"It's not just about putting up a product and attaching a price to it," says Forrester Research analyst Steve Kafka, "but also all the associated pre- and post-transaction functions like logistics and payments. Marketplaces need to provide the services that make the deals happen."

Marketplace software supplier Ariba Inc. took a big step in that direction last week when it inked a deal with the Descartes Global Logistics Network to integrate the tracking and transportation of marketplace orders into Ariba's B2B Commerce Platform.

The new suite of hosted services, called Ariba Logistics and Fulfillment Services, Powered by Descartes, will give marketplace customers the ability to track orders worldwide and provide E-mail and pager alerts if shipments are delayed. It will also let customers piggyback their shipments with those of other customers and let them search for the best prices from a variety of shippers: their own, those that work with the merchants selling the products, and those that negotiate shipping arrangements with Ariba.

Descartes is a logistics systems provider in Waterloo, Ontario, with a global network of 400 carriers and tens of thousands of customers. It already processes more than 2 million transactions a month, says Art Mesher, the company's chief strategy officer and the former head of Gartner Group's supply-chain business practice.

Descartes has been working since February to integrate its system into Ariba's E-commerce platform using the Extensible Markup Language; it expects to release a beta version in about 90 days. After that, Descartes' network "will be delivered as an embedded system in the Ariba platform, and every system it sells will come with default connections to our network," Mesher says.

Descartes uses electronic data interchange and XML to translate any set of data to any other network. "We remove all the integration and interoperability complexity from the user and put it into the network," Mesher says. "We don't sell a logistics network. Each customer has its own network, and we just federate them together."

To be part of its network, Descartes charges shippers an up-front fee of between $250,000 and $1 million, plus a per-transaction fee ranging from 10 cents to $12 per shipment, depending on volume. The price for marketplace users to use the service hasn't been disclosed, but it will be transaction-based.

Ariba is adding "a critical component of business-to-business E-commerce by connecting buyers, suppliers, and market makers to Descartes' vast network of freight carriers and logistics providers," says Aberdeen Group senior analyst Lara Abrams. The move should "make the ROI on using an E-marketplace that much stronger."

Distributing products globally will be the top fulfillment challenge in 2001, followed by lowering fulfillment costs, managing volumes, and accepting online returns, according to a survey of online suppliers conducted by Forrester Research last year.

Logistics was a key reason that Starwood Hotels & Resorts Worldwide Inc., parent company of the Sheraton, Westin, and W Hotel chains, decided to build its own marketplace rather than join an industry business-to-business exchange, says Rick Betz, Starwood's senior VP of strategic sourcing. Betz says that integration of fulfillment and other supply-chain services will be a key factor in the success of marketplaces.

Starwood last week created a joint venture with online hospitality marketplace Zoho Inc. that will fully integrate supply-chain management, says Zoho chief operating officer Chris Hjelm, the former CIO of Federal Express Corp.

Betz says months of talks with Marriott about building a hotel industry marketplace fell apart over the logistics issue. Earlier this month, Marriott teamed with Hyatt on a marketplace that will use GoCo-op Inc.'s purchasing software.