At the turn of the millennium, the extended retail business was aglow with technical and operational possibilities. The internet was seen as both a platform for selling things and for making the merchandising and fulfillment process more efficient. Data processing power and storage capacity was growing dramatically, so analysis that previously took weeks could be done in hours. And, critically, data communications speeds were accelerating to the point where near real-time insights could be provided to frontline associates.
These were heady times for retailers and suppliers who had previously been considered well behind on the technology curve for most operations, with the possible exceptions of point-of-sale and ordering. Out of this maelstrom was born Transora, GlobalNetXchange, World Wide Retail Exchange and dozens of smaller consortium trading exchanges (CTEs) that promised to revolutionize every facet of the way retailers and suppliers worked together.
Within months of the launches of the three large exchanges, the analysts at Gartner predicted that only 20% of the CTEs would survive industry consolidation by 2004. They were off by about 20%, as Transora, GlobalNetXchange, World Wide Retail Exchange all failed and only a few of the smaller, commodity-based exchanges lasted more than five years.
What happened in paradise? According to analysts at the time, at least six major challenges faced CTEs and similar portals. These included the fact that most exchange operators were too optimistic about delivery dates for functionality, they lacked consensus about where the functionality should reside, there was poor budgeting, and there was no marketplace-to-marketplace integration. There were also supplier recruitment, participation and integration issues and, perhaps most importantly, there was significant political infighting internally at participating companies (who should control the project?), between trading partners (who should get the biggest slice of any savings?) and even at third parties like trade associations.
Seventeen years is more than a lifetime in the tech world and it certainly has been for exchanges and marketplaces serving retailers, wholesalers and brands. Trading partners now have more clarity into what is really needed to participate successfully in an exchange or digital marketplace, and understand the benefits these exchanges can deliver for both the safety of the customer and the efficiency of the operation. Tech vendors have also matured their thinking and have built out solutions that serve the goals of the trading partners.
Other variables are in play too, like the generational shift at retailers and brands to more tech-savvy workers and the change in corporate culture resulting from mobile computing and similar trends.
The new exchange and portal technologies now available enable retailers and wholesalers to search for suppliers who meet select criteria like regulatory compliance, certifications and much more. This helps the companies bring new products to market in just a fraction of the time. Unlike electronic supplier catalogs, these systems help automate and guide the sourcing process from end to end, and includes supplier qualification, order negotiation and the on-boarding of a new supplier.
To help companies reduce risk, the new exchanges highlight suppliers that are compliant with the retailer’s business and/or safety requirements. This feature alone saves weeks of time and helps retailers meet their need to replace noncompliant suppliers, which are expected to increase as deadlines for the Food Safety Modernization Act are reached throughout 2017 and demands for validation on issues like organics and non-GMO are raised.
The consortium trading exchanges of the early 2000s are long gone for several reasons, most notably the disconnect they exhibited between the old way of doing business and the proposed new way. They won’t be back. The new exchange and portal technologies hold much more promise and have considerably less risk for retailers and brands. They take into account and try to capitalize on capabilities like cloud computing and big data that weren’t around 17 years ago and, in so doing, deliver on the original promises of digital trading exchanges.
Randy Fields is chairman and chief executive officer of Park City Group, a cloud-based software company that uses big data management to help retailers and their suppliers sell more, stock less and see everything. Fields is a cofounder of ReposiTrak, a cloud-based solution that enables all participants in the farm-to-table supply chain to easily manage records and regulatory compliance. Fields can be reached at [email protected].