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Exchanges ready if enlisted

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Industry-backed online exchanges could find themselves in good position in a war economy, provided they address a slew of security concerns, according to analysts and hub officials.

Covisint L.L.C., an automotive industry hub in the midst of diversifying into other industries, is especially well positioned. But other hubs, including Transora and ChemConnect Inc., also are developing technical trading infrastructures that could be tapped by defense industry suppliers.

Southfield, Mich.-based Covisint, which handled more than 840 auctions totaling $40.7 billion in transactions and 53,000 separate catalog purchases between January and Sept. 11, is bound to step up sales of collaborative workplace applications with the start of a war on terrorism, said Dan Jankowski, VP-global communications.

Indeed, the automotive industry already has extensive experience with wartime operations. During World War I and II, as well as other military actions, the auto industry built everything from vehicles and bunk beds to airplanes and munitions, Jankowski said.

If called upon during the impending war on terrorism, the automotive industry could use e-commerce business processes already in use through Covisint to react very quickly, he said.

"It is easy to translate our solutions," Jankowski said. Covisint has already forged strong ties to the steel industry through a partnership with e-Steel Corp., New York, and links to other industries are being established.

Trading without travel

What do public exchanges bring that could help during times of international strife?

For one, they allow businesses to meet, co-design, buy and sell products without requiring people to travel, said Michele Hincks, VP-marketing at ChemConnect, San Francisco, which serves 20,000 employees at 7,000 worldwide companies in the $1.3 trillion chemical industry.

Hincks predicts a drop in business travel "will continue to stimulate more online commerce" and use of real-time collaborative technologies.

There are time savings, too. "An auction among new trading partners cuts negotiation time among those companies in half, at the minimum," Hincks said.

On the other hand, the terrorist attacks have caused some to worry that online exchanges could be used by terrorist-backed shell companies to procure chemicals or weapons. But such concerns appear overblown.

Companies listing their buying or selling capabilities on the likes of a Covisint or ChemConnect are already vetted for legitimacy, and their credit worthiness is preapproved. Moreover, sellers and buyers often use digital certificates to encrypt communications, and password checks are conducted throughout the selling, buying, shipping and payment processes.

"In the buying and selling of chemicals, the industry is cautious because you need to be cautious with them," Hincks said. "When someone new is introduced, each of the other member companies have a say whether they will or will not trade with them."

Backbone secure

Andrew Watson, president of international b-to-b auction specialist CoreHarbor Inc., Atlanta, said the backbone telecommunications infrastructure used by hub trading services for global communications is strong.

Telecommunications systems across North America, Europe and Asia have enough redundancy to guard against nefarious forces looking to disrupt the supply chain, Watson said. Auctions conducted in the days following the World Trade Center and Pentagon attacks proved to be as quickand about as actively tradedas they were prior to the attacks, he said.

"Problems with backbone integrity are a remote possibility," said Watson, pointing out that industry trading exchanges often step in when a buyer or seller is cut off from competing because of technical issues. "The biggest concern is the number of corporate networks [that are vulnerable to attack]."

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