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August 16, 1999

Electronics Procurement

IBM and PartMiner develop site for electronics buying

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t can take electronics companies weeks to find parts they need, but IBM and PartMiner Inc. are developing an electronic-procurement service that helps electronics companies locate and purchase supplies more efficiently and cost-effectively.

The service, called the Free Trade Zone, is a combination electronic marketplace, content aggregation site, and hosted-application service. It's expected to be launched by year's end, according to PartMiner, a spot-marketing company that uses data mining technology to locate hard-to-find electronic components and broker them to manufacturers.

Users of a Free Trade Zone beta site say it has made them more efficient. "Our buyers used to take hours to track down parts or find comparable substitutes," says Kathy Drake, president of Harrington Signal Inc., a maker of alarm and elevator control systems. "If we had to use a substitute, we had to wait to get spec sheets, verify the information, and place an order. It might take us two weeks to go through that process. But with the PartMiner technology, we can do it in a few minutes."

Electronics buyers and suppliers use Web browsers and a hosted-application service to access Free Trade Zone's electronic marketplace. Buyers can post requests for quotes on components, then conduct reverse auctions to find the lowest bidders. The system handles request-for-quote responses, order entry, and tracking and shipping data.

Free Trade Zone also features a bill-of-materials system that lets customers negotiate prices, generate purchase orders, and exchange invoice data. "Today, most quotes are done via E-mail or fax, and there's no way to do negotiations online," says Mark Schenecker, PartMiner's chief technology officer. "With this, they'll be able to see a quote history, see what they've bought, and do supplier management."

Free Trade Zone costs nothing to customers or suppliers. PartMiner has received $20 million in venture capital to fund the site as a vehicle for its spot-marketing service, says Schenecker.

When reverse auctions don't turn up enough suppliers--which happens about 20% of the time in the electronics industry, analysts say--PartMiner will offer to find the missing parts and broker a deal to deliver them.

Transaction data resides in DB2 databases on IBM hosts that are accessible via the Internet. The supply-chain applications that run the service are based on the Extensible Markup Language and Java, making it easy for them to exchange data with back-end systems that contain inventory and other procurement information, Schenecker says.

The electronics industry is also testing several other products for procurement and supply-chain integration, such as i2 Technologies' Rhythm server. But most of them require the parties involved to implement a specific application, according to Tim Minahan, a senior analyst at the Aberdeen Group's E-commerce consulting practice. "Free Trade Zone has the potential to turn the whole application model on its end," he says. "If companies begin to deploy the hosted service, it could make some of them reconsider the whole way they're approaching the market."

IBM Research provided hardware, software, and expertise to help develop Free Trade Zone, ostensibly in an effort to create electronic-procurement products that could be offered to other industries. But IBM cancelled its participation in a scheduled announcement with PartMiner last week and declined to discuss its future plans for the service.

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