Business-to-business (B2B) exchanges are making a comeback—though not everyone is cheering. Burned by pricing and other con-cessions and still waiting to see the promised volume and liquidity levels, many suppliers are wary of further involvement in e-marketplaces. This time around, however, suppliers may actually find a variety of ways to benefit from participating in them. What has changed the equation is the emergence of private exchanges: invitation-only networks that connect a single company to its customers, suppliers, or both.

Private exchanges can do what their open precursors could not: by provid-ing secure, one-on-one communication, they enhance shared supply chain processes, such as inventory management, production planning, and order fulfillment. Some suppliers are using the process improvements generated by their participation in exchanges they don’t own to build closer relationships with customers. Others are going a step further and launching their own exchanges. So far, 15 percent of all Fortune 2000 companies have set up private exchanges, and an additional 28 percent plan to have one by the end of 2003.¹ Many more report that they intend to follow suit. Researchers predict that private exchanges will garner up to 90 percent of the investment in new e-marketplace infrastructure over...