Newton, MA -If forecasts are correct, business-to-business buying over the Web could jump from $40 billion in 1999 to $1.3 trillion by 2003.
Given the scope of this trend, companies that supply the OEM are searching for the best way to sell over the Web (see the special report in this issue). While many vendors plan to set up e-commerce capabilities on their own websites, many also want to participate in e-commerce "portals" that gives buyers-including engineers-access to products from hundreds of suppliers.
These portals are taking two forms. Demand-driven portals, organized by third-party companies, register suppliers and set up on-line buying sessions where suppliers bid on quote requests (RFQs) from buyers. Such portals tout the cost savings to buyers, as well as the new customers that suppliers can find via the Web. Supplier-driven portals, on the other hand, focus on the need to show buyers the importance of value-added technology, as well as application support.
Armed with a large infusion of venture capital, Massachusetts-based SupplierMarket.com has registered some 6,300 industrial manufacturers since the company started in October. In that group, there are about nine suppliers for every one buyer, notes CEO Jon Burgstone, an industrial engineer whose past experience includes major supplier selection responsibilities for Ford Motor Co. He notes that at any given time, the web-based service posts RFQs valued at from $100 million to $150 million for products ranging from fasteners and materials to gears, pumps, and valves.
"What distinguishes us from other industrial e-commerce portals is this very broad mix of products," says Burgstone. "Buyers can also upload drawings of an entire assembly, so that suppliers can bid on several components in a design."
Mattress giant Simmons used SupplierMarket.com to fill an order for 8.5 million pounds of polyethylene film for bags to protect its mattresses. After posting its online RFQ, Simmons found a supplier that could meet the order at a cost 7.3% below what the mattress company had to pay for a comparable order in 1999.
SupplierMarket.com's "SmartMatch" software searches for a fit between a buyer's requirements and detailed product specifications provided by participating suppliers. The company also pre- qualifies every supplier by gathering data on plant capacity, number of employees, annual sales, ISO 9000 certification, product mix, and other measures. For its services, SupplierMarket.com collects a 2% fee on all transactions.
More choices. Some OEM vendors, however, believe that other kinds of e-commerce portals are needed to meet the engineer's demand for sophisticated engineered components. "Often, engineers do not know precisely what component they need to solve a design problem," says Robert Schroeder, CEO of Pacific Bearing (Rockford, IL). "So they need a value-added e-commerce site that gives them the technical help to make the right purchase."
Buying on price alone, adds Schroeder, could result in a product that does not meet quality standards and may lead to higher costs or performance problems.
With the help of Atlanta-based NetVendor, Schroeder is recruiting power transmission vendors for a new site that will provide value-added purchasing and application support services for engineered products. The new e-commerce site could be operational this summer.
Such efforts, no doubt, are just the beginning of a whole new wave of web-based buying services.