Online supplier proposes building long-term relationships Internet companies seeking to help smaller companies consolidate buying power online to get lower prices for materials and services may be forgetting an important ingredient - the suppliers also need to benefit. That's what Ross Berner, co-founder and senior vp of Chicago-based Prime Advantage Corp., believes is both the Achilles heel and potential opportunity for Internet-based business-to-business market exchanges in the future.
"Companies that use all types of raw materials and services are our primary customers. We aggregate demand for them to get lower prices for things like steel or freight transportation," Berner said in an interview with FLEET OWNER. "However, there's another component to this - the suppliers. Not only do they need to get more volume and revenue from aggregated demand, they need it with a long-term contract. That way, it's a win-win for everyone."
Right now, where trucking is concerned, most Internet market exchanges are focused on the spot market - in essence, creating "bulletin boards" to list available freight on a day-to-day basis. Berner believes that to really make an Internet exchange grow and be successful for truckers, something more long term is required.
"Only 15% of trucking is oriented towards the spot market, with the remaining 85% operating with long-term contracts," he explained.
Berner said he learned about the advantage of scale through his own trucking experience with United Road Service, a nonunion auto-hauling carrier he started in 1997. "The advantage of scale at United Road Service was that we could buy trucks and fuel at a better price than our smaller competitors," he explained. "It was a strategy that worked well for us and is at the heart of what we are trying to do with Prime Advantage. We're trying to recreate that in the virtual marketplace.
"The advantage of a conglomerate is that size gives you power," said Berner. "We want to provide a tool to give smaller companies more clout in price negotiations, whether for materials or transportation."