Buying supplies via online auction could save aerospace manufacturers significant time and money, but the industry has been too slow to adapt, believes online marketplace Exostar.
Exostar, founded in March 2000 by BAE Systems, Boeing, Lockheed Martin and Raytheon, now has 7,200 active suppliers on its books. Of these, says Exostar vice-president Ludo Van Vooren, half have tried online auctions: the rest operate in such specialised fields that auctions are not appropriate. But "they don't know how to approach the auctions", says Van Vooren, meaning that they either lose contracts through mistakes in the bidding, or cut their margins unnecessarily tight. Exostar is convinced that its members could be doing better, and has brought in online auction specialist E-three to educate them.
"Our job is to educate the existing users of auctions," says E-three director James Anthony. "These suppliers need help identifying the more subtle benefits in the auction process." Anthony and Van Vooren believe that using online auctions instead of conventional procurement could be up to 50% faster, provide 15% savings for buyers, and help sellers by making the procurement process more rigorous and transparent, and by making buyers use a common format for requests. The problem, however, is convincing sellers that the auction process is not simply a way of forcing prices down, Anthony says. In the automobile industry "suppliers were unprepared for online auctions -Êthey ended up giving away too much margin or giving away business". He adds that E-three will try to convince them that "auctions are not just a tool for beating down prices".
Moving to online procurement, even without auctions, will give many of the same benefits as an auction, Van Vooren believes. "It takes longer to set up because you need more rigour, but overall it is faster and implementation is easier,"he says. Anthony believes that 80% of sourcing projects will be online in two years, with almost all online by 2014. However, he warns, "the transition will be hard; there is a lot of resistance in the supplier community." Boeing is using electronic requests for quotations - but not online auctions - for 7E7 supplier contracts, he adds.
ALEXANDER CAMPBELL / LONDON
Source: Flight International
