Disruptors Video: An eBay for Manufacturers (MFG.com)

Remember all of those B2B exchanges that were supposed to change the industrial landscape before they evaporated at the tail end of the last dotcom boom?  Well, at least one of them survived—a small company based in Atlanta called MFG.com.  Today, it is a thriving Web marketplace for manufacturers and their suppliers.  I talk with CEO Mitch Free in this week’s episode of the New Disruptors.

MFG.com is a Website where engineers and purchasing managers from places like Apple or Northrop Grumman can put up CAD diagrams of parts they want manufactured and get bids from suppliers all over the world.  In the past twelve months, over $2 billion worth of parts have been sourced over MFG.com. 

But instead of trying to take a cut of each transaction like eBay does, MFG.com charges a subscription fee of about $6,000 a year to each supplier.    Free says the company is on track to pull in $25 million in revenues this year and is running at break-even.  Amazon founder Jeff Bezos is the largest outside investor (he learned about it from one of the engineers at his spacecraft startup, Blue Origin).  Germany’s Samwer brothers—their startup Alando became eBay Germany—also own a stake. 

Free wants to turn MFG.com into an online platform for the manufacturing industry.  Last year, he bought Europe’s SourcingParts (a Salesforce.com for purchasing managers), and launched a manufacturing social network last March called MFGx.com. “We’ve borrowed some of the elements from Craigslist, MySpace, and Wikipedia,” he says.

But perhaps the most potentially disruptive thing about MFG.com is what Free wants to do with his growing database of CAD diagrams for every imaginable fabricated part, metal stamping, and industrial mold.  He hopes one day industrial designers and engineers will be able to estimate the true manufacturing costs of the products they are designing by comparing the parts they need with similar ones in MFG.com’s database.  They could tweak the design and get instant feedback on the likely manufacturing costs. All that Free needs to offer such a service is a geometry search engine for 3-D objects that can work at a commercial scale. (video) (Full transcript after the break):

TRANSCRIPT:

ERICK SCHONFELD:     Erick Schonfeld with The New Disruptors.   I’m at the MIT Museum in Boston talking with Mitch Free, the CEO of MFG.com which is the largest manufacturing exchange on the planet.   Think eBay for industrial parts like stamping machines and molds and gears.   Jeff Bezos, founder of Amazon.com, is the largest investor in MFG.com.   

MITCH FREE:    Jeff had heard about us for a couple of sources.  One is some of the engineers at his Blue Origin project were using us to source prototypes for the space craft they’re designing.   

ERICK SCHONFELD:  What’s disruptive about MFG.com?

MITCH FREE:     MFG.com is a marketplace for the manufacturing industry. And it’s so efficient we’ve been able to dis-intermediate traditional trading houses, manufacturer's representatives and brokers.   These are people who sort of sat in the middle between companies that manufactured products and their supply chain. 

We're bringing together one of the largest industries in the world, it is highly fragmented, and we're the dominant player in that marketplace.    

We did a subscription model versus taking transaction fees or commissions because once you start taking transaction fees or commissions then you incentivize the participants to go around the marketplace in order to usurp paying that fee. 

ERICK SCHONFELD:     So what’s next for MFG dot com?

MITCH FREE:     We created MFGx.com, a social network for the manufacturing industry.   We’ve borrowed some of the elements from like Craigslist, MySpace, Wikipedia.   And then we’ve also just filed a patent recently start to begin to leverage some of the data that we have.   We have hundreds of thousands of 3D CAD models.

So we can actually now predict when an engineer or a purchasing group sources a 3D part.  By using 3D-search technology, we can look at previously sourced and purchased parts and see what that part is more than likely going to cost in the market.   

ERICK SCHONFELD:     So if I’m an engineer and I’m designing some sort of gear or widget I can figure out how much that’s going to cost before I even design into the part?

MITCH FREE:     Absolutely in real time.   As you’re designing that in your CAD system we can bounce that geometry via web services off our database and look at similar parts and tell you in real time as you’re designing what the market charges to make parts like that.