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Going Beyond E-Procurement

Freemarkets lets companies get a handle on global-supply management. Second in a series.

The business imperatives behind global-supply management seem to make too much sense for it to be a fad or just the latest 90-day-life-cycle buzzword. GSM promises to help companies ensure higher levels of quality through a deeper understanding of their suppliers' performance history and capabilities; reduce time cycles in everything from requests for quotes to product design to manufacturing through electronic exchange of engineering drawings, product specs, and modification processes; and mitigate risk on critical projects by monitoring suppliers' work closely throughout the project.

Woven into the fabric of global-supply management is the promise of more-robust business processes that are made consistent throughout a global organization and optimized to wring out costs, inefficiencies, and time. Through related software and services, on-the-job experiences and better ideas can be rolled into the operations of a business and its suppliers and partners.

FreeMarkets Inc., which was founded in 1995 and pioneered the online reverse-auction process, wants to play a role in the burgeoning GSM space. This month, the vendor launched software tools, called FreeMarkets ES, and related services to handle tasks such as process configuration, workflow, project management, data transfer, integration, access and permission controls, and messaging (see "Supply Siders," Jan. 13, 2003).

Glen Meakem and Dave McCormick, CEO and president of FreeMarkets. Photo by Richard Kelly.

It's hard to do business worldwide while keeping track of myriad systems, says FreeMarkets CEO Meakem (right, with president McCormick).
FreeMarkets' gambit presents a fascinating look at how vendors must rapidly evolve as the needs of their customers go through similarly jarring changes. By late last year, FreeMarkets execs realized that if the company stood still on the "front side" of global-supply management activities -- those up to and including the purchase of goods or services -- it would be just a matter of time before its relevance began to diminish. And it could look forward to becoming ever more of a niche player or being acquired. The company reported revenue of $167 million in 2001, and 2002 revenue is expected to reach about $182 million. FreeMarkets will report its fourth-quarter earnings this week.

FreeMarkets ES is the first step the company is taking to enhance its position as a front-side player by becoming a strategic partner on the back side: the implementation of products that have been purchased and the processes, requirements, relationships, workflows, project management, and certifications that surround the successful movement of those products from separate things to integral parts of things shipped out to customers or even customers' customers.

"Companies today have myriad ERP systems in different versions and different languages with different upgrades, and around the world or even in different divisions there are different pricing structures and different requirements and limitations," FreeMarkets co-founder and CEO Glen Meakem says. "How is somebody supposed to keep track of all that while also doing business globally on a consistent basis?"

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