An industry supply exchange is a shared electronic network through which the buyers and suppliers of one industry exchange catalogues, contracts, purchase orders and invoices. One exchange may connect thousands of hospitals with the makers of medical supplies. Another may connect chemical companies with their customers and their transport companies. The best-known exchange for hospitals serves the United States, and much of its software is built by engineers in India.
Why does one industry need its own network? Take hospitals. A large hospital buys tens of thousands of different items, from gloves and syringes to artificial hips. It buys them from hundreds of suppliers, each with its own catalogue and its own contract prices. Without an exchange, every hospital would need a separate connection to every supplier. With an exchange, each hospital connects once, and each supplier connects once. The exchange converts each document into the format that the receiver needs. Many of these documents use electronic data interchange (EDI), fixed electronic formats for orders and invoices.
The exchange also keeps a shared catalogue. Each product has one record, with its code and its contract price for each hospital. This matters because the most common problem is a price mismatch: the supplier invoices a price that differs from the contract.
Consider a 400-bed hospital in Ohio, in the United States. Its procure-to-pay software raises a purchase order for 200 boxes of examination gloves at the contract price of $7.50 a box. The order passes through the exchange to the glove maker, which confirms it and ships the boxes. The supplier then sends an invoice through the exchange at $8.10 a box, its old list price. The exchange compares the invoice with the order and the contract, and flags the difference of $120. The hospital's accounts payable (AP) automation holds the invoice until the supplier sends a corrected one. Without this check, the hospital would have paid the higher price. Small errors like this add up across thousands of invoices a month.
The exchange's records are also useful for planning. Suppliers can see what hospitals order each week, and they use this in their supply-chain planning. Inside the hospital, the hospital operations platform holds the supplier contracts, and the orders it creates pass through the exchange.
In India, most hospitals still buy through local distributors, by phone, email and paper invoices. Some large hospital chains are starting to connect their purchasing systems directly to their main suppliers.