AMR's Mickey North North Rizza recently authored a brief titled "Sourcing for Free". Focusing on MFG.com, her write-up considers the question of whether it's worth the time invested to work with Spend Management vendors that are free to buying organizations. The main focus of her analysis of MFG.com, a marketplace provider that charges suppliers to participate on its network, is to offer a short summary of what the vendor can offer to manufacturing and procurement organizations by looking at one users' experience. Her example shows the power of MFG.com to help smaller buying organizations source low volume parts. In our experience with MFG.com, we can also vouch that the system delivers on its promise of helping companies find new suppliers, especially in the machinings area.
But free is free, and MFG.com has some shortcomings when it comes to strategic sourcing. For one, MFG.com has far fewer qualified suppliers when it comes to specific industry qualifications (e.g., ISO/TS in automotive), as the system favors more job-shop type suppliers. But more important, MFG.com does not provide end-to-end sourcing workflow and process from a buyer's perspective, and lacks the ability for buyers to roll-up their category spend information, and have suppliers look at it on an aggregate level. It also forces companies to work through MFG.com's web-based interface rather than their own platforms, forcing companies to manually integrate data from the web-application with their own. At the same time, MFG.com also discourages efficient types of sourcing behavior by approaching the quoting process from a "scavenge the universe of suppliers on a unit level perspective" rather than looking at how organizations can best consolidate spend by having fewer suppliers quote for more of the business.
In other words, MFG.com is ideal for helping companies identify new sources of supply if they have the time to consider suppliers on a unit -- rather than category -- level. It also works from a tactical buying approach, and can help companies benchmark their current unit cost pricing quickly (especially if suppliers are passing along price increases). But essentially, in its current release, MFG.com is a tool that is best for engineers in the prototyping phase looking to develop target costing information for new product launches rather than a tool for procurement organizations which already have sourcing platforms in place to bid out spend on a category basis.
Still, MFG.com does have a lot of things going for it. For example, it offers a good supplier rating system, unlike Thomas Register or other such free services. In addition, we really like how the system tracks award decisions, allowing buyers and suppliers to know who is serious and who is not. Consider how suppliers can see if buyers use the tool to make contract awards versus merely using the system to hammer their incumbents or to benchmark the market. This goes beyond what other sourcing platforms provide to suppliers in the way of feedback since losing suppliers are typically kept in the dark about actual contract award decisions. Because of this, many suppliers are negatively biased towards all of the major platforms -- from Ariba to Emptoris to Procuri to Iasta -- on the market because they do not believe that participating in online negotiations is a good way to win new business. An eBay-styled rating model does give suppliers a better opportunity of winning the business. Perhaps MFG.com could offer some type of 2.0 Web Service to other providers with this type of supplier / buyer ranking mechanism.
But perhaps the most differentiating aspect of MFG.com is the supplier-pays business model. As discussed, we've observed over the years how a buyer-pays model can distort a truly level playing field (e.g., buyers can use it to beat up their incumbents or simply to benchmark, without giving new suppliers a fair shake). A supplier-pays model means that all parties have a vested interest -- and the ability to provide feedback -- to keep the system fair and open. If buyers do not play by the rules, they’ll be ostracized in the future.
In short, MFG.com is a fascinating study of a different way of doing business in the Spend Management world. And for procurement organizations, we can see how it can certainly serve as an invaluable point tool for supplier identification or tactical quoting. We can also see a scenario where MFG.com enhances its strong capabilities for engineering organizations to work more closely with procurement by allowing for true category-based sourcing approaches. But until this happens, it will remain a stronger quoting and costing tool for engineers rather than a platform for buyers and purchasing professionals. It does not help bridge the engineering and procurement gap today, but perhaps it will in the future.
Jason Busch (Aptium Global's Lisa Reisman, an MFG.com user, also contributed to this entry)