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E-commerce: the parts supply chain’s missing link

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Rio Tinto has installed a company-wide e-commerce system that deals with a major equipment supplier providing it with over 6000 parts order line items every month.

Prior to the system’s implementation, the supplier based several of its employees on site at Rio Tinto to enter and chase up orders.

In today’s digital age both companies needed greater efficiency, so they developed an integrated procurement relationship using an electronic transaction platform to connect their back-end systems.

As part of this move, the companies also synchronised electronic catalogue data and increased the updates from monthly to daily.

Rio Tinto chose Quadrem’s eMarketplace as its platform and as a result both buyer and supplier have improved operations. Now, in many cases orders are filled in the suppliers’ warehouse within minutes of them coming from Rio Tinto.

The supplier now processes more than 90% of Rio Tinto parts orders without any manual intervention, which has led to a higher level of order accuracy.

Now Rio Tinto staff can focus their dealings with the supplier on value adding issues rather than wasting time ensuring orders are correctly placed. This has led to higher levels of service and satisfaction for Rio Tinto.

While the above example refers to the improvement in Rio Tinto’s dealings with a single supplier, Rio Tinto’s e-commerce program has already been rolled out to hundreds of suppliers.

But the benefits of e-commerce do not end with transactional efficiencies.

Many big companies that spend a lot of money on consumables set up contracts with key suppliers in order to get better prices and service. But it is often easier said than done to get hundreds of plant maintenance employees across different business units and in several operations to use and take advantage of that contract. E-procurement tools and processes can reduce this off-contract spending by up to 64%, to the advantage of buyer and supplier.

Quadrem’s Perth-based regional vice president Ian Hollingworth says the company was founded by mining industry people. Indeed, before joining Quadrem from its start-up phase in 2000, Hollingworth himself worked for WMC in Perth as an e-business manager.

Hollingworth tells Australian Mining that Quadrem develops solutions that remove costs for buyers and suppliers by digitising the many steps involved in buying and selling products and services.

“Our role is to streamline the interactions between buyers and their suppliers,” Hollingworth says.

“Our systems and approach to procurement and fulfilment will minimise the amount of time people have to spend on low value-added activities like resolving errors, reconciling invoices and updating parts.”

Quadrem has reached a significant scale of operation and is dealing with about 350,000 orders and other business documents such as shipping notes and invoices each month. This involves around 400 buying operations worldwide. Business done via the eMarketplace amounted to about $6bn last year and is on track to increase by 30% in 2005. Finally, the company is also cash flow positive, an important milestone for any e-commerce company in an industry that has seen many fall by the wayside.

“If large companies are going to commit to mainstreaming their procurement processes with Quadrem as a partner they want to have confidence we are going to be around for the long term. We provide that,” Hollingworth says.

“A lot of what we do is really extending a buyer’s ERP system into their supply chain, so when they use our services they are really integrating their system with our system, which allows them to more effectively interact with their suppliers.”

Buyers continue to use their existing ERP system and connect to Quadrem, which connects to the suppliers back-end.

Effectively, Quadrem acts like a hub that removes the complexity from the individual trading partners by providing a single interface between the buyer and supplier, even though their back-end systems may be different. It is a many-to-one–to-many system that works for big buyers dealing with large and small suppliers.

Quadrem also has a range of tools to suit a supplier’s particular characteristics. For instance, it can provide small suppliers that do not have ERP or middleware systems with Internet software tools that allow them to hook up to the buyer.

The system is installed and set up off line and is then tested end-to-end to make sure everyone is comfortable it works from a technical and process point of view to ensure parts turn up at the right time and place.

Hollingworth says plant maintenance staff ordering parts still deal with their own ERP.

“The difference, though, is with this system in place the item information in the ERP system is more likely to be accurate and when the order arrives at the supplier end it is more likely to be processed without delay,” Hollingworth says.

“And, maintenance guys are also more likely to get feedback to say ‘yes we’ve received this order and everything is okay and it’s on its way’.

“So it is more of an interactive process from a user perspective, but it is totally non-disruptive because they use their ERP system as they normally would.

“Quadrem is a facilitator; the concept is not to get in the middle of the relationship but to facilitate it and make sure the data is right at both ends. It is behind the scenes, invisible, and hopefully the only thing people notice is things work better,” Hollingworth says.

Meanwhile, Quadrem is expanding its Australian operations to better serve customers in Queensland. Quadrem staff in Brisbane will focus on supporting the electronic procurement programs of the Queensland-based operations of Anglo American and Rio Tinto.

Quadrem also has offices in Perth, Sydney and Singapore as well as on most other continents.

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