E-marketplaces make a comeback

Quadrem International Ltd., a global marketplace for industrial MRO (Maintenance, Repair, and Operations) products for the mining and metal industry, announced this week that it expects a 100 percent increase in revenues and a doubling of the number of transactions over 2003.

Started by the world's largest mining and metals companies, which comprise 60 percent of the world's production of gold, copper, coal, zinc, silver, and base metals, the Quadrem growth may be a leading indicator that the much-maligned concept of e-marketplaces is back.

Last year, Quadrem had US$1.3 billion in transactions, and less than six months into 2004, the company lists $1 billion dollars in transactions and expects to close out the year at $2.5 billion and increase profits by 100 percent, according to Ray Castelli, senior vice president for global solutions and services at Quadrem.

But is Quadrem an anomaly or a sign of the times? Pierre Mitchell, vice president of research at AMR Research Inc., believes e-marketplaces are back, but with a difference.

"They used to define themselves as the destination for trade. What they are doing now is providing hosted applications and content and connectivity and they allow a buyer to hook up with many suppliers," said Mitchell.

Currently, Quadrem has 200 buying organizations and 6,500 e-procurement suppliers.

Newmont Mining Corp., a leading gold producer, switched from a paper-based system for RFPs, purchase orders, routing to suppliers, acknowledgements, and delivery to Quadrem's e-marketplace in order to accelerate transaction processes.

"We have taken advantage of (Quadrem) to take a cash discount for early payment. We now receive between $75,000 and $100,000 per month in discounts," said Lance Throneberry, director of supply chain management at Newmont.

Throneberry also said that using Quadrem has increased the turnover rate for materials and supply inventory and improved forecast accuracy.

However, according to AMR's Mitchell, the technology at the surviving e-marketplace providers is "still a bit of a hodgepodge" that provides a set of subscription-based or transaction-based technologies and services such as hosted apps, content management, and Web EDI.

"It is relatively simplistic sourcing and procurement applications as well as a set of custom, technology (that's) built on top, namely for specification management, supplier discovery, commodity-specific catalogs, and industry-specific connectivity," said Mitchell.

Mitchell believes the remaining exchanges have reached critical mass, approximately 200 down from 1,500 four years ago, and are going to do well.

"They started retooling almost two years ago. They compete with [enterprise software] vendors," said Mitchell. "Basically they came to the grim realization that they were vendors rather than [buying] consortiums. Welcome to vendorhood."

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