Even though they acknowledge that the web could make them more efficient, most still trade and forecast using EDI, phone and meetings.
Despite its growing role in customer interface, the web has been slower to catch on among retailers and manufacturers when it comes to trading functions on the back end. A total of 81% of consumer package goods manufacturers and retailers believe that the Internet and other new technologies will make them more efficient in their trading relationships, according to a new report from Forrester Research. But it’s potential that won’t necessarily be realized soon, as 57% also say the cost of technology and installed legacy systems are holding them back.
On the supply side, most retailers and manufacturers use established electronic data interchange systems to place and track orders, but most retailers and manufacturers say phone and face-to-face meetings are still the way they forecast sales and inventory and plan promotions. In fact, none of the 25 retailers surveyed used the web as a back-end management tool other than the one who said it used the web to support category management functions.
Retailers cite the difficulty of integrating proprietary systems and a lack of agreement on goals with their trading partners, while manufacturers tended to site a lack of resources to invest in technology. “Most manufacturers and retailers compete on price, so they look to squeeze a every penny out of their operations to turn a profit,” says Forrester analyst Robert Rubin. “Yet by relying on phone, fax and face-to-face meetings to conduct business they waste time, lose money and miss opportunities.”
As manufacturers and retailers move toward web-enabled e-commerce on the back end, EDI as a trading method is expected to peak in 2002 before volume starts migrating gradually to the Internet. Volume retailers like Wal-Mart will in the future require suppliers to trade on their private hubs, while public exchanges will begin to aggregate smaller retailers, Forrester predicts. By 2005, says Rubin, as much as 23% of all b2b trade between retailers and manufacturers will flow through the Internet.