If you're thinking of becoming a cyber buyer, picking the best site is a tricky process. For starters, says R. Jerry Baker, C.P.M., former executive vice president of the National Association of Purchasing Management, These sites are in their infancy, and that makes it difficult to set up a rigorous set of selection criteria.
Then there's the sheer number of them: Some 600 new marketplaces were introduced last year, perhaps three or four in just one market. The upshot: Evaluating your choicesor whether to pick one at allcan be a downright confusing experience. Here are nine essential questions to ask before you
make your choice.
Does it meet your needs?
Net markets can take many forms. Some function more like exchanges and offer you or your suppliers the opportunity to trade commodities such as excess energy capacity. Others let buyers bid against each other for surplus goods. Still others are more like shopping malls or catalogs, giving buyers the chance to get online access to a wider-than-usual variety of finished goods and their suppliers. Your first task is to figure out which products you plan to purchase electronically and what type of Net market you need.
For example, Bruce Miller, manager of raw materials and processing for the Cleveland division of Olympic Steel, a Bedford Heights, Ohio-based maker of flat-rolled steel, and his colleagues wanted an efficient way to bid on products. A year ago, they signed up with Metalsite.com, an auction site for steel-related raw materials, to buy coil. Miller posts a bid online for a particular product and, about five days later, the winner is announced.
On the other hand, there's Rob Silber, purchasing manager of the San Francisco facilities of Elan Pharmaceuticals (based in Dublin, Ireland). He needed a network over which scientists could purchase laboratory supplies from more suppliers than they could get access to the old-fashioned way. Last year, he signed on with Chemdex.com, which hooks him up to 2,200 suppliers selling everything from latex gloves to monoclonal antibodies.
Fact is, you may need more than one marketplace category. A company could, for example, buy indirect products such as laboratory supplies from one type of site and go to a spot market, say, for certain chemical compounds. They're not mutually exclusive, says David Yockelson, director of the META Group, a market research firm in Stamford, Connecticut.
Another consideration in determining whether a site meets your basic requirements is how critical the products are to your operation. Chances are, like most buyers at this early stage of the game, you'll want to choose sites that sell less-essential products. When Olympic Steel's Miller needs to purchase critical coil products, he doesn't do it online yet, since he can't take the chance of losing out to a higher bidder. Instead, he travels the traditional route, working directly off-line with mills and other suppliers.
If you need to keep your company's name a secret while doing business over the Internet, then you'll naturally have to work with sites that protect your identity. Consider Jesse Paquet, buyer of subcontract machining services for Jamesbury Inc., a Worcester, Massachusetts, manufacturer of industrial valves. He uses a Net market called SupplierMarket.com to find manufacturers who will produce machine components according to his specifications, which he posts online. But he always does it anonymously. It's important that we're not opening up the doors to everyone, he says. Our competitors shouldn't be able to figure out who's bidding for what.