John Berry, AppNet's vice-president of marketing, says AppNet plans nine exchanges for different industry sectors. VerticalNet Inc. of Horsham, Pa., operates 56 Web sites serving different industries, many of which include exchanges. Air Canada and the 10 other airlines in the Star Alliance group of airlines plan an exchange where they can purchase aircraft parts, general office supplies and other goods and services from a number of suppliers. Fourteen of the world's major oil companies are planning their own buying exchange, as are large auto makers and mining companies. Yet the anticipated shakeout will not stop exchanges from having a major economic impact.
Exchanges make it easier for buyers to compare prices and win discounts from suppliers.
Many allow for auctions and other dynamic pricing mechanisms, which also cut costs. Perhaps even more important, they will eventually cut overhead expenses by automating much of the purchasing process. Mr. Hucal estimates the processing efficiencies will account for about a third of the total savings. The other two-thirds will come from better use of volume purchasing to get the benefit of volume discounts and buying from suppliers with whom favourable pricing has already been negotiated. This is good news for many businesses and consumers.