Taking an e-hub abroad

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E-marketplaces, like many Internet ventures, are global businesses the day they open their doors. But to move beyond taking just the occasional order from an overseas buyer, e-markets have had to take aggressive steps to build out their enterprises globally.

A perfect example of this strategy comes from electronics e-marketplace Inc., Westlake Village, Calif. Launched in May 1999, the site has created a neutral marketplace for buyers and sellers of electronics components. Need2Buy is in the midst of a major globalization effort that it hopes will shift more than half of its revenues overseas by the end of next year.

Unplanned demand

Need2Buy's particular niche is helping manufacturers manage unplanned demand-when the forecasts for the materials they need to build their products come up short of actual requirements.

"In the high-tech world, there are two ways to procure," said Andy Wilson, Need2Buy's president-COO. "Working with manufacturers and distributors, you upload rolling forecasts for production schedules. This covers the majority of supply needs for components. At the same time, the supply chain is accelerating tremendously, and that has driven up the portion of unplanned, off-contract purchasing that companies must manage."

To serve this portion of the market, Need2Buy has built a product database that helps manufacturers find suppliers to quickly fill their needs when their forecasts come up short.

Also, the marketplace can help manufacturers off-load excess component inventories when forecasts cause them to buy more than they need.

"Procurement is not a perfect science," Wilson said. "Manufacturers often have good materials they simply can't use, and they have no way to push the product out to the market because they're not sellers."

Need2buy initially launched as a U.S.-based business. But the global nature of high-tech manufacturing quickly came into play.

"We didn't position it as a global site, but we've had a significant number of participants located overseas," said Wilson, who estimates that North America accounts for only about one-third of all electronics manufacturing. Asia leads at about 50% and Europe accounts for the rest.

The industry "lends itself to a global marketplace," Wilson said. "You can move hundreds of thousands of dollars of electronics components overnight using [an overnight shipper] like DHL [Worldwide Express]."

Despite that promise, analysts say tweaking an e-marketplace to handle global trade can be tough. "It's a huge challenge," said John Ciacchella, VP-Silicon Valley office of A.T. Kearney Inc. "In terms of interfacing with a [global] customer, I think marketplaces will be able to sort that out quickly. But a lot of back-end operations, like tax, licensing and customs issues, can be a real challenge."

Another challenge, Wilson said, is that like politics, all e-commerce is, in the end, local. "As much as the electronics industry supply chain is a global supply chain, it is not one big homogeneous market," he said. "The roles of distributors, the acceptance of EDI [electronic data interchange] and just the whole mind-set of geographies becomes very different very quickly."

Need2buy adopted separate and distinct strategies for expanding into two key markets-Europe and Asia.

In Europe Need2buy decided to keep full control of its own destiny. In January, it established its European headquarters in Munich, from which it will serve the entire European market. It quickly began to compile an extensive database of European vendor profiles.

Then, to further jump-start its European operations, last month it acquired a Munich-based electronics distributor, Unimate Electronics. The acquisition provides Need2Buy with a local operations and fulfillment infrastructure, as well as local staff and expertise, Wilson said.

In Asia, Need2Buy partnered with Japanese giant Mitsubishi Corp. in a joint venture dubbed Need2Buy-Asia, which is building a localized version of Need2Buy's procurement applications.

Because Need2Buy had less experience in the more insular Asian market, it decided a local partner was not only preferable but absolutely necessary, Wilson said.

B-to-b e-commerce in Europe and Asia, despite recent advances, is still lagging anywhere from 12 to 18 months behind the U.S., Wilson said. Still, the e-marketplace expects its global expansion will have a big impact on its business by next year, when it expects half of its revenues to come from the U.S. with the rest split, somewhat evenly, between Europe and Asia, he said.

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