Mathaisel acknowledges that some key customers show no sign yet of wanting to use public exchanges. So Solectron, like Celestica, is working with six large customers on private exchanges and has set up a website for suppliers to share planning and inventory information with Solectron’s systems. "The major multinationals have invested millions of dollars in developing proprietary supply chain processes," observes James Hatcher, director of e-business and supply chain Asia Pacific for global manufacturer QAD. "That’s part of their competitive advantage."

Private, Public or Both?

Your readiness to share data outside your company is one factor that will determine whether you participate in public exchanges or stick to private networks. Even companies with fully integrated internal supply chains may not have business processes to support exchanging data with trading partners. That’s another reason why private hubs are so popular right now.

"Private exchanges are evolving more rapidly because that is taking baby steps instead of giant strides," says Rakesh Sood, general partner of Sprout Group, a Menlo Park, Calif.-based VC company affiliated with Credit Suisse First Boston Corp. "Communities will evolve," he says. "At some point you’ll need to connect to other things out there?maybe a logistics hub or a payment processing hub." First, companies have to determine what it takes to build those connections and the respective ROI. These experiments are more likely to happen in a closed environment.

Lam Truong, senior vice president and head of Seagate Technology’s e-business strategy group in Scotts Valley, Calif., says that before his company uses an exchange to collaborate with its contractors and suppliers on product design it has to install a central repository for all the documents created in that process. Right now, there’s no version control for engineering drawings or specifications that would be necessary if Seagate and its contractors need to rely on them without the benefit of explanatory e-mails or meeting minutes. Putting that repository into production will take a year, Truong says.

He wants to set up a private exchange on E2Open, of which Seagate is a founder. In the electronics industry, "70 percent to 80 percent of our suppliers are the same," Truong says. "We would ask [them], do you want to deal with each of us separately or deal with all of us the same way?"