FreeMarkets offers competitive arena
In David Hidding's Oct. 26 letter, ``Online auction puts quality behind price,'' he admits that he's never participated in a FreeMarkets OnLine competitive bidding event. Michael Fassbender, another nonparticipant, extends the debate with his Nov. 16 Mailbag, ``Good business traits lacking in auction service on Internet.'' Both letters reflect a complete lack of understanding about FreeMarkets OnLine, its service, and the massive underlying trends caused by technology.
FreeMarkets and its buyers work through a rigorous process aimed at making better-informed purchasing decisions. That process is designed to assemble all of the facts a buyer should have before making a commitment — facts about quality and capability. And yes, facts about true market price. The process involves many supplier assessment steps and on-site visits, before and after the bid. Contrary to the letters' implication, the market is private — only those suppliers invited by the buyer participate. The business does not automatically go the the low bidder. Nonprice factors weigh heavily into decisions, just like they always have.
If the buyer's strategy calls for consideration of overseas suppliers, then the invitation list includes overseas participants. If the buyer elects to purchase from close-to-home, then only proximate suppliers participate. The process is very disciplined. It reflects excellent business practice, not the absence of ``good business traits'' implied by your headline.
We believe relationships between buyer and supplier must be based on competitive performance and not for the sake of the relationship itself. When FreeMarkets' buyers purchase technical products like custom moldings, they are deciding with which suppliers to establish long-term relationships. The decision is based on all the facts and involves a range of purchasing, quality, engineering, and manufacturing staff at the buying organization. It is typically a multiyear decision, and does not represent a choice to ``surf'' the market and switch business repetitively. It often results in a consolidation to fewer and larger supplier relationships.
The FreeMarkets process and professional services allow suppliers to be considered on the basis of their manufacturing and technical achievements, not just on the reach of their current relationships. Buyers are using the process because it makes sense. They are making better decisions. In 1998, our buyers will purchase nearly $500 million worth of fabricated metal, plastic, and electronic products through the FreeMarkets sales channel.
Look all around you in consumer markets. Does the fact that Wal-Mart, Sam's Club and Best Buy offer low prices mean that they offer inferior quality? Not at all — the quality of consumer products continues to improve every day, while in many industries, prices continue to fall. That merely reflects active competition and innovation at work.
Internet technology is changing the world. Local markets become national and national become global. A proper understanding of modern technologies is important to Plastics News readers and to the economy as a whole. It would be unfortunate if readers were misled by debate between uninformed readers.
Glen T. Meakem
FreeMarkets OnLine Inc.