchange of documents like invoices, advanced shipment notices and inventory data," says Putzeys. "At the beginning, we were going to offer full blown cpfr, new product development ­ you name it, we were going to do it. What we've learned over the past year is to focus on where we can add concrete value and to go no faster than our customers can go. We were running before they were even walking." Unfortunately, once you move beyond procurement into catalogues and supply chain services, the benefits can seem less concrete, because these types of applications were designed to be efficient at a certain capacity, and they are nowhere near that yet. Visionary projects like the megahub, which was launched to great fanfares last January promising to provide interoperability between trading exchanges, died an early death because the market just wasn't ready, admits GNX's Laughlin. "We still use the megahub internally for data translation because it allows us to handle multiple file formats. But people weren't prepared to invest in it as a separate entity." Unlike WWRE and Transora, GNX is also steering clear of catalogue hosting, says Laughlin. "We don't want to be all things to all men. I just don't believe the catalogue market is going to develop as rapidly as everyone thought it would." Looking at a diagram that illustrates the complexities of data formats and data flow in the supply chain, it is difficult to see how the exchanges have provided any more clarity to it all, says PricewaterhouseCoopers director of consumer packaged goods, Sachin Shah. If anything, they have added another layer of complexity. "To be honest," says Shah. "It's a bloody mess." Technically, it's a simple diagram. A manufacturer registers its product data at a central registry, which makes sure it is compliant with the appropriate standards and then passes it on to a data pool provider or catalogue host such as an exchange. The exchange then offers a raft of added-value tools enabling companies to search through the data, use it to jazz up category management work, compare suppliers across a category, assist range reviews and of course plug it into other tools on the exchange, such as cpfr and procurement. The problem is, there's no central item registry; there are quite a lot of data pool providers/exchanges and there are no agreed standards. In the absence of any overarching standards body to steer a course through the minefield, it is retailers who are dictating progress by insisting suppliers provide data in a specific format to the exchange/data pool of their choosing. This is forcing manufacturers into the ridiculous position of having to publish data in different formats to different catalogues, according to the affiliation of their retail customers. Tesco, for example, is asking suppliers to provide data to UDEX specifications onto WWRE's catalogue. But the Transora catalogue has different specifications, and the two are not interoperable ­ yet. Meanwhile the various data pools are simply ploughing down their diverging paths in a bid to drive enough critical mass to become the default standard. The canny exchanges have accepted that we might never get any global standards, says Accenture's Bumstead. Instead, the best way they can add value is by providing translation tools, so that data only has to be published once. Exchanges will then make it meaningful to anyone wanting to access and use it by filling in the missing links. In the meantime, none of this noble activity is generating much hard cash, which could leave the exchanges between a rock and a hard place. On the one hand, pressure from investors has forced them to focus on activities that would deliver rapid returns, such as auctions. The downside is that they are only now getting to grips with the services that could really change the way people do business, and short-term market forces could prevent them from ever realising their grander ambitions. n {{FEATURES }}