The bazaar-the place where people meet to buy and sell, wheel and deal-has had a long run in human history, so it’s no surprise that it’s here with us now in our Internet-centric world. The latest version is called the Web-based electronic exchange, and almost every industry from trucking to pharmaceuticals is seeing them applied to their specific business.

That’s not a bad thing. Exchanges help manufacturers, suppliers, distributors, and customers connect to one another and use the Internet to do business. In theory, that eliminates many of the middlemen in the supply chain, with the resulting cost-savings being passed on to the customer.

There’s profit to be made, too. According to AMR Research, the Boston-based technology consulting firm, the online business-to-business market will be worth $5.7 trillion US by 2004. And 60% of that business, says AMR, will go through online exchanges.

Numbers like that bring on big players. Ford Motor Co., General Motors Corp., and DaimlerChrysler AG have formed an online exchange-called Covisint-for the automotive industry. Leading tire manufacturers are soon to launch one called Rubbernetwork.com. One of the more promising ventures so far is CoreBin.com (www.CoreBin.com), developed by Bendix. You can buy over 6000 core parts in various categories including clutches, compressors, differentials, electrical components, engines, hydraulics, and brakes. If you can’t find the core you need, you can post a classified ad to locate it. You can also search by core group, manufacturer, model, part number, and location, and create an automated auction search, which will alert you when an auction of interest is in progress.

Shippers and their freight carriers are also playing the exchange game. Celarix Inc., and online exchange site launched in 1998, features 30 of the world’s largest manufacturers and 14 ocean-carrier lines. The Celarix exchange offers cargo matching, rate selection, and transportation of multi-modal shipments.

We’re seeing complementary exchange sites linking up. Truckers B2B, the largest buying co-op on the Internet, announced an alliance with National Transportation Exchange (NTE), an electronic freight-matching marketplace. Created by the Celadon Group, Truckers B2B (www.truckersb2b.com) pools the buying power of Celadon with site members to offer discounts on items such as fuel, tires, parts, calling cards, and insurance. It caught the wave of rising fuel prices and quickly generated a large membership. In April, the company went public, and now claims over 3650 member companies representing more than 161,000 trucks. NTE (www.nte.net) links large LTL shipments with available space on truckload trailers, actually buying capacity from carriers and then selling it to shippers. NTE claims a base of 500 customers, including shippers, consignees, logistics companies, forwarders, brokers, and truckload carriers.

Get the idea? A successful online exchange is about being big, and it’s about being fast. And that’s where the potential problems with online exchanges lie-and why some suppliers and customers aren’t necessarily buying all the hype.

Electronic exchanges need to be big and fast because, as in any bazaar, volume and margin are the name of the game. Online exchanges are best at moving commodity items. In order to be successful, they need to focus on liquidity-that is, they need to move large amounts of product quickly, because commodity margins are typically low. And some manufacturers worry about their products being reduced to mere commodities in an online context, where buyers can compare prices across hundreds of suppliers.

(The solution, of course, would be for manufacturers to differentiate themselves by offering value-added services. But not all manufacturers are able to do that.)

Other potential users of online exchanges balk at being present in a marketplace where the owner of the exchange charges a fee to install itself between the manufacturer and its existing customers. Making it a free exchange would take away the concerns of potential users about fees standing in the way. But is a “free” exchange a viable business proposition?

Also, a successful exchange depends on it being a neutral venue. It was this issue that caused Meritor Automotive to back out of an online parts exchange called FleetWorks, where commercial truck manufacturers, dealers, parts distributors, and service providers would be able to share access to an electronic catalogue and a 24-hour customer service desk. Meritor was to have been the majority investor, but the company was worried about the perception that its investment would have had a chilling effect on the participation of competitive suppliers.

And then there are concerns about credibility. The trucking industry has been fortunate to see reputable suppliers jumping into online product and freight exchanges.

But at a bazaar, anyone can pitch a tent. Does the merchant you’re dealing with understand the product he’s selling and the industry he’s selling to? Is he selling a quality service, or is he out to make a quick buck?

Online exchanges are an exciting new marketplace tool that have the potential to benefit every player in the supply chain.

However, as with the old-style bazaar, so with the new-the best advice, as always, is buyer beware.