Business models

The advantages of platforms in the metal industry

| Author / Editor: Marek Sacha / Alexander Stark

In many other industries platforms have already proven their added value.
In many other industries platforms have already proven their added value. (Source: gemeinfrei / Pexels)

Digitalization in the steel and metal trade is far from being as widespread as it could be - at the same time, getting started has never been easier.

If you look at the current degree of digitalization in the metal and steel industry, you are still presented with a very heterogeneous picture. In production, many companies have recognized the benefits of digital technologies and have partially implemented them. According to a Fraunhofer study from spring 2019, 95 % of the companies in Germany have already automated almost half of their processes. However, the entire industry only achieves a digitization level of 30 %.

The situation is particularly dramatic in the steel and metals trade. "In many enterprises the fax machine is still state of the art for the completion of procurement orders, the study revealed. By the way, in Germany, faxing celebrates its 40th birthday this year. Companies that use digital sales platforms are unfortunately still considered a bit of an exotic among steel and metal trading companies. Yet processes could be accelerated and better structured, i.e. made more efficient with these platforms.

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In many industries platforms have proven their added value. Just think of Amazon or Airbnb. Customers can choose from a multitude of providers in a digital ecosystem and quickly find the best offer for themselves. The providers, on the other hand, can reduce their advertising expenditure, because the presence on the platform is more likely to get them in contact with customers than by only advertising on their own.

Step towards globalization

Similar advantages could also be realized in the steel trade. As a first step, a suitable marketplace should be found for the company to facilitate its digital transformation. Marketplace solutions already provide a ready-to-use basis. Generally, a trading platform consists of a shop-in-shop solution, i.e. a supplier remains visible as such, but consumers can still search for products across the entire platform. How well this works in practice is shown by the examples of ebay and Amazon, which triggered a veritable wave of start-ups. Tinkerers, small antiquarian bookshops or goldsmiths for whom their own online shop would have been too expensive could suddenly address an international clientèle.

With a suitable platform, many suppliers in the steel trade who have not yet exploited the benefits of e-commerce could catapult themselves into the digital age. They can present themselves independently on a digital marketplace and at the same time be easily found by buyers. If you are looking for a specific material product, you will find all the suppliers who can deliver it. The prices can then be negotiated individually. This benefits both large traditional companies and small specialist providers who can easily reach customers all over the world on a digital marketplace.

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Only one interface instead of 100

One platform for everyone is a convenient solution because individual dealers do not have to make any investments to sell their products online. There is no need to set up your own online shop and no need to connect to a large number of customers who want to order digitally. After all, an e-commerce solution in the B2B sector needs to be maintained on a regular basis and it also makes sense to connect the merchandise management system directly.

Both suppliers and consumers only need one interface if they trade on one platform. If you operate your own online shop on your website and perhaps have 100 customers and now want to connect them digitally, you have to create 100 interfaces and keep them up to date. The great advantage of a platform for the entire steel trading industry is therefore the greatly simplified IT complexity for all parties involved.

Also, the access to these types of platforms usually doesn’t involve big hurdles. Technical knowledge is usually not required since the connection to the suppliers' enterprise resource planning system is taken over by the IT experts of the platform. Consumers then only have to register themselves on the platform.

The Time Saving Machine

Considering the huge number of individual parts of a car or the metal and steel parts required for a high-rise building, one can get an idea of how much time could be saved if all components and materials could be ordered online - via a single platform and without limited office hours.

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With a global platform, manufacturers can focus on production and sales teams gain more time for customer service. The time saving results not least from the elimination of media breaks. No one would have to copy orders from a fax and enter them in an Excel spreadsheet anymore. Buyers also save time in finding the right suppliers and material products. Buyers can access product availability and information directly. Standard orders or recurring orders could be processed with a few mouse clicks.

But the platform vision goes even further. In addition to the pure processing of orders, there are other advantages resulting from this pool of providers and processes. In the future, a platform could also support the logistics of suppliers. Then, even more capacities could be saved. Financing or insurance services would also be possible in the medium term. After all, Amazon and Google are already active in the banking sector, and Amazon already offers its own insurance policies for some products.

Before Silicon Valley dominates the digitalization of this industry, we Europeans should do it ourselves. Whoever sets the platform standard will later define the market. To put it in the words of digital expert Felix Staeritz: "This is not about the digitalization or disruption of the industry, but about its future as a whole."

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This article was first published by MM MaschinenMarkt.

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