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Breakout Session # 1011 James A. Sdoia Vice President, Inventory Locator Service Wednesday, April 28, 2004 1:50 PM

e-Procurement: Promises versus Reality. Breakout Session # 1011 James A. Sdoia Vice President, Inventory Locator Service Wednesday, April 28, 2004 1:50 PM – 2:50 PM. Promise. An agreement to do or not to do something Indication, as of a successful future.

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Breakout Session # 1011 James A. Sdoia Vice President, Inventory Locator Service Wednesday, April 28, 2004 1:50 PM

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  1. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

  2. e-Procurement: Promises versus Reality Breakout Session # 1011 James A. Sdoia Vice President, Inventory Locator Service Wednesday, April 28, 2004 1:50 PM – 2:50 PM NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  3. Promise • An agreement to do or not to do something • Indication, as of a successful future Webster’s New World Dictionary of the American Language NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  4. Reality • The quality or fact of being real • A person or thing that is real; fact Webster’s New World Dictionary of the American Language NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  5. Procure To obtain;get Webster’s New World Dictionary of the American Language NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  6. e- • Do you remember when e was just the fifth letter in the alphabet? • Or worse, when it was a grade in school? • Or how about its value as a transcendental number to eight decimal places of 2.71828183? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  7. “e” as a designation for electronic • Began in the 1960’s • EDP • Burroughs e-Series Accounting Computers • IBM Tape Drive-1955 • 1970’s: EFT • 1980’s: EDI • 1990’s: e-everything NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  8. 1980’s – The e-volution continues • New Procurement Tools • The FAX machine • The PC • EDI • Greater Access • Integrated Applications NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  9. 1996 - The Internet as a business tool • Marketing and Communication • The “rolodex” is reborn in electronic form • Early Procurement Tools Emerge • Auction • Classified Ads • “e”-Frenzy takes over • Here come the promises NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  10. Promises, Promises • From a October 2000 software company press release: XXXXX’s eProcurement solution will allow medium-sized companies to leverage their buying power, strengthen their supplier relationships and streamline their internal purchasing processes. It gives companies the ability to eliminate unplanned buying and improve cost efficiency by automating procurement practices and funneling online purchases through pre-selected suppliers under pre-negotiated pricing contracts. "The eProcurement market is beginning to explode, but many of our customers have been left on the sidelines because they simply can't afford an enterprise eProcurement application," said XXXXX, president of XXXX's ASP business unit and chief marketing officer. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  11. Promises, Promises It's a small world after allby Andrew FisherPublished: November 15 2000 16:20GMT | Last Updated: November 16 2000 19:26GMT In these ferociously competitive, cost-conscious days, anything that can save a company large sums of money is bound to make executives sit up and take notice. Electronic procurement holds out such a promise and is enticing ever-more businesses to move their purchasing online. The advent of electronic marketplaces or business-to-business (B2B) exchanges promises to take this process even further. E-marketplaces have been springing up in all sectors, whether to link the purchasing activities of big players in industries such as cars, retail and electronics, or to provide neutral web-based forums for smaller companies to do business with each other. Sellers can also derive advantage. "With e-procurement, suppliers have the ability to become far more proactive in the way that they do business," adds the Butler report. They can be hooked into companies' stock systems to see when goods may be due for renewal instead of just showing their products in a catalogue and waiting to be approached by buyers. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  12. Bystander: “You don’t know where you are, or where you are going, but you expect me to be able to help you. You’re in the same position as you were before, but now it’s my fault.” A lost balloonist reduces his altitude to ask a man he spotted below for directions. Balloonist: “Can you tell me where I am?” Bystander: “You are in a hot air balloon 30 ft off the ground talking to me.” Balloonist: “You must work in information technology.” Bystander: “How did you know?” Balloonist: “Because everything you said is technically correct but it is of no use to anyone.” Bystander: “You must be in marketing.” Ballonist: “How did you guess?” NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  13. Promises, Promises: in the Aviation Industry • AsianAerospace 2000 (February 22-27) • e-Marketplaces/e-Procurement services announced: • AviationX • Aerospan.com • MyAircraft.com • Skyfish.com NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  14. Promises, Promises: in the Aviation Industry • Replacing the manual RFP/RFQ system • Reducing Transaction Costs • Reducing Transaction Time NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  15. Promises, Promises: in the Aviation Industry • Replacing the manual RFP/RFQ system • Reducing Transaction Costs • Reducing Transaction Time “Supply Chain Focus” NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  16. Promises, Promises: in the Aviation Industry • Replacing the manual RFP/RFQ system • Reducing Transaction Costs • Reducing Transaction Time • Reducing The Price Of The Component NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  17. Promises, Promises: in the Aviation Industry • Replacing the manual RFP/RFQ system • Reducing Transaction Costs • Reducing Transaction Time • Reducing The Price Of The Component “e-Marketplace Focus” NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  18. Promises, Promises: in the Aviation Industry iShopAero.com aviationX NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  19. Reality: in the Aviation Industry Why did they fail? iShopAero.com aviationX NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  20. Why did they fail? • Not a lack of funding • Most had “big name” backers • So what was it that they had overlooked? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  21. Reality Check Time E-Marketplaces By Karen J. BannanJuly 1, 2001 "The e-marketplaces that failed were built on the notion that the owners were going to get very rich very fast," says Barbara Reilly, VP and research director at Gartner. "They weren't built on solid business models, nor were they built on really making the existing business process more efficient. They never delivered on their promises." NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  22. Reality Check Time E-marketplace survival strategies (Booz Allen, Hamilton) Last modified:January 5, 2003, 4:00 AM PST With the help of the Darden Graduate School of Business at the University of Virginia, Booz Allen revisited a large sample of the e-marketplace sites--approximately 1,100 of the 1,802--to document the failure rates.  Of the full sample of exchanges, 45 percent have disappeared. Of the e-marketplaces in the consortium-backed category, however, only 21 percent have failed.  15 percent of the consortium marketplaces we examined merged with or were acquired by others. When we looked at our data from the perspective of service-offering segmentation, thehighest failure rate occurred among the total procurement e-marketplaces--those offering digital catalogs and online auction services. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  23. Reality Check Time Rapid backlash against early e-marketplacesBy Geoffrey NairnPublished: March 11 2002 14:08GMT | Last Updated: March 12 2002 15:31GMT "Meanwhile, people failed to do the really basic research. Do people use the internet in this industry? How likely are they to use the internet as a trading platform?" Experts say many trading exchanges were fatally flawed in both conception and execution. They are most critical of the marketplaces set up by venture-backed dotcom start-ups. These managed to win over investors - at least in the initial rounds of funding - but were less successful in convincing the industrial players whose participation they desperately needed. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  24. Did anyone succeed in Aviation? • Inventory Locator Service, LLC • Founded in 1979 • The original aviation eMarketplace • Approx 100 employees • $28+ million in annual revenue NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  25. Why did ILS succeed? • Every new player claimed there was a need for a central e-Marketplace in the aviation industry. • Every new player claimed their service is the one that can fulfill that role. • But everyone seemed to ignore the fact that ILS was (and still is) that marketplace. NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  26. For Elements Are Needed For A Successful eMarketplace • Content • Community • Commerce • Activity • Tools • Credentials NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  27. There Are Two Elements To Content • Quantity • How many SKUs are listed? • If it is needed, is overhaul data also available? • Quality • Is the database up-to-date? • How can I be sure? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  28. Example: ILS Content Quantity • Over 54 Million Line Items • Over 5 Billion Parts • Over 1.5 Million Line Items Of Overhaul • Plus • OEM Listings • PMA Listings NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  29. Example: ILS Content Quality • Inventory Update Requirements • Minimum of every 30 days • Inventory Update Methods • Random Audit Program • Accredited Vendor Program NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  30. Community NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  31. ILS e-Marketplace Community • 200 Airlines • 700 Repair Facilities • 80 FBOs • 45 Government Procurement Agencies • Over 10,000 users • In over 70 Countries NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  32. Commerce (Activity) • Parts/Services Searched For • What was the hit rate? • How Many Unique Customers Use The System • RFQ’s Sent/Received • Bids Placed Get real data…not projections NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  33. ILS e-Marketplace Activity- March 2001 • 2,740,530 Part Searches • 79.2% Hit Rate • 6,452 Unique Customer IDs • 46,063 Quote Requests • 179,769 e-Mails & Faxes • 1,212 Message Broadcasts It’s About Results! NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  34. Commerce (Tools) • Inventory/OHC Listings/Search • Service Directory • RFQs (via e-mail & fax) • Auctions (Forward and Reverse) • Government Bidder Services • Catalogs • Systems Integration NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  35. ILS e-Marketplace Tools • Inventory/OHC List/Search • Supplier/Services Directory • Message Broadcasts • Auctions (Private & Public) • BidQuest™ (e-Procurement) • Catalogs • Government Bidder Services • Systems Integration • Decision Support Tools NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  36. Credentials • Neutrality • Financial Stability • Technology Track Record • Security • Service NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  37. Credentials • Neutrality • Financial Stability NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  38. Credentials • Neutrality • Financial Stability • Technology Track Record NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  39. ILS Technology Track Record • Dumb Terminals with Acoustic Couplers • PCs with DOS • Windows 3.1 • Windows 98 • Windows NT • Internet Explorer • Netscape NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  40. 1979 mid ’90s NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  41. 2004 NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  42. Credentials • Neutrality • Financial Stability • Technology Track Record • Security NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  43. Credentials • Neutrality • Financial Stability • Technology Track Record • Security • Service NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  44. ILS Service • 24 X 7 Operation • 99.9% Uptime YTD • Formal and documented Disaster Recovery Program • Subscription to SunGuard • Field Service Personnel • Training Seminars NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  45. For Elements Are Needed For A Successful eMarketplace • Content • Community • Commerce • Activity • Tools • Credentials NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  46. Summation • eMarketplaces are not new • Supply chains and eMarketPlaces are not the same • Some dot.com casualties may continue • Innovation and technology are important, but so is a sound business foundation and an understanding of the industry NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management within the Business Cycle”

  47. Thank You For Your Attention Any questions? NCMA World Congress 2004 “Maximizing Value to Stakeholders…Contract Management in the Business World”

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