The global economy is in saw-tooth mode. The same goes for many chimney industries that provide the basic raw materials that go into building all kinds of end products, from cars to medicines to sofas.
Supply chains remain under pressure, interest rates and prices fluctuate.
Bryzos CEO Shep Hickey and ChemDirect President Dave Hase told Karen Webster that three years into the pandemic, companies in the steel and chemical industries (respective focal points of their platforms) are surging to digitize and modernize B2B commerce in times of uncertainty.
“There’s fear out there,” Haase said, “but there’s a lot we can do with technology to limit the risk these companies have” by finding business partners, improving price discovery — and paying for it too, with in-app payments. and credit.
The change is evident in their verticals, executives told Webster. Hickey noted that senior steel company executives, including CEOs and CFOs, see value in moving to online marketplaces to expand their buyer base, reduce risk exposure and maintain profit margins. As with any massive but fragmented global industry, the cast of characters can be diverse, as Hickey noted, ranging from large players with robust in-house analytics departments focused on optimizing operations to dozens of smaller companies. more transaction-oriented, simply looking for their next order.
All has to deal with rapidly changing industrial dynamics. A slight drop in the price of steel – say, a pound of nickel – can trigger a cascading effect that hurts the industry as a whole.
As Hickey pointed out, “These are the things you can talk to the executives about and show them that if you’re using a market, maybe you don’t need to start dumping your metal – because you have a larger network of buyers.”
According to Hickey, “all a platform really does is fulfill the wishes of its users – we are a big communication pipeline, to some extent, to help buyers and sellers get along” .
Especially in B2B, where trillions of dollars flow between companies and across borders, platform “stickiness” comes down to one thing: customer experience.
Expectations of what a platform could and should be are increasingly shaped by those B2C behemoths Amazon and Uber, which have embedded a soup-to-nuts experience, covering everything from browsing to payment to payments, returns and discounts.
Uber stands out as a prime example of the growing expectation for invisible and integrated payments. The model is a continuum of seamless interactions, from finding the driver and car you want, to choosing the agreed pick-up time and location – and the payments, of course, are invisible.
In-app payments essentially keep shoppers in a single ecosystem for end-to-end purchases.
Easier said than done in commercial commerce, where booking and payment require changes to how businesses manage their own payment flows and net terms. This is where the effort towards a B2C experience must take into consideration a number of factors that Uber and Amazon simply do not meet.
Yes, there is a certain level of complexity in ensuring that the Uber passenger has the solvency to get into the back seat of that car. Credentials on file are checked to ensure the necessary funds are in place before the driver is called into the job himself. If the registered card has NSF, the transaction defaults to a backup card – or failing that, the driver doesn’t do the job.
There’s a whole other level of assurance that needs to be in place when a $50,000 order goes through a B2B platform.
See also: B2B marketplaces offer buyers trust, transparency and relief from boredom
As Hickey noted, the B2C transaction ends when you checkout. But B2B processes starts at checkout. “All the wheels start turning and the coal goes into the boilers,” Hickey noted, “and the forklifts start moving.”
Exceptions are commonplace. Orders may be partially filled. Shipments may be delayed due to accidents or bad weather.
“In the metals industry,” Hickey said, “you spend a lot of time sweeping yesterday rather than working today.” This means designing flows on the platform that can account for these exceptions and allow buyers and sellers to continue trading while solving these operational issues.
As Hickey said, “there’s a kind of ‘wink, wink’…you can overship by a certain amount in the industry.” Sometimes up to 10%. After all, not all steel lengths are uniform, and it’s an easy way for suppliers to increase revenue while buyers have additional material to work with. However, this can lead to friction. For any given order, companies are going to have to reconcile invoices and payments a significant percentage of the time.
When the time comes to satisfy the conditions, this is when the dance between buyers and suppliers becomes most pronounced.
Buyers want to take as long as possible to pay. Suppliers want payments expedited as quickly as possible.
In Bryzos’ model, the company will automatically fund the seller’s bank account, eliminating the need to extend credit or pursue collections. Partners can secure real-time funding decisions to ensure funding is appropriate.
And in a somewhat different model, Haase said, platforms such as ChemDirect negotiate how the supplier wants to be paid and let the buyer choose their own terms. At the end of 2021, ChemDirect launched its flexible financing option ChemPay in partnership with the Balance B2B financing solution. As a result, CFOs can have greater confidence in payments and (having paid a small fee to ChemDirect) need not worry, as they otherwise would, that new, smaller customers need to be qualified.
See also: Chemical industry buyers find new supplies on online marketplaces
As Haase explained, “there are a lot of things that go into full price transparency for chemical manufacturers.” He noted that prices are negotiated by trade teams. There is no safety stock in terms of inventory. Inventory is shipped and received within days, but payment terms can extend to 30, 60, or even 90 days.
As he told Webster, “If you have the right solutions…we can take all of this away from them, and with the right funding in place.”
Looking ahead, Hickey and Haas said, with so much economic uncertainty in the mix, platforms offer new revenue streams as businesses embrace digital commerce in a meaningful way.
ChemDirect’s Haase noted that as demand waned, his company launched a separate online marketplace for excess and aging inventory. With a nod to the fact that at least some vendors may not want to advertise that they offer discounted products, the new marketplace is “vendor blind and agnostic…we offer specifications without supplier information”. Along the way, the appetite for vendors to try an online marketplace for the first time is growing – after all, they want to sell their inventory.
“That’s the beauty of a two-sided market,” Haas noted. “When you get it right, it develops its own gravity as you grow.”
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