I received a newsletter from Aptium Global which hit on the topic of supplier identification during the sourcing process. It is specifically focused on direct materials through MFG.com but I found it interesting.
Goodbye Alibaba…Hello MFG.com!
For sourcing professionals, identifying the right set of direct materials suppliers has always been a challenging task. Historically, organizations have relied on a variety of print and online databases such as Thomas Register and Alibaba.com to identify potential sources of supply (in addition to their own trusted global contacts). But on a recent project, our firm decided to consider another source, MFG.com, to gather an initial list of the most viable cost competitive suppliers.
Given our experience, MFG.com has a number of pros and cons at this early stage in their development. In short, it is a great tool for those procurement professionals who want to identify viable suppliers for new products or single line items. It can help companies not only gain a list of viable suppliers, but can also help guide a strategy in how best to present and lot part information to the supply base.
For those that do not know MFG.com, the site is a hub linking buying organizations with ninety three thousand suppliers, many of whom pay for an annual membership allowing them to post a profile on the site and receive invitations to RFQ events initiated by buyers. The site gives buyers the ability to post RFQs and award business on the site for free. Unlike other free online services, which serve solely as supplier search mechanisms, MFG.com performs more like a matching service – an online data service for the buying and selling of direct materials, if you will. When the buyer identifies the category while setting up the RFQ, suppliers are matched and invited to the RFQ based on the category(s) they indicate in their profile. Suppliers can decide whether to proceed with the RFQ based on the information given by the buyer, including any drawings or specifications related to the RFQ.
It is in our experience with MFQ.com, sourcing professionals are able to quickly narrow down the universe of suppliers to participate in later stages of the sourcing process. In addition, the system is straightforward to use and customer service is excellent. And thanks to MFG.com’s eBay-like feedback and rating system, it is possible to consider other organization’s accounts of actual supplier performance in decision making.
But a few challenges with MFG.com make it come up short as a stand alone sourcing platform. Most important, an individual RFQ must be issued for each part within a category. This makes it difficult for buyers who are seeking to rationalize a supply base, and optimize their spend across the fewest possible qualified suppliers It is also difficult for suppliers to give their best quotes, given the lack of advanced negotiation formats. Besides noting in the comments column that several RFQs are posted, MFG.com does not enable suppliers to provide volume discounts in their quotes. While discussing our feedback with MFG.com representatives, they told us that they recognize the need to consolidate multiple line items into one RFQ and plan on acquiring a new software program that will help them. Additionally, while the buyer is able to run a report of the supplier’s vital information and quotes for each part, MFQ.com does not provide the ability to view the category as a whole without manual manipulation of data after a bidding event.
Given our experience, we can recommend MFG.com without hesitation to organizations looking to broaden their direct materials supply base (especially in the metals arena). Without question, their solution takes existing supplier database approaches one step further into the sourcing process. But in our view, MFG.com is not a replacement for e-sourcing platforms from providers such as Ariba, SAP, Emptoris, Procuri, and Iasta, each of whom offers excellent capabilities today. As such, companies will get the best value from MFG.com by integrating its supplier identification and initial quote capability into a broader strategic sourcing approach that balances the need for total cost management with item-level cost savings.
Melissa Stephanou is Project Manager at Aptium Global where she leads multiple sourcing projects.