)-trading lumber

Will electronic commerce squeeze wholesalers out of the chatn?

A UCTION site ebay. bookseller lA,Amazon.com and other lnternet retailers get all the attention. But electronic commerce between businesses is where the action is.

Last year, consumers bought $8 billion in goods over the Internet. Businesses bought an estimated $43 billion. By 2003, over 907o of a projected $1.4 trillion in Internet commerce will be business to business.

But with the Internet's ability to conceivably link any buyer with any seller, where does that leave the wholesaler-distributor? Will e-commerce cut out the middle men?

First Tlade On

Atlanta, Ga.-based retailer Jasper Lumber Co., lnc., made the inaugural trade on the electronic exchange Telrx April 5, buying a rail car of SPF 2x4 studs from Vancouver, B.C., mill Riverside Forest Products Ltd.

Retailer Strober/Haddonfield, Cherry Hill, N.J., made the second trade, acquiring a rail car of 2xl0 hem fir from Crown Pacific, Portland, Or., the first time the two companies had done business together. Strober's Joe Todd notes,

In the forest products industry, the answers may be determined by the success or failure of two electronic exchanges, months-old FpIx, Dallas, Tx., and weeks-old Talpx, Chicago, Il. Increasingly, business-to-business buyers and sellers are linked by such on-line exchanges-part electronic catalog, part marketplace and part content library to help make purchasing decisions. An exchange can lower transaction costs, especially in fragmented markets where prices are difficult to compare.

And few industries, agree Frrx and TRI-px representatives, have as repeti-

New Exchange

"Talpx gave me the opportunity to buy direct from Crown Pacific, something I had not done before. The trade was convenient-I didn't have to write out a P.O."

Telpx's 25 pioneer members represeilt over 200 locations and combined produce 1.4 billion bd. ft. of lumber and panels and $1.2 billion in retail sales. Members in the sign-up process account for another 2 billion bd. ft. of lumber, 300 million sq. ft. of panels and more than $2 billion in retail sales.

tious, time-consuming trading practices as the lumber industry. But while both exchanges streamline the trading process, their approaches are polar opposites.

With Internet-based TRr-px, suppliers input their offerings and buyers input the product they need, so all matching offerings are displayed (other sellers do not have access to competitors' offerings and prices). Buyers can then enter a bid on an offering and the seller has 30 minutes to accept or decline the offer. Accepting a bid automatically generates a purchase order.

Currently, all buyers on the new service are contractor-oriented lumber yards and all sellers are mills (although treaters and others eventually may join). One feature is that the system can hook up companies that have never done business together before, as evidenced by the second trade ever on Telpx (see story at left).

T,qlpx's Richard Haddad admits that his service competes with traditional wholesalers, but only for straight load commodity orders. Wholesalers, he says, will still be looked to for mixed loads and other type orders.

"We are plain vanilla right now," Haddad says. "Simplicity is key for us-we need to start simple and make this work. Therefore, we are strictly focused on straight car and truck loads of lumber and panels. Our members will drive where and how we grow and expand the exchange."

In time, Telpx will expand into types of orders. Says Haddad: "We want to be the Nnsnle of the forest products industry."

The aim of Fprx, on the other hand, is to improve, not uproot, cunent forest products trading and maintain the relationships of the business. As a result, wholesalers currently participate on the system.

"When you got a fax machine, you still kept your phone," explains Frtx ceo Chris O'Neill. "Some things are better done by phone, others by fax. It's the same with Fplx. It's a digital communications system."

In designing Fptx, O'Neill says, "we addressed the institution. We wanted to support one-to-one business." As such, trading is only between established partners who have already set up credit procedures, preserving individual relationships. Conversely, Tllpx, for a fee, guarantees all trades, so all qualified buyers and sellers can roam the system in search of matches.

Since Fplx debuted six months ago, the company has been building interest in and participation on the system by targeting specific types of partnerships. Pilot programs, for instance, focus on spruce or OSB, so fpix can more easily identify and coordinate natural trading partners.