The global economy is in whipsaw mode. So are many of the smokestack industries that supply the basic raw materials that go into constructing all manner of end products, from cars to medicine to couches.
Supply chains remain pressured, interest rates and pricing remain in flux.
Bryzos CEO Shep Hickey and ChemDirect President Dave Haase told Karen Webster that three years into the pandemic, there’s a growing movement by firms in the steel and chemical industries (their platforms’ respective focal points) to digitize and modernize B2B trade during uncertain times.
“There’s fear out there,” said Haase, “but we can do a lot of things with technology to limit the risk that those companies have” in finding trading partners, improving pricing discovery – and paying for it all, too, through embedded payments and credit.
The shift is evident in their verticals, the executives told Webster. Hickey noted high-level executives at steel firms, including CEOs and CFOs, are seeing the value of 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 varied, as Hickey noted, ranging from larger players with robust analytics departments in house focused on optimizing operations to scores of smaller firms that are more transactionally focused, who are simply search of their next order.
All must contend with rapidly shifting industry dynamics. A slight drop in steel’s price — by, say, a nickel pound — may start a cascading effect that hurts the industry at large.
As Hickey remarked, “these are the things that you can talk about with executives, and show them that if you use a marketplace, maybe you don’t have to start dumping your metal – because you have a bigger network of buyers.”
Per Hickey, “all that a platform really is doing is carrying out the wishes of its users — we’re a big communication pipeline, to some degree, to help the buyers and the sellers agree.”
The Experience Matters
Especially in B2B, where trillions of dollars flow between enterprises and across borders, the “stickiness” of the platform boils down to one essential thing: customer experience.
The expectations of what a platform could be and should be are increasingly being shaped by those B2C juggernauts Amazon and Uber, which have embedded a soup-to-nuts experience, covering everything from browsing to checkout to payments, returns and rebates.
Uber stands out as a prime example of the growing expectation for invisible, embedded payments. The model is a continuum of seamless interaction, from finding the driver and car desired to choosing the agreed-upon time and place of pickup — and payments, of course, are invisible.
Embedded payments, essentially, have the effect of keeping buyers inside a single ecosystem for end-to-end purchasing.
Easier said than done in commercial commerce, where booking and paying require changes in how businesses manage their own payment flows and net terms. This is where striving toward a B2C experience must take into consideration a number of factors that Uber and Amazon simply don’t encounter.
Yes, there’s some level of complexity that goes into making sure that the Uber rider has credit worthiness to ride in the back seat of that car. The registered credentials on file are checked to make sure there are adequate funds in place before the driver is ever called to the job itself. If the card on file has NSF, the transaction defaults to a backup card — or, failing that, the driver does not do the job.
There’s a whole other level of assurance that needs to be in place when a $50,000 order is going through a B2B platform.
See also: B2B Marketplaces Offer Buyers Trust, Transparency — and Relief from Tedium
As Hickey noted, the B2C transaction ends when you check out. But the B2B processes begins at checkout. “All the wheels start turning and the coal goes into the boilers,” noted Hickey, “and the forklifts get moving.”
Exceptions are commonplace. Orders may be partially filled. Shipments can be delayed due to accidents or bad weather.
“In the metals industry,” said Hickey, “you spend a lot of time sweeping up yesterday versus working on today.” That means designing flows across the platform that can account for those exceptions and can keep buyers and sellers transacting while addressing those operational hiccups.
As Hickey stated, “there’s sort of this ‘wink, wink’… you can over ship by a certain amount in the industry.” Sometimes by as much as 10%. Steel lengths, after all, are not all uniform, and that’s an easy way for suppliers to increase their revenue while buyers have extra material to work with. However, that can lead to friction. On any given order, the companies are going to have to reconcile invoices and payments a significant percentage of the time.
Looking at Terms
When it comes time to satisfy terms, that’s 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 firm will automatically fund the Seller’s bank account, which eliminates the need to extend credit or chase collections. Partners can underwrite the financing decisions in real time to make sure that the financing is appropriate.
And in a somewhat differing model, said Haase, platforms such as ChemDirect negotiate how the supplier wants to get paid and let the buyer choose their own terms. In late 2021 ChemDirect introduced its ChemPay flexible financing option partnering with the Balance B2B finance solution. As a result, CFOs can have higher confidence that payments are coming in and (having paid ChemDirect a small fee) don’t have to worry, as they otherwise might, that new, smaller customers must be qualified.
See also: Chemical Industry Buyers Find New Supply on Online Marketplaces
As Haase explained, “there’s quite a lot that goes into being totally transparent about pricing for chemical manufacturers.” He noted that prices are negotiated by sales teams. There’s no safety stock in terms of inventory. Inventory is shipped, and received, within days – but payment terms can stretch out over 30, 60 or even 90 days.
As he told Webster: “If you have the right solutions…we can take all that off their plate, and with the right financing in place.”
Looking Ahead
Looking ahead, said Hickey and Haas, with so much economic uncertainty in the mix, platforms are offering up new revenue streams as companies embrace digital trade in a meaningful way.
ChemDirect’s Haase noted that as demand has pulled back, his firm has launched a separate online marketplace for overstock and aging inventory. With a nod to the fact that at least some suppliers may not want to advertise that they are offering goods at a discount, the new marketplace is “supplier-blind and agnostic…we offer the specs without the supplier information.” Along the way the appetite for suppliers to try an online marketplace for the first time increases — after all, they want to get inventory sold.
“That’s the beauty of a two-sided marketplace,” noted Haas. “When you get it right, it develops its own gravity as you grow.”
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