B2B Manufacturer-Distributor Disruptors
Two other companies in the United States that are disrupting the conventional manufacturer-distribution model in the business-to-business (B2B) space are GoDirect Trade and OpenMarkets. There are indications that GoDirect Trade and OpenMarkets are changing how products are distributed in the aerospace parts industry and the medical equipment and supplies industry, respectively.
- GoDirect Trade, a business that Arizona-based, long-time aircraft engine and avionics manufacturer Honeywell Aerospace launched on December 15, 2018 after only 12 weeks of product development, is a digital marketplace that makes the process of selling and purchasing aerospace parts more efficient and more pleasant.
- The aerospace parts that are sold on the platform are segmented into the following categories: landing gear, actuation, auxiliary power unit (APU), electronics, engines, quick engine change (QEC), flight structures or surfaces, general, interiors, lighting, mechanical, thrust reversers, wheels and brakes, blades, APU parts, and avionics.
- To guarantee product quality, GoDirect Trade ensures that each listing on the marketplace has product photos, price, and quality documents.
- With the help of blockchain technology which facilitates part traceability, GoDirect Trade promises a smooth and transparent experience for its buyer base, which, to date, is composed of around 2,000 buyers from more than 800 businesses in the aerospace industry. The company's buyer base is a mix of airlines, aircraft operators, and aircraft repair centers.
- Inspiration for the marketplace came from arts and crafts platform Etsy and automotive vehicle research platform CarFax, but the platform is powered by Adobe's Magento Commerce and was developed with the help of Tata Consultancy Services.
- Sellers are subject to a yearly subscription cost of $15,000.
- GoDirect Trade is gaining traction in the e-commerce space that used to represent just less than 2% of the transactions in the $4-billion used aerospace parts market.
- It is providing a more convenient and more transparent alternative to the traditional buying and selling process where pricing a part takes days or weeks and closing a deal takes four emails and two phone calls on average. Each part on the GoDirect Trade platform is available for immediate sale and shipping.
- Requiring sellers to provide complete information, including images, price, and quality documentation, was an industry first. In just 10 weeks, the business was already able to generate $1 million in revenue.
- GoDirect Trade has been covered by numerous news and media outlets, including The Wall Street Journal, Forbes, Yahoo! Finance, Phoenix Business Journal, Aviation Week, Aviation International News, and CIO.com.
- According Lisa Butters, GoDirect Trade's general manager, the fact that a buyer on the platform recently purchased a used jet engine worth $100,000 is a signal that the aerospace industry is now more willing to shift to digital. The purchase, which took only a few days because of blockchain, would have taken around six months if the traditional process was used.
- With well-known suppliers such as Dassault Falcon, StandardAero, Jet, H+S Aviation, and Turbo Resources already onboard, the business is now able to populate its e-commerce marketplace with more than $300 million worth of parts inventory. The first three months of the business saw inventory reaching 2,000 parts, with prices ranging from around $1,200 to $120,000.
- As of May 2019, GoDirect Trade was already able to generate a total of $2 million in revenue, with Honeywell Aerospace projecting this amount to reach $10 million by end of 2019. Average transaction amount as of that month was around $8,000.
- OpenMarkets is an Illinois-based software-as-a-service (SaaS) startup whose goal is to help healthcare providers save when procuring capital equipment and other medical products. Its software offers users improved visibility into clinician needs and vendor relationships.
- The company positions itself as "the smart way to buy and sell" medical equipment such as bladder scanners, sterilizers, positioning tables, anesthesia machines, carts, point-of-care ultrasound equipment, lab equipment, stretchers, surgical drills, and laparoscopic instruments. It offers savings of up to 20%.
- Well-known suppliers on the platform include Fujifilm, Mindray, Faxitron, Technibilt, Health o Meter, and Clorox Healthcare.
- OpenMarkets's current annual revenue is an estimated $10.8 million.
- According to Frost & Sullivan, group purchasing organizations (GPOs) and pharmacy benefit managers (PBMs), both long-time players in the manufacturer-distributor supply chain, consider OpenMarkets and other digital marketplaces and contract management platforms such as Amazon Business, Global Healthcare Exchange (GHX), and DST Pharmacy Solutions an opportunity and a threat. Hospital buyers now express increased willingness to buy direct from digital marketplaces that are capable of providing superior transparency, pricing, and personalization.
- OpenMarkets is one of a few startups in the medical equipment and supplies industry that "recognize the long-standing inefficiencies and have built technology-enabled channels to connect product and service suppliers directly with providers." Its software offers price transparency, cost efficiency, and improved supplier-healthcare provider relationships that cannot be achieved with usual distribution channels such as GPOs.
- Medtech companies are likely rethinking their relationships with GPOs given that there are now better alternatives.
- So far, OpenMarkets has over 125 equipment suppliers and over 4,103 healthcare facilities buying and selling equipment and products on its platform. Over 30,000 products are on offer on the platform, with these products typically priced 11.8% lower than regular prices.
- OpenMarkets was recently able to enter into a multi-year partnership with Resource Optimization & Innovation (ROi), a Missouri-based supply chain organization with a network of almost 250 hospitals.
- Platform innovator Applico identifies OpenMarkets as one of the B2B marketplaces that are contributing to the "disruption of B2B distribution" in the United States.
- Health systems are said to be reclaiming the purchasing process from GPOs. A case in point is Maury Regional Health, which no longer uses its GPO Vizient for purchasing. It now purchases through OpenMarkets and uses its GPO for strategic consulting services only.