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Stivison--E-commerce Has Arrived

February 2000
Where does a 400-lb. gorilla sit?

In this era of mega-mergers and high-flying Internet stock valuations, we are hearing some very large numbers. But most of these numbers seem like abstractions. There is the common-sense part of our minds that rebels at multibillion-dollar market valuations of cyber companies with paltry physical assets and no profits whatsoever. Sure the numbers are big, but they seem as relevant to our day-to-day world of laying ink down on paper as those astronomers use to tell us the number of light years to some distant star.

But GM—the heavy steel, huge factory and honest-to-goodness tangible antithesis of the cyber company—recently announced in The Wall Street Journal that it expects to do more than $85 billion of commerce via the internet in 2001. That's real commerce for actual goods and services, not stock speculation. It is $85 billion worth of tangible steel, tires and printing. The orders might have been placed and billed in cyberspace, but the products are tangible and the dollars are very, very real.

Check your calendar, because 2001 is only next year.

Not just GM, but Ford is making similar projections, also in excess of $80 billion of annual purchasing.

Overnight, the 400-lb. gorillas of American basic industry have redefined the rules, the timing and the extent of business-to-business electronic commerce. They have chosen where they want to sit—and where they have chosen is right in the middle of the Internet. They have decreed that proprietary, one-company-to-another electronic commerce solutions are as outdated as mechanical adding machines. Companies that want a piece of the automotive business pie must participate in the Internet-based systems.

We are on the brink of something huge. Until now, the major justification for electronic commerce (electronic data interchange or EDI) was to reduce the administrative costs of handling paper. Business magazines have been filled with case studies of companies routinely slashing the costs of processing individual purchase orders from $40 to $2. Until now, though, the lion's share of the projected savings has been in the areas of purchasing and accounting.

But there is a new twist. Beyond eliminating paper shuffling, the big automakers are insisting that their suppliers use the same Web "bidding bazaars" to also do business with each other. Every step of the process—from raw materials to the delivery of products to the new car owner—will go through the same Internet-based system. Bidding, pricing, delivery, inventory-on-hand—all become much more transparent.
 

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