04/03/00 Design News
Emerging trends in manufacturing
Two views of e-commerce
Larry Maloney, Editorial Director
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 online 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
Supplier Market.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
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.