Linkage benefits within an e-Marketplace

If you’re an owner of a firm, and have one billion pesos in funds, what will you do? The common responses include: you’d probably invest in a new venture, raise current production capacity, or embark on a private exchange to make business operations efficient and easier. Chances are, however, not all of us have one billion pesos to start with. But can decision-makers attain similar goals by embarking on a more effective strategy?

A private exchange is not considered a marketplace, as it operates on "one-to-many" and not "many-to-many." This is simply an Internet hub operated by a single entity, to support the firm’s own commercial interactions with known suppliers and/or buyers. A private exchange is often used to integrate a company’s internal system (like an Enterprise Resource Planning or ERP) with external trading partners, and works best for those that have an aggressive cash chest. Setting up a private exchange can be cumbersome, too, unless companies are able to form a dedicated team that can handle extensive training for end-users and suppliers alike, including formation of exchange guidelines or rules.

Many-to-many exchanges, on the other hand, provide a venue for all suppliers and buyers to transact businesses using the power of the Internet. SourcePilipinas’ e-Marketplace is one example, where clerical functions are done away with, from having to relay information to suppliers and expediting of requirements, among others. Purchasers are more able to focus on critical functions like value analysis, research and material forecasting, and strategic supply management. Furthermore, one can better allocate resources to improve their position within the value chain, and probe their strength relative to competition.

The part worth considering though, is that you need not shell out funds to join SourcePilipinas’ exchange. Being a public exchange, Source has helped supply chain managers identify supplier performance and improvement opportunities. By coming up with a competent supplier partner list in a transparent manner, companies can segregate those that could handle routine purchase requirements, and effect long-term purchase contracts for critical items. Statistics show that longer-term contracting has increased from 24 percent of aggregate contracts in 1990, to about 37 percent today, and e-Marketplaces’ growing network pool will support this phenomenon. More purchasers have elevated their role as pro-active supply chain managers, after objectively monitoring suppliers’ compliance with quality, cost and delivery, along with other performance barometers like technology contribution, supplier responsiveness, and industry and environmental compliance. Participation in an exchange likewise highlights the benefits of order consolidation, and brings about opportunities for enterprise expansion. Today, more and more buyers are looking for suppliers that can help them uplift existing business processes to one that is globally competitive, and provide greater access to growing databases.

Compliance with good corporate governance is strongly adhered to, as market administration staff are there to monitor auction processes. Results and contract compliance, on the other hand, are handled by a compliance monitoring team, while customer support systems are in place to handle other customer concerns.

In the end, joining an e-Marketplace is a decision whether you want to position your company as a mover or follower. Companies will never know if the "best" of what they’re getting today, is the same as tomorrow. Companies that joined e-Marketplaces like SourcePilipinas fared well by gradually migrating their present business processes, while enhancing relationships across the business spectrum. In addition, it would be a lot easier to map out plans prior to setting up your own private exchange, that would allow an enterprise to be objective in supplier relations.

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Mariflor P. Santos is a senior applications associate of SourcePilipinas.com Inc., handling special projects, local and international linkages, ePayment and other value-added services. For comments or queries, e-mail her at [email protected].