Q: What is the difference between a private trading exchange and an application service provider (ASP)?
A: These days, not a lot.
A few years ago when the public trading exchanges first appeared, we heard a lot about eprocurement and auctions. The auctions may still be there today but the successful exchanges are reinventing themselves as the providers of cost-effective and slick IT services, offering the sort of functionality which is still time-consuming and expensive for firms to develop themselves.
Today, retail group GlobalNet Exchange (GNX) – launched as a high profile public exchange by a consortia of major retailers four years ago – prefers to describe itself as ‘a hosted technology solutions provider’. ‘We stay away from the exchange label,’ says CEO Joe Laughlin, ‘We prefer to say we are a technology focused company developing community services.’ Equity partners in GNX include the likes of Sears Roebuck, Sainsbury, Carrefour, Metro and Kroger with regular communications between core members designed to focus attention on the key retail pain points.
Product development function
Among its recent initiatives has been a new product development function – targeted largely at own-label merchandise – and in September it unveiled a performance management solution. This is being piloted initially by Sainsbury and is designed to provide a benchmarking tool for retailers to share and assess performance data.
Other GNX members will be moving rapidly into this space: Carrefour is due to follow in November starting with its Taiwan operations and Metro begins pilots with its Belgian business in a few months.
Development has cost ‘several million dollars’ – rather more than individual GNX partners would wish to spend or IT vendors could afford in the current economic climate. Significantly, too, the only other retailer using this sort of performance management tool is WalMart: its ‘Retail Link’ system has used comparable technology for some time to keep its suppliers on their toes.
‘Our members wanted a similar tool to WalMart’s,’ explains Laughlin, ‘and that is what we have developed.’
The move is interesting – not just for the competition it provides for established IT players but also as an example of retail co-operation among big (but not as big as WalMart) companies to develop technology to take on the world’s leader. The GNX collaborative performance management (CPM) system is a web-based solution that can extract data from existing back-end solutions to create a standard model for retail trading partners to identify and correct areas of low performance.
‘CPG suppliers currently have little feedback on how their performance compares with their competitors,’ adds Laughlin, ‘With this system they can finally achieve that.’ GNX users will be able to set their own series of key performance indicators such as on-time deliveries, order accuracy, promotions fulfilment and out-of-stock situation, and create relevant benchmarks to help suppliers gauge their success rate and focus on their weak areas. It is also likely to be the first of several similar tools which are too complex for individual retailers to develop but clearly have potential benefits to the wider trading community.
‘We’re targeting areas where we know there is interest,’ adds Joe Laughlin, ‘we’re there for the long-term.’ This bullish stance contrasts with that of other public exchanges which have become rather quiet in recent months. Transora, the grocery suppliers’ own initiative, is already re-focusing on catalogue activities leaving the likes of GNX to take over much of its other operations while the WorldWide Retail Exchange (WWRE) – initially established by rival retailers in response to GNX – has similarly become very silent.
While early exchange activity generally concentrated on auctions, many identified services like GNX’s new CPM as key areas for development for their long-term programmes. Few exchanges, however, have actually delivered on these early promises making GNX something of an exception. Significantly, too, many of those planned early exchange activities soon became quite simple and cost effective for individual companies to develop thanks to the rapid development of technologies like web services.
Jointly funded software development like this may also present a challenge to the key IT vendors.