How to Build a Digital Platform Before Big E-Commerce Companies Like Amazon and eBay Beat You to It
The following article was provided to Steel Market Update (SMU) by steel service center: Kloeckner Metals. At our SMU Steel Summit Conference last year a Kloeckner executive pointed to changes in their digital footprint as being on the new opportunities facing the domestic service center industry. In the article below, Jonathan Toler of Kloeckner explains why other service centers will need to develop a digital strategy:
As the metals industry digitalizes, it is becoming increasingly important for metals distributors to develop quality digital platforms. E-commerce businesses like Amazon have the potential to enter the industry, by catering to smaller suppliers. This makes now the ideal time to develop industry platforms before this disruption occurs. Developing a digital platform does not have a one size fits all approach. The approach really depends on your specific role in the supply chain, and what products you sell.
The business-to-business world is different from the direct to consumer world in a few important ways. Companies In the consumer world, such as Amazon or eBay, are primarily driven by product pricing. Sometimes delivery time can be a factor, especially around the holiday season, but most consumers are primarily focused on price. There are many more considerations to take into account when you are choosing which metals supplier to buy from.
These considerations include things like what inventory looks like, whether the order can be shipped on the same truck as another order, how fast the order can be delivered, and what value-added services are available. Sometimes there is an analog component to the transaction, as well as the digital aspect.
At the same time, online marketplaces like Amazon have changed the way customers think about ordering. Customer tastes are changing, and it is no longer acceptable to have a purely analog system. Customers don’t want to call a sales person just to ask if a common item is in stock. Some companies have approached this by publishing a .pdf inventory list, while others are able to provide their real- time stock levels online. Here are five steps to consider as you begin to build your own digital program.
1. Where To Start
For those who might be new to digitalization, there are two main areas to concentrate on as you begin to build your platform:
• Streamline Ordering Process: A digital platform should answer a few questions: How do you make sure the order is correct? How do you put in the order and provision the order? How do you get the order to the floor? How do you go from customer intent to trucks rolling to customers with your deliveries? Investing in an Enterprise Resource Planning (ERP) system or in a steel specific software would be the first thing to do.
• Merchandising: People expect to be able to get an inventory picture online, even if it is not a complete, real-time analysis. You need to be able to give customers an idea of what you specialize in, and what is typically on the floor. Some companies have approached this by publishing a .pdf inventory list.
2. Partnering With Other Companies
One way to move digitalization forward is to partner with another company, that already has a digital platform in place. You may find that it’s better for your organization to remain primarily focused on its core competencies around the service of the steel industry.
Other options to consider:
• Leasing/White Labeling Software • Build Off An Existing/Open Source Platform • Data Sharing • Creating a Joint Venture
Most of the misconceptions about digital partnerships generally focus on a fear of losing control of sensitive data or sales channel operations. One of the things that we have implemented is the ability for our users and their organizations to operate in walled gardens, which control the user’s access to content and services. Additionally, the beauty of these partnerships is that they do not have to be permanent. These agreements may only span the amount of time it would take for your organization to make a determination of the types of investments its willing to make as it digitizes.
3. Providing Flexibility
Flexibility must be a major consideration when building all digital products. The demands of a small customer are very different from those of a large customer.
Larger customers usually have a set process and may have some legacy systems in place. Sometimes they have IT resources that can help with data transfer and integration, and which will allow more options when implementing. The implementation process can take more time, however, because there are also usually toll gates and protocols that need to be followed.
With a small customer, speed to market is usually faster. You can get a small customer on-boarded and launched within a day, as they may not need as much customization or a complex implementation.
It is equally important to develop the ability to integrate with the many different data systems that businesses use. One thing that AmazonBusiness has done very well is to build integrations into 30 different ERP systems. You need to be able to integrate into a variety of business to business systems, such as SAP and Oracle. You want to make it easy for your customers to keep track of their orders and products, so that they have an easy time at the end of the year when it comes time to audit.
4. Common Challenges
One of the biggest challenges is the lack of an industry standard for terminology. A lot of common sizes, common grades, and common products have no standard naming. Some mills may refer to a product in a completely different way than other mills, and the same holds true for customers. This can create a nightmare when you are trying to manage data on a digital platform.
The reason why this challenge arises is because there is a lot more to a metal product than just length and angle size. Many other factors go into the product such as where it was produced, the tolerance. It’s important to work with your partners at the mills, customers, and other stakeholders as you look to further digitize your product information management capabilities.
Once you are able to get a storefront or digital process up and running, you may be greeted with the daunting task of understanding your customer behavior. KPIs like website traffic, revenue generated, and conversion rates may be easy to learn, but there are deeper user interactions and metrics, such as click patterns or the time users spend on certain pages that can optimize your customer’s experience. This pattern of analysis and optimization can be a full-time job that requires constant attention.
Finally, creating your own digital platform may sound risky, but it may be more of a risk not to in today’s world.
About Jonathan Toler: Jonathan Toler joined Kloeckner Metals in October 2016 and is responsible for helping launch all of Kloeckner’s digital tools and continuing the development of their existing digital products. Jonathan was most recently Director, Product Management at owners.com, and he brings a wealth of experience in developing, launching and managing e-commerce products.
Steven Nghe is currently the Head of Marketing & Communications at Kloeckner Metals. Nghe is a marketing professional with more than 14 years of experience in various environments and industries. His goal is to tell you about the sexy side of steel. Nghe holds a bachelor’s degree in Business Management with a concentration in Marketing from North Carolina State University. Prior to Kloeckner, Nghe worked for Delta Dental, Wells Real Estate Funds, Georgia Institute of Technology and Doosan.