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ecFood Approaches Profitability - An Internet Trading Exchange Bright Spot

Written By: Olin Thompson
Published On: June 14 2001

ecFood Approaches Profitability - An Internet Trading Exchange Bright Spot
Featured Author - Olin Thompson - June 14, 2001

Event Summary

ecFood (www.ecFood.com) has announced $50 million in transactions for the first quarter of 2001. The quarter's volume continues the upward trend set over the past three quarters. The end of the first quarter also saw the first year's anniversary of providing paid online services to the food and beverage industry. ecFood's highly focused customer base of buyers and sellers continues to grow as the company sees profitability by the end of 2001. ecFood provides web-based sourcing for the food and beverage industry.

The company's roots are deep in the food industry. The majority of the company's personnel have strong food industry backgrounds. This experience shows in a number of ecFood's offerings that reflect the realities of sourcing in the food and beverage industry.

A key food industry specific offering is ecSpec, the company's specification management solution. With ecSpec, a buyer can fully define the specifications for the items to be purchased and the seller can fully understand the needs of the customer. At the core of ecSpec is a series of food industry specific tools including specification templates, industry standard terminology and ontology, and key word based or parametric searches.

The company provides several buying e-sourcing options including reverse auctions, Request for Quote (RFQ) and one-to-one negotiation tools in a Demand Aggregation or individual format. These buying options are backed by professional services that include Market analysis, Item profiling, Sourcing configuration, SKU rationalization and Supplier recruitment. A combination of professional services and tools provide the purchaser with work flow to move from their current state to one of being ready to utilize web-based sourcing. The workflow assists the purchaser in selecting appropriate SKU's and preparing item specifications that identify volumes, locations and order patterns through the purchasing process including the setting of and evaluation of goals and measurements.

e-sourcing permits the food company to conduct Internet-based auctions for its purchases. Recent items purchased using e-sourcing included pasta, corn syrup, stretch wrap, liquid sucrose, apple juice, pallets, and diesel fuel. A recent auction for 1.2 million pounds of rice resulted in a savings of 12.3% for one SKU and 10.8% on a second SKU. An auction for navy and pinto beans resulted in bids from 10 suppliers over a half hour bid period and resulted in savings of 15%. Discussions with sellers indicate that they are reaching customers who would be unavailable to them without the use of ecSourcing. Buyers using e-sourcing have included Bordens, HP Hood, Hormel, Interstate Brands, Agrilink and Furman Foods.

Demand Aggregation allows multiple buyers to combine their demand to gain better terms with suppliers. The associated buyers could be an industry group, existing buying group or an ad hoc group assembled by ecFood. Demand Aggregation opportunities scheduled in the near future include beef trim, butter, cheese, chicken meat, carton tape, pallets, labels, transportation and others.

A recent Demand Aggregation agreement was created with The Coca-Cola Bottlers' Association (CCBA), an independent trade association serving participating member Coca-Cola Bottlers in the United States. CCBA will use ecFood as part of its cooperative purchasing programs. Under the agreement ecFood, will provide a full range of e-procurement software and services including sourcing, supplier rating, negotiated bidding and specification management. The initial efforts included both ingredients and MRO items.

Market Impact

The buyer benefits of web-bases sourcing continue to be documented in most industries. The unique needs of the highly competitive food and beverage industry have meant that these benefits have been slow in developing for these companies. As food industry specific functionality becomes available, food companies are proving that the benefits shown in other industries are achievable in the food and beverage industry.

As the number of dot coms dwindles, we see some examples of highly focused exchanges with growth and a path towards profitability. ecFood is an example of one such exchange. A number of other food industry specific sites have fallen by the wayside plus the general-purpose sites (for example, ICG and Freemarkets) have found the needs of the food and beverage market a significant challenge.

The food and CPG consortium, Transora, offers a wide variety of services to the food and beverage industry. These services include some web-based sourcing. As of today, the sourcing tools and services available from ecFood have progressed beyond those foreseen by Transora.

User Recommendations

Web-based sourcing is a new tool that extends the efforts of the food and beverage company's existing procurement efforts. All food and beverage companies should evaluate web-based sourcing to lower their cost and improve the quality of their purchasing operations.

Mid-sized food and beverage companies should be especially attracted to these approaches. Large food and beverage companies typically get the lowest price available due to greater volume and market visibility. These large companies can also afford to invest in private exchanges. Web-based sourcing has proven to provide the mid-sized company with these same benefits at a fraction of the cost.

Transora members should evaluate ecFood as an alternative to the sourcing options planned by Transora. At minimum, ecFood should be evaluated as a short term cost reduction effort and a learning experience in the new world of web-based sourcing.

ecFood should continue its focused approach to the food and beverage industry and its focus on profitability. It should increase its market awareness efforts to become a better know name within its target market.

About the Author

Olin Thompson is a principal of Process ERP Partners. He has over 25 years experience as an executive in the software industry with the last 17 in process industry related ERP, SCP, and e-business related segments. Olin has been called "the Father of Process ERP." He is a frequent author and an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and the impact of technology on industry.

He can be reached at Olin@ProcessERP.com.

 
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