Freemarkets, the e-procurement and Internet trading exchange specialist, last month further underlined its continuing strength by reaching a total of $2.5 billion in online commerce through its European e-marketplaces. Dean Palmer reports
Freemarkets, the e-procurement and Internet trading exchange specialist, last month further underlined its continuing strength by reaching a total of $2.5 billion in online commerce through its European e-marketplaces.
It now has more than 1,700 online markets in Europe to date, with high-profile customers including BP, GlaxoSmithKline, Pilkington, Visteon, Norsk Hydro, Delphi and Bayer. And around 2,100 European suppliers have already been involved in Freemarket’s online bidding supply contracts.
Shane Tulloch, vp Freemarkets Europe, comments: “The reason customers are continuing to adopt our technology is because we help them to cut costs quickly. In some cases, we’re seeing clients making savings in less than 15 days.
“We’re not just targeting the Fortune 500 companies though. In March we launched our stripped down version of FullSource called QuickSource. This is aimed at SMEs and costs from as little as a few thousand dollars up to a million dollars.”
Founded in 1995, and now with over 600 employees, Freemarkets creates online e-marketplaces for a wide variety of manufacturing industries, including automotive, aerospace, pharmaceuticals, electronics, metals, plastics and capital equipment. The headquarters is in Pittsburgh, but it has a growing network of offices in Brussels, London, Singapore and India. And the company appears not to have been affected in the same way as other e-procurement vendors such as Ariba and CommerceOne. It has continued to grow revenues quarter on quarter
The company claims to be able to save buyers, on average, 15% of their annual procurement costs. How?
The process is not simply about staging an online auction in order to make savings for the customer. There’s a lengthy (4 to 6 months typically) supplier ‘screening’ process which has to occur before any online bidding can begin. And there are four main phases to Freemarket’s buyer solution: the first process centres on the identification of savings opportunities, working directly with the buyer.
Next, comes the preparation of the Request for Quotation (RFQ). Since the bidding process is compressed into a few hours, RFQ preparation involves much more than simply providing drawings and volume forecasts. Questionnaires are prepared, site visits often occur, and all elements of total cost are carefully scrutinised.
Stage three is the supplier screening process, where Freemarket’s “market-making” team acts as a funnel, narrowing down the field of potential suppliers to those whose capabilities best match the buyers’ needs.
The fourth stage is when the actual online bidding occurs. Those suppliers who have been selected by the buyer (typically between 5 and 10), prepare their quotes with the support from Freemarkets. All the suppliers have to participate in training sessions on Freemarket’s BidWare software so that they can submit real-time bids. The buyer and suppliers then dial into a secure global network ready to begin the actual bidding. BidWare is also available in 30 different languages, with many different formats depending on the market.
The bidding process itself, which usually takes place at one of Freemarket’s Operation Centres, is not simply a case of each supplier submitting online bids over a certain time period. There also needs to be rules in place to ensure market integrity. As David Sobie, Freemarket’s UK director of market-making, explains. “We have strict rules in place. Suppliers agree to bid as aggressively as they can, and buyers agree to award the business at online bid prices, to only qualified invited suppliers.”
There seems to be three key criteria for success: Can you specify what you are buying? Are there enough suppliers to create competition? And is the size of the buy large enough to generate competition among those suppliers? If the buyer can answer “yes” to these questions, then Freemarkets can make savings for them.
Author: Dean Palmer