Trading Places

By Sari Kalin, CIO |  Business

Ray Rawson hardly seems like the type to get caught up in the dotcom revolution. He's a plain-talking, blue-jeans-clad farmer, fitter than one might expect for his 56 years, busy working a 10,000-acre spread that spans two rural counties in Michigan. Yet early in the morning, before his crews show up, Rawson's farm business meets e-business at a website called DirectAg.com.

At the site, Rawson reads agricultural news that helps him pick the best time to sell the options on his soybean, corn and wheat harvests. He figures that in one month last fall, he made an extra $100,000 or so in profits thanks to information that he would have had to otherwise chase down by phone or would not have seen at all. Information such as news on what the ag markets did overnight in Europe gives him an edge in figuring out what they might do in the United States that day. He's also saved money on purchases. DirectAg.com's prices on farm supplies often beat those of local distributors, since he can get a larger volume discount by concentrating his buying in one place. He's saving around $70 a ton on fertilizer alone -- a big chunk of change for someone who buys several hundred tons at a time. "In one year, it's enough to go out to dinner a couple of times," Rawson deadpans, "maybe in the Cayman Islands."

Rawson is just one of a growing number of business folks flocking to websites that bring together buyers and sellers within a particular industry, or across a particular business activity, for one purpose: wringing inefficiencies out of the supply chain. These sites go by many names -- e-hubs, e-marketplaces, e-market makers, vertical portals, business-to-business trade communities, intermediaries and even metamediaries. They are cropping up in industries from petrochemicals to produce, steel to semiconductors. In 1998, such marketplaces handled around $12 billion in business, not including marketplaces that trade financial instruments, according to Dataquest, a GartnerGroup company. And by the year 2003, Dataquest expects $1.25 trillion in nonfinancial goods and services to be traded through them. "Buyers and sellers who aren't participating...will certainly be at a disadvantage," says Leah Knight, analyst at Dataquest in San Jose, Calif.

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