Who will benefit from the e-commerce tidal wave? - Brief Article - Statistical Data Included

Eurofood, Feb 1, 2001

While rapidly accelerating growth in the value of Business to Business (B2B) e-commerce transactions is universally forecast, the key uncertainty is whether or not the efficiency gains will be shared equally by the different partners in the food supply chain, it became clear at this week's 'B2B e-Procurement for the Food Industry' conference, organised by Agra Europe (London) Ltd. and held in London. While presenting a picture of a virtual tidal wave of e-commerce being about to engulf companies, speakers also warned of the risks involved in getting started, when the start-up costs greatly outweighed the benefits (the "early-adopter's dilemma," according to John O'Brien of Accenture), and the benefits were in any case unclear at the outset.

In Europe, if not in North America, "there has been far more hype than substance to date," according to Richard Crane of Deloitte & Touche. He was disappointed by the fact that there had been more portals than transactions, but the advantages of e-procurement were "compelling" and the drivers were "very powerful." "It will be a key part of any business in the food chain in 2005 if not 2010," he said.

Profit potential

For agriculture it could provide a potential increase in profitability of 20% or more, he said, because it should enable farmers to "trim 10% off half of their costs," assuming they shared in the benefits. Crane gave the example of an enterprise with an output of [pound]1 000 per hectare generating a profit of [pound]200/ha; the above cost saving would raise the profit to [pound]240/ha.

With regard to trading exchanges, the key objective is liquidity (volume) and such exchanges must, as Grant C. Robinson of the Canada-based Agribiz.net pointed out, provide "tangible business value." Exchanges are known to offer a number of benefits such as lower transaction costs and increased speed and volume of processing; they also provided opportunities for attracting new customers, creating new services and building new business partnerships. "The opportunity with the exchange technology is that you can find ways to eliminate costs in a collaborative process rather than in a destructively competitive environment," he said. "Trust your old economy business rules but learn to adapt them to the new economy and make technology an enabler of your business," he concluded. A final advantage from effective use of the Internet was traceability, through being able to monitor product source, composition and production systems. Although it was not clear how this information would be valued by consumers, it would give them choice and allow more effective control over quality assurance schemes.