By Christopher Gopal -- Supply Chain Management Review, 6/1/1997

Electronic Commerce (EC) is one of today's hottest business areas. Not only is it being widely discussed, it also is receiving heavy investment as many companies—from startups to massive multinational corporations—get involved in this new way of conducting business.

What is Electronic Commerce? There seem to be as many definitions of EC as there are players in the game. Still, a common definition of Electronic Commerce is necessary to understand its potential impact on supply chain operations. A description that most of the players would agree on is this:

Electronic Commerce is the buying and selling of goods and services (or the enabling of such activity) through electronic networks, including the Internet.

Electronic Commerce is not a single technology, nor can it be accomplished by any one company operating alone. It also is not the replacement of paper-based procedures by the electronic transmission of information.

Electronic Commerce already exists in several forms, but it has not yet fully developed. Many people believe that Electronic Data Interchange (EDI) is Electronic Commerce, but in fact it is but one step in that direction. EDI, efficient though it is, essentially offers a one-to-one (or one-to-a-few) electronic relationship. True Electronic Commerce, on the other hand, will allow simultaneous, many-to-many relationships.

There is no doubt that true Electronic Commerce is coming. A survey of top executives conducted by Ernst & Young LLP indicates that they clearly accept the premise that Electronic Commerce is coming fast. Survey respondents reported that within 10 years, they expect to be generating 40 percent of their sales over the Internet.

It's vital that companies prepare now for that eventuality. Electronic Commerce will create a completely new set of customer-supplier relationships and introduce a whole new dynamic into the supply chain. For some companies, their ability to exploit EC's capabilities may well determine who will win—and who will lose—the battle for customer loyalties.