Net Markets: So How's It Going?

Time flies when you're in a revolution. But how are Net markets really performing?


For now, he relies on it as a complement to his usual procurement system, for less-important items he can afford to lose to a higher bidder.

I'm Cautious, But Enthusiastic

Despite such limited activity, however, buyers like Miller are enthusiastic about their experience. What they really like is the added convenience of Net markets, as well as the ability to reach a greater number of suppliers. Greg Avsharian is a case in point. As the president of Century Plastics, a Romeo, Mich., maker of plastic components for automobiles and consumer products, Avsharian swears by Suppliermaket.com, which he uses to buy everything from magnets to boxes. He says he's increased his supplier base by 35 percent since he got in on the act a year ago. "Instead of making five million phone calls you just throw out a bid online and you get the answer back quickly," he says. "The process would have taken days before."

They're happy about lower prices, too. Avsharian turns to Suppliernet when he's looking to reduce his costs, or an existing supplier has raised prices a tad too much. Recently, he found a new packing supplier who saved him 15 percent on a process "we thought we'd squeezed the last penny out of," he says. As it turned out, the supplier had a new way of configuring the packing and, as a result, was able to jam more of the product in the space. At the same time, however, there can also be too much of a good thing. In other words, once you win a good deal from a supplier, you can't count on getting it again. "I can't rely on making a one-time bargain part of an ongoing relationship," he says.

I Still Have Questions

At the same time, buyers aren't always comfortable with their Net markets' operation. For starters, there's the shoehorn problem: trying to make how they do business fit the way the electronic market works. There, the results are mixed. Mike Kraner, director of Western Family Foods in Tigard, Ore., a buying agent for beef, pork and poultry for a number of cooperative warehouses, has been purchasing from a site called FoodUSA.com since May. He uses it mainly to buy poultry, not other types of meat, however. Why? With those varieties of meat, prices can change from minute to minute. But, buyers of FoodUSA generally work through an intermediary, not directly with suppliers, as they usually do, and that can slow the process down considerably, according to Kraner. Generally, purchasers have had the easiest time with simple catalog systems, like Chemdex, in which buyers look for items sold by many suppliers at set prices. But, even there, customers may have to adapt their business process to fit the system. At Telik, where buyers used to order supplies, 22 researchers now do the job, going directly through Chemdex. That's resulted in greatly improved efficiencies, but, says Scott, "People don't like change. We've had our moments."

I'm Waiting for More Services

Technical integration is another point of contention. Few Net markets offer systems that seamlessly link all aspects of the process, from ordering to invoicing to fulfillment. In many instances, for example, buyers must put sales orders and invoices through manually. In cases where there is more integration, however, purchasers are happy with the results. Chemdex, for example, provides buyers with an invoice summarizing their activity for the week and will also help link their invoicing system to a company's own accounting system.

Don't Forget Suppliers

What about suppliers? According to industry analysts, they're considerably less enthusiastic than buyers. First, there are technical problems. "Suppliers find it more difficult than they'd thought to get up and running," says David Yockelson, director of the Meta Group, an advisory services firm in Stamford, Conn. "The technical challenges involved in updating and coordinating hundreds of products dynamically have been more than they bargained for."

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