How To Purchase Metals On The Internet

This primer for screw machine shop owners explains how to to search for material supplliers online.

With all the news about dot-com sites folding, you might think that e-commerce is destined to take a seat next to fads such as pet rocks, Rubik's Cubes and CB radios.

Think again. Surely, the e-commerce hype was out of hand. However, when looking at the numbers, you realize that the much-ballyhooed e-commerce revolution is still occurring... but as evolution, not revolution.

According to the Gartner Group, a technology research consulting company, the worldwide business-to-business (B2B) e-commerce market is forecast to grow from $403 billion this year to $7.29 trillion in 2004. Moreover, a survey in mid-2000 by Carpenter Technology found three-quarters of machine shop managers are open to using the Internet for at least some business-to-business activities. That figure should increase as people reach a comfort level with the technology. (After all, it probably took 5 years before most companies had a fax machine.)

In response to competitive pressures to lower costs and work faster, many screw machine shop owners are looking to the Internet to purchase supplies and materials. According to the Carpenter study, nearly half of machine shop managers last year reported having used the Internet for business purchases, either from home or work. In contrast, only 16 percent of the overall U.S. population had shopped online, according to a recent worldwide study of e-commerce by Taylor Nelson Sofres (TNS) Interactive.

Online metals buyers seem to agree that Internet purchasing offers one clear advantage over traditional metals sources: convenience. Internet metals sites never shut down. This benefit can prove especially useful for managers of operations who—saddled with shopfloor issues, sales calls, and other duties—often find themselves processing quotes well after normal business hours when salespeople at metal service centers are at home relaxing.

During the past year, screw machine shop operators have found more reasons than ever to shop online. Selection has improved dramatically, with most commonly used bar stock and alloys available at highly competitive prices. E-commerce site functionality has improved, too. In some cases, a few keystrokes or clicks of the mouse provide instant access to availability and firm price quotes. Added to this, some metals sites keep records of past transactions, materials certifications and technical data.

So a brave new world awaits. How do you get there and make the most of it?

Equip Yourself

Most personal computers manufactured in the past 3 years are properly equipped to handle an average machine shop’s Internet business—whether processing e-mail bids and quotes from customers and suppliers, or scanning the Web for materials or machine parts.

In addition, almost all new computers are marketed for Internet access and include an internal high speed modem, a component needed to convert digital data to analog signals for transmission over normal telephone lines. You will need to select an Internet service provider (ISP), a company that lets you connect to the Internet. National ISPs include America Online and Earthlink, for example. Chances are good that your regional phone company, cable company or long-distance provider offers ISP services. Expect to pay about $15 to $25 a month for unlimited dial-up service.

Digital subscriber lines (DSL), cable modems and T1 lines can turbocharge the speed of your Internet connection, but they are not necessary for an overwhelming majority of e-commerce activities.

Other than a browser program, no special software is necessary for most e-commerce sites. You can use Internet Explorer, Netscape Navigator or America Online’s browser to access sites. These programs are usually bundled with your operating system or provided by your ISP.

Different Sights At Different Sites

Even a first-time online shopper should have little trouble navigating one of the well-designed metals Web sites. Not all sites have the same purpose, however. There are three primary categories of e-commerce Web sites: auctions, public exchanges and private exchanges. It is important to know that each business model offers distinct services and methods of buying.

Auctions — These virtual auction sites are similar in many ways to their well-known consumer counterpart, eBay. In general, cost is the advantage here, as you name your own price. Of course, you may be outbid and end up with nothing. Selection can be somewhat limited and sporadic, but sometimes you can score a real bargain. As with any auction, if you expect surprises, most likely you will not be disappointed.

Public exchanges — An alternative outlet for service centers and manufacturers, exchanges have taken on several forms. Vertical exchanges target a particular sector or metal, with a subset of regional sites seeking business in various international locales like India or Asia. (Think specialty store, like Foot Locker.) Horizontal exchanges offer metals along with other commodities that a typical manufacturer would buy. (Think department store, like Wal-Mart.) In either case, prospective buyers first must register, and then prepare a separate RFQ (Request for Quote) for each product type, for circulation to exchange suppliers. Customer support varies widely by site. Some suppliers have turned to exchanges as an outlet for excess inventory or non-prime materials, which can lower costs but limit selection.

Private exchanges — While a few steelmakers have joined together to finance vertical exchanges, others, such as Carpenter Technology, have created their own Web sites. With their valuable name over the door (or, more precisely, home page), such bricks-and-mortar sponsors have been careful to build upon proven systems of customer service and sales support. Quotes are guaranteed and often immediate, with inventory status usually available in real time. Moreover, most producer sites provide for order tracking and easy re-ordering based on past transactions.

Which e-commerce model is right for your business? It depends on your circumstances. For certain long-range projects, where neither deadlines nor material specifications are tight, an auction site might offer an attractive deal. Other projects may allow time for a range of suppliers to answer RFQs posted on an open exchange. When you have specific material needs and real deadlines, a private exchange provides a level of convenience and reliability that’s tough to beat.

Beyond Point, Click And Buy

E-commerce is more than merely transactions

. . . It’s a function of how businesses relate with their customers. To that end, there are other features of e-commerce that may be different from conventional ordering, as the control has shifted from the seller to the buyer in many instances.

Delivery is one example. Most sites offer several options based on cost and timeliness. The buyer may consider the point of origin, however, when purchasing products online. What looks like a great price might merit a second look when you consider high shipping costs or slow delivery.

Online record keeping is another benefit to consider. Customer focused e-commerce sites maintain your purchasing history for you to recall or review in the future. This can simplify reordering, especially when you need the same materials. It can also provide a backup for paper records in case they get lost or misplaced.

Capabilities such as record keeping raise the important issues of security and privacy. There are issues on both the buyer and seller’s ends. First, make sure your browser has modern encryption technology. (All newer versions have it.) Check and use the security settings on your browser and on your computer to protect your information and shield it from others. Meanwhile, the seller has a responsibility to provide a secure environment for purchasing. Closely review the e-commerce site’s privacy policy to learn how your personal information will be protected. Many times, third-party alliance partners such as VeriSign provide an extra level of security, for example, by processing credit card transactions using its highly secure technology.

Finally, consider the level of customer service you will receive. Just because the Internet can automate purchasing and ordering doesn’t mean you should sacrifice human contact and service. Look into return policies. Call the customer service line several times to see if the representatives are knowledgeable and responsive. Send e-mail via the Web site to gauge how quickly your queries are answered online. Because many of the e-commerce sites are so new, there is little reputation on which to base your assessment. You have to do the homework yourself.

Some Final Thoughts

Discovering real benefits from e-commerce requires little more than good business judgment. As with all purchasing, online metals buyers must determine the proper balance between price, quality, reliability and responsiveness. In turn, those metals sites that thrive, through repeat business from satisfied customers, are those that execute such basics as ease of use, customer service, fair price, broad inventory and reliable delivery.

The real find: An online supplier that matches traditional metals sources yet offers something more—the freedom to independently review materials options whatever the hour and full control over the ordering process. Relationships matter, perhaps now more than ever as customers work with suppliers to become more efficient.

With computers now packaged as common appliances, the time is not far distant when all screw machine shop operators will routinely purchase metals online. Will they recall the waiting and paperwork commonly associated with buying metals today? Maybe with some nostalgia . . . but probably without any remorse.