There is no doubt that methods of finding suppliers are shifting. Thomas Global Register (online), recently closed its doors and will discontinue publishing IEN, a magazine it has published since the Great Depression Era. While the company cites the global economic downturn as the primary driving force behind this, Jason Busch, of Spendmatters, reports a different potential cause: declining revenues over the last few years. If this is the case, and Thomas Global's value offering has not kept pace with the shifting supplier directory market, then where is the supplier directory market going?
In another Spendmatters post, Jason, segmented the supplier directory market into 4 categories, based on the value offering and business models of the supplier directory firms that offer different approaches to the market of small and mid-size companies who tend to source manufacturers (as opposed to large companies which rely on sourcing offices and large sourcing companies abroad). According to the Spendmatters' segmentation:
1) Group 1 features companies which have applied offline paradigms to the internet. Examples include ThomasNet, and smaller, niche focused sites like Surplus Record. These sites brought their supplier listings online and provided support to help their listed manufacturers and service providers improve visibility and accessibility.
2) Group 2 includes companies like Alibaba.com and Global Sources, supplier directory providers who seek to bring the world's manufacturers to your computer screen–a more global or worldly approach. They have a similar model to the first group, and tend to offer value in the breadth of their directory with respect to manufacturing listings by category and country. As Jason points out, these tend to be the sites frequented by small and mid-size companies, product inventors and entrepreneurs in the early stages.
3) Group 3 includes companies that are repositioning their supplier networks, which were geared more towards facilitating transactions, into supplier networks which will facilitate sourcing new suppliers and issuing RFQs. These companies include Ariba and Ketera.
4) The 4th group of companies include commerce driven models, like MFG.com. Where companies like Alibaba and Global Sources present a wider, more global listing, MFG.com seeks to supply a service focusing more on depth. MFG.com allows industrial buyers and engineers to source potential suppliers, transfer relevant, and IP sensitive product documentation in a secure format, and proceed through the RFQ and negotiation process.
Because of our work with new product development, start-ups, and entrepreneurs, we often get addressed with questions regarding the 2nd group segmented out by Jason, or the alibaba.com's, and Global Sources, of the internet. I probably caution those new to working with manufacturers overseas that there is A LOT more to seeing a nice website and emailing a potential factory overseas, just as much as Dan Harris, of ChinaLawBlog, gets X phone calls a week from some poor sap who wired money to a supposed factory overseas and hasn't heard a peep from them since.
It's also not uncommon I hear someone with reasonable business experience and intelligence regale folks with a story about some horrific China-related quality incident or fraudulence that happened to someone else, but when it really comes down to vetting who they're working with and what's going on at the factory they are depending on, no one at their organization has visited the factory in a looooonng time. If you think this sounds absurd, see the end of Dan's post on How Not to Get (China) Internet Scammed here, and note that the same sort of cognitive dissonance, or believing that there is no way they could be involved with the same sort of low-level quality or fraudulent factory over the internet as the scam tale which they laughed about, can also be seen in 60 year-old midwesterners paying lots of money to order 22 year old, mail-order brides from Russia, only to find out that Olga isn't really coming to Illinois.
As I've mentioned several times in other posts, companies like Panjiva are working to provide greater transparency into the suppliers you may be working with overseas and what they may be up to. Information is power and when considering the ever-important topic of risk management, it is useful to know which suppliers are getting busier and which are on their way out of business all together. This is certainly not a substitute to having eyes and ears on the ground at the factory you're working with, but with respect to ferreting out potentially bad suppliers found via the internet, a 3rd party source of information like Panjiva can be useful. While the internet has opened up quite a bit in the way of locating and communicating with manufacturing sources over the last decade, I would wager that the number of scams is probably still on its way up. I think there is still quite an opportunity in helping online supplier directories provide better quality information, and help in managing the sourcing process, alongside the names and contact information of manufacturers. The question is, when you can you really start substituting good information communicated online, for paying to have experienced personnel on site at the factory? We're not there yet, by any means.