The Cost of Doing Business
Nor is participation in Aeroxchange cost free for suppliers. Companies like A.J. Levin pay fees as high as $9,000 a year to make their electronic catalogs available to Aeroxchange's AeroBuy subscribers.
A.J. Levin has already received some value for its fees besides hanging on to FedEx as a customer.
Aeroxchange gives suppliers instant visibility with potential customers all over the world via the Internet. When a buyer does a search for a particular part, it sees all the supplier subscribers offering that part, whether they're firms they normally deal with or not. Aeroxchange then sends suppliers regular reports showing which buyers have "hit" their catalogs.
After reports showed Northwest Airlines, which was not then a customer, had viewed the company's catalog 400 times in one month, A.J. Levin made a sales call and suggested the two companies should be doing business. "They agreed, and now they've become an important customer for us," Levin says. "That was a benefit we wouldn't get any other way than by participating in Aeroxchange."
Levin doesn't expect wins like that every month. For one thing, there are only a dozen or so airlines using the service on a regular basis, and some, like Lufthansa, were already customers. But winning additional new customers via Aeroxchange is at least a possibility. SAS, the Scandinavian airline, not a customer now, is one potential target.
"It partly depends on how Aeroxchange expands," Levin says of his prospects of winning new business. Koszarek says his company is constantly marketing the service to airlines big and small. American Airlines joined earlier this year.
Resistance is Futile
While very small companies with little technology expertise can participate with nothing more than a PC, Internet link and browser, A.J. Levin is going much further, integrating its systems with Aeroxchange's.
Instead of surfing to the portal site to collect RFPs and communicate with customers and potential buyers, Aeroxchange sends data directly to the company's computers over the Internet in XML (eXtensible Markup Language), an open standard for complex Internet-based communications.
Aeroxchange's role is to take data from its subscribers' different computer and communications systems both buyers' and sellers' systems and make it intelligible to trading partners on the other side.
"They're basically the translator," Levin explains. "Say Air Canada deals with X12 [another EDI standard] and this other company uses a system from SAP (an ERP software vendor), Aeroxchange translates from both (to XML in the case of A.J. Levin)."
For now, the company has to watch for messages containing RFPs and manually respond to them via e-mail. But before the end of the year, Levin expects to have software in place on his back-end systems that will automatically respond to RFP messages from Aeroxchange, pull prices from its catalog, apply appropriate volume discounts and send back a response all with no human intervention.
Not every small business could achieve this without investing in outside programming and systems integration services. "We're a little smarter than the average bear when it comes to technology," Levin says. He will install and configure add-on software himself for the Microsoft Business Network technology the company uses, he says.
It's not just automated responses to RFPs. When a buyer issues R.J. Levin a purchase order again, in XML format the new software Levin is installing will automatically generate all the paper work, update the company's accounting system and even send the customer a shipping notification when the order goes out the door.
|Aeroxchange.com is one of many business-to-business e-marketplaces.|
"Doing all of this automatically will allow me to increase throughput without having to add people, and that means I'm ahead of the game," Levin says. He figures the new systems could allow A.J. Levin to increase orders from 20 to 50 a day.
So what's not to like about Aeroxchange?
Levin complains that some of the other activities at the exchange are less beneficial. In some cases, for example, A.J. Levin has responded to joint RFPs from a number of buyers. It's hard to know what price to quote because there is no guarantee all buyers will actually place orders with the winning bidder in the end, he says.
If he quotes a price based on an aggregate volume of 1,000, and then only two of three buyers place orders for only 400 units, is he committed to the price per unit he quoted for 1,000?
Koszarek says this problem shouldn't arise. In Aeroxchange "cooperative purchasing" events, if one buyer pulls out, suppliers are supposed to be notified and asked to re-bid, he explains.
Levin also has concerns about security. While Aeroxchange is doing everything it should be at the data level, he claims he has seen instances of customers posting their Aeroxchange passwords on bulletin boards in their offices. He worries that if an unscrupulous competitor saw and copied down a password, they could log in to the Aeroxchange system as that buyer and see A.J. Levin's catalog prices and RFP bids.
Koszarek notes that Aeroxchange subscribers, unlike subscribers to some other e-commerce services, can have as many user accounts and passwords as they want, at no additional charge. So there should be no need for employees to share user IDs and passwords and therefore less likelihood they would need to post passwords. Aeroxchange also makes clear in its policies that subscribers must not share passwords.
"Under the circumstances, it's hard to think airline buyers would create security infractions by posting passwords," Koszarek says. "We certainly haven't seen that kind of behavior."
Despite the cavils, it's clear that, overall, Levin sees a bigger upside than downside to participation in Aeroxchange. While there is no guarantee that small businesses in other industries would have similar experience with industry e-marketplaces if any exist the lesson appears to be that e-marketplaces and EDI can be beneficial for small suppliers.
According to some estimates, there are over 1,000 e-marketplaces operating on and off the Internet. For names of major global e-marketplaces by industry, check out this emarketservices.com article.
Based in London, Canada, Gerry Blackwell has been writing about information technology and telecommunications for a variety of print and online publications since the 1980s. Just for fun, he also authors features and columns on digital photography for Here's How, a spiffy new Canadian consumer technology magazine.
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