Online Marketplaces Offer Global Opportunities

Online Marketplaces Offer Global Opportunities

Buyers and suppliers alike find online marketplaces offer a world of advantages.

When Joe Mattes and his business partner started TR Manufacturing in 2004, they entered an Indiana market saturated with machine shops. The partners could not afford a full-time salesperson but they needed to develop a customer base for their close-tolerance machining services. They decided that the internet offered a low-cost way to market their company.

A Web search led them to an online marketplace, MFG.com. While there were other services available, says Mattes, they were targeted at larger volume shops, rather than the small-lot precision machining TR Manufacturing specializes in. By signing up as a supplier on the site, TR Manufacturing was able to access RFQs from thousands of companies. Today, the firm does business in industries such as aerospace, which has no presence in Indiana, and for companies on both coasts. "We can offer our shop rate at a lower wage than some of these other places based strictly on where we are," says Mattes. "One of our customers found they couldn't do work in their captive machine shop for what we can charge, so they pretty much closed it down."

Mattes says using an online marketplace provided not only more reach, but a more efficient selling process. "With MFG.com, you know these people need your service, they need parts made," he explains. "Whatever service you are offering , they match up and the amount of time you save is huge."

For an annual fee, suppliers of both made-to-order and standard parts are listed on the MFG.com site. Suppliers set up RFQ filters that match their expertise and capacity, and a multimedia profile that tells prospective customers about them. As RFQs come through the site, which match their capabilities, they can respond to these potential buyers. The service is free to buyers.

"You could search Google for someone that does metal stamping or machining, but you're not going to learn much," says MFG.com founder and CEO Mitch Free. "You'll see a Web page but you won't learn if they're in the market and have the capacity for what you need now. We offer a very intelligent match which results in the natural market efficiency of two parties that need each other at the right moment in time. The result is naturally lower pricing."

Mitch Free: MFG.com will launch a global Web site this month.

When Turbo Trac USA's purchasing manager left, James Turner, vice president of business development, was suddenly thrown into his shoes as the developer of a highly efficient mechanical transmission system was preparing an important prototype. Turner looked for help online, and after researching various blogs and discussion groups, he decided to try MFG.com. While he had been unhappy with the vague responses to his RFQs he had received through traditional sourcing channels, he says he received multiple quotes from MFG.com suppliers, and he was "very pleased" with the bids. "Overall, lead times are shorter and pricing is extremely competitive," says Turner, who says the custom gear ended up costing at least half what he had been prepared to pay.

MFG.com's Free said he had braced last November for a rough year, reducing the company's workforce by 12% and ending some research and development projects. But he said the manufacturing slide has actually helped business as manufacturers have scrambled to find new customers, and buyers try new methods to reduce costs.

This month, MFG.com plans to launch a revamped Web site designed for the global market. Free said the company currently has multiple marketplaces running that "don't talk to each other." The new consolidated site will operate in nine languages and allow other companies to build plug-in applications for the site. "We're the best at operating a marketplace, but there are people who are better than us at building tools for specific jobs, such as contract management or analytics. We're building an ecosystem of those partners," he says.

Free is not alone in positioning his company for global success. In February, Jack Ma, the founder of the Alibaba Group, one of the world's biggest business-to-business e-commerce companies, and his management team met with companies such as Yahoo and Amazon.com to explore opportunities for expansion in the United States. In May the company reported that it had reached 481,575 paying members for its international and China marketplaces. Net income for the company fell nearly 16% in the first quarter as it lowered fees in an effort to increase market share.

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