According to a new study by management consulting firm The Boston Consulting Group (BCG), business-to-business (B2B) purchasing in the United States will grow by 33 percent per year and reach $2.8 trillion (US$) in transaction value by 2003.
BCG also said that the Internet will soon replace private Electronic Data Interchange (EDI) networks as the medium of choice to transport electronic transactions.
“In 1998, U.S. B2B e-commerce was $671 billion, comprising $92 billion in Internet-based transactions and $579 billion in transactions using EDI over private networks,” said BCG Senior Vice President David Pecaut. “By 2003, the transaction value of B2B e-commerce over the Internet will be $2.0 trillion, and an additional $780 billion in purchases will be made over private networks using EDI.”
B2B Includes Internet and EDI Traffic
BCG’s research shows that the size of the B2B e-commerce market is far greater than is commonly reported, in part because it recognizes the established base of EDI over private networks and its extensions to the Internet. While EDI over private networks represented the lion’s share of 1998 volume at 86 percent, BCG expects this condition to reverse rapidly, with $2.0 billion, or 73 percent, of the $2.8 billion volume in 2003 traveling over the Internet.
North America Dominates
North America, which dominates the B2B e-commerce marketplace, will likely retain its significant lead over the next few years, but the global dynamics of B2B e-commerce will shift. Asia and Latin America remain further behind, but this condition may change rapidly as global supply chains go online. For local suppliers in local markets, B2B e-commerce presents significant growth opportunities, as they expand their networks and customer bases by accessing new export markets.
Purchasing Reaps Big Rewards
The switch to B2B purchasing is accelerating, with success stories everywhere. For example, PurchasingCenter.com, a B2B site that links buyers and sellers in the industrial supplies marketplace, has registered more than 3,000 purchasing professionals since its launch less than two months ago. “Purchasing professionals are eager to leverage the Internet and new technologies to make their jobs easier,” said Paul Baier, President and CEO of PurchasingCenter.com.
United Parcel Service (UPS) is another company that has cut costs with B2B. UPS recently processed its one-millionth transaction on its 13,000-user Oracle-based Internet Procurement system. The system has allowed UPS to consolidate and fully automate procurement for more than $10 billion annually in non-production purchases, resulting in a reduction of the procure-to-pay lifecycle of 25 percent, or 10 hours per person per week.
UPS has also successfully reduced requisition processing from six weeks to five to seven days.
“Just last month, we hit the one million mark on processed requisitions from more than 13,000 users, a demonstration of the successful consolidation of our purchasing process and reduced redundancies,” said Jack Busche, UPS vice president of procurement.
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