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Lean Manufacturing Articles

Strategic Positioning

     Very weak: ITEs not capitalized on neutrality or part­

     Weak: Beginning to explore partnerships, but not de­
riving any revenue from them.

     Fair: Strategic positions with second tier bricks and
mortar companies.

     Good: Substantial bricks and mortar companies use
ITE as primary distribution or sourcing channel.

     Strong: ITE, either neutral or aligned with manufac­
turers, is recognized as an integral part of the indus­
try supply chain.

Domain Expertise

     Very weak: No industry-specific added value.

     Weak: Provides content, but does not differentiate
business or customer service.

     Fair: Strong senior management team from inside the
industry, and partnered with industry organizations.

     Good: Supports industry specific processes, offers
strong customer service with domain expertise, and
delivers strong industry knowledge.

     Strong: Definitive online source for industry and
product information and innovation.

What do companies need to think about before they enter into an electronic marketplace as participants?

Manufacturers do not need an Internet strategy! Manufacturers do need a sound business strategy that uses the Internet as an enabling tool.


What have been the lessons learned so far about the electronic marketplace from the participant's perspective?

The first lesson we see emerging relates to a change in the way companies conduct internal processes and in­teract with other firms. The Internet and all that comes with it will have an incredible impact on internal pro­cesses. Steps in a process to procure or manufacture a part or deliver a service that were once disjointed, will become integrated as information flows more easily through the organization. Externally, the Internet will expand many companies' markets, allowing them to find new suppliers and customer in geographies they never had any presence in.


The second lesson is simply organization within these changing processes. The buyers are learning that the more organization they bring to the RFQ process, the more efficiency they add to the entire supply chain.


Suppliers are realizing that there are multiple appli­cations for the skills and capacities of their plants. They can take advantage of new business opportunities by searching for open RFQs within their areas of expertise and nominate their company to bid for the contract.

What are the implications of independent trading exchanges on the supply chain?

Implications to the Supply Base


Participants can utilize ITEs in a number of different ways to impact the shape and size of their supply base. By utilizing a neutral online marketplace, buyers can find the correct trading partners with which to augment their existing supply base or simply build a new supply base. By utilizing a supply-chain-centric private ex­change, buyers have already identified the correct trad­ing partners and need to determine the best available capacity to meet their sourcing needs.


Overall, ITEs will reshape industrial supply chains to meet production and quality demands in order to bring the product to market in a more efficient manner.

Impact on the Buyer-Supplier Relationships


ITEs are positively impacting supply chains across the nation by introducing ideal trading partners and facili­tating true e-commerce solutions for built-to-order di­rect materials. By matching the correct trading partners,


ITEs are mending supply chains and introducing new efficiencies and product collaboration.

Impact on Price and Vendor Relationships


Although price is an important determinant in selecting a supplier, it is not the most important factor. For instance, years in business and industry certification are much more important to buyers utilizing ITEs. One has to remember that since there were no prospecting or acquisition costs spent to attract the RFQ, the supplier has room in his/her pricing model to modify his/her throughput and operat­ing expenses. Hence, the reverse auction model actually highlights the efficiencies it introduces to the supply chain.



Now is the time to learn and experiment. Understand the business models of exchanges in your industry and participate as a buyer and/or a supplier. Be leery of sub­scription fees and pay attention to the terms and condi­tions. You should only pay when value is realized by your company. Compare cost and services offered vis-a-vis the needs of your company. Register with a couple of ex­changes and compare the human touch and customer service. Engage opportunistically for the good of your company and offer both good and bad experiences as feedback.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 14

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