Small suppliers face tough hurdles if they are going to survive in the ecommerce supply chain, warns research analysts Giga Information Group.
Giga's warning comes even though ecommerce has been widely hailed as the great leveller in business, helping small and medium companies compete on an even playing field with their larger competitors.
But reliance on off the shelf products and the introduction of Internet based private trading networks - dominated by large companies - can still place the small supplier at the mercy of its larger partners.
As manufacturers use ecommerce to streamline the supply chain with these trading networks, such as the Automobile Network Exchange (ANX), they become even more powerful and smaller suppliers are forced to join or go out of business, according to Giga.
"The amount of supply chain consolidation, the amount of change, depends on how much power they have - if they are the only supplier in that field or whether there are many," said Martha Bennett, vice president of research, Europe, at Giga, speaking at Business Online 99 in Berlin which ends today.
"Xerox, for example aims to reduce the number of its suppliers in Europe from 9,000 to 1,000. The one's that win will have a better time to market and faster response times," she said.
Some large manufacturers however, are happy to subsidise their small suppliers to get them trading online rather than lose their business, pointed out Andrew Bartels, vice president and senior analyst at Giga.
Internet based trading networks are however much more attractive for SMEs than traditional electronic data interchange (EDI) networks. EDI is too expensive for many SMEs as it requires the supplier to use a separate system for each manufacturer it deals with.
"The single most important impact of the Internet is the replacing of a series of proprietary systems," said Bartels.
SMEs also have to compete with the larger players without big budgets for large customised systems. While there are plenty of "off the shelf" ecommerce products available, they play a constant game of 'catch-up', said Bartels.
"There are products out there, but what defines ecommerce keeps expanding. So it is no longer just selling on the Web, but now means the integration with back end systems and so on," explained Bartels.
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