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Caterpillar uses its Web site to invite bids on parts from preapproved suppliers. Suppliers bid on-line over a specified period and a contract is awarded to the lowest bidder. Negotiation time is reduced and average savings on purchases are now 6 percent. In this way, the customer has taken almost total control of the transaction, for it has become difficult for suppliers to compete on anything but price. There is little opportunity to differentiate products, engage in personal selling, or to add service, as traditional marketing strategy would suggest suppliers do.
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