When Glen Meakem set out with partner Sam Kinney to launch FreeMarkets Online Inc. in 1995, he knew they would have to change the very fabric of how business is done between manufacturer and supplier to succeed.
And they have.
Meakem and company quickly developed a rather complex computer software-based purchasing process that offers manufacturing clients extensive market research to identify the best possible suppliers of a given component. Then FreeMarkets brings those suppliers together online via a secured computer network in what amounts to a reverse auction designed to establish a fair market price for the buying client. The buyer then chooses among lowest bidders.
For the suppliers, FreeMarkets becomes, in effect, a sales agent/distribution channel for their products, and for the buyers, the purchasing process becomes more cost-efficient and quality-based.
While the complex process could be applied to virtually any industry, Meakem says the company has focused mainly on custom-fabricated plastic injection moldings, metal fabrication, custom electronics and, as he puts it, near-commodities such as coal, steel and steel scrap.
Trying to change the way manufacturers and supplier have done business since the beginning of time remains a daunting task. But Pittsburgh-based FreeMarkets Online has made daunting headway in the purchasing game. In 1998, the company transacted $500 million in market volume for roughly 10 clients, up from $20 million in 1996.
Meakem wont disclose sales figures, other than to say the companys revenue is growing at an annual rate of 350 percent. It also grew from 37 people at the end of 1997 to about 115 people by the end of 1998.
We beat our plan by a good chunk, says Meakem, who adds that his company is profitablesomething he didnt expect until next year.
He attributes last years growth to the fact that two major clients really adopted the FreeMarkets method of buying components.
Before 1998, we had a lot of pilot use in the market, but now were growing quickly and gaining critical mass, Meakem says.
That growth should continue at even higher levels this year, he says. He notes the company has booked new business that will double the current amount of business conducted. He also expects both revenue and employee numbers to double. To fund the growth, Meakem says hell use profits first and possibly additional outside capital, and the company is considering the possibility of an initial public stock offering within the next couple of years.
Says Meakem: We intend to grow fast and we intend to be a big, valuable company.