E-commerce for Metal Casting

"We are at the start of a business-to-business e-commerce revolution that will unfold during the next 10 to 15 years and the process of businesses buying from and selling to each other will be totally automated," according to Steve Harmon, an Internet analyst in a recent interview with Business Week. More than 60 percent of companies have deployed e-business in a majority of their business units - up from 46 percent six months ago. The goal of e-business is to establish a highly efficient electronic community that works in unison with customers, suppliers and partners to eliminate waste, cut costs, improve service and gain market share.

 

B2B E-Commerce

Total sales using B2B e-commerce have gone up exponentially from zero a few years ago to $114 billion today, according to Goldman, Sachs & Co. According to a study by Deloitte Consulting LLC, 91 percent of U.S. businesses will do their purchasing on the Net by the end of 2001. Some 31 percent do so now. In addition, numerous studies by well-respected market research firms such as Forrester Research, International Data Corp.(IDC), Yankee Group, et al. forecast that B2B e-commerce would generate anywhere from one to three trillion dollars in revenue by 2003. Gartner Group recently released an even more mind-boggling set of numbers that project B2B to reach $7.3 trillion by 2004 (see Figure 1 below).

Benefits of B2B Marketplaces

Sellers (metal casters), buyers and market makers each stand to benefit from the B2B marketplace.

Sellers use B2B eCommerce to lower costs and access new customers. Marketplaces extend that reach still further by creating and leveraging close collaboration between trading partners, tightening the relationship between supplier and buyer, promoting price discovery and spend aggregation, and slashing supply chain costs.

Buyers can use B2B marketplaces to reduce direct and indirect supply chain costs by leveraging their global scale, focusing their spending on preferred suppliers, and taking advantage of dynamic models such as auctions and bid-quote for efficient sourcing and spot buying. This can create new opportunities to build transparency in the supply chain, decrease logistics costs, increase inventory turns, and improve the overall performance of the manufacturing and procurement processes - thus returning 15 to 27 percent back to the business in reduced costs (AMR estimate, 1999).

Market makers are the fulcrum of these new B2B e-commerce relationships, catalyzing the growth of the B2B economy by leveraging their domain expertise, customer relationships and supply chain strength to fuel the growth of B2B marketplaces. In return for delivering incredible value, market makers stand poised to reap substantial rewards by sharing in the returns achieved by buyers and suppliers.

The Metal Casting Industry

Approximately $30 billion of metal castings are purchased in the U.S. every year and nearly $120 billion worldwide. This number is expected to increase an average of 1.5 percent per year for the next 10 years according to Stratecasts of Ft. Myers, FL. Peak production periods will be 2004 through 2009.

Choices for Metal Casters

Online markets, also known as B2B marketplaces, are commerce sites on the public Internet that allow large communities of buyers and suppliers to "meet" and trade with each other. They present ideal structures for commercial exchange, achieving new levels of market efficiency by tightening and automating the relationship between supplier and buyer. They allow participants to access various mechanisms to buy and sell almost anything - from services to direct materials.

Although still in their infancy, B2B marketplaces have the potential to drive the B2B e-commerce revolution. By virtue of their structure, which unites member companies in seamless trading communities of common business interest, B2B marketplaces maximize speed and efficiency. They offer buyers and sellers uniquely powerful forums to reduce transaction costs, enhance sales and distribution processes, deliver value-added services and streamline customer management.

The emergence of so-called "business-to business e-commerce" promises unparalleled efficiencies to the manufacturing of just about everything - and lower costs to consumers. But B2B also promises to gut sales and procurement departments in many companies, bypassing wholesalers and distributors.

E-Marketplaces

These Internet-based sites draw business buyers, producers and suppliers together in one virtual place where participants can contact new customers and reduce operating costs. Presently there are several types of e-marketplaces:

• Auctions - For unique items such as used equipment, surplus inventory and perishable goods, auctions are becoming the most popular sales channel. They can be driven either by sellers (such as AdAction.com, which runs auctions of advertising space on the Web and other media) or by buyers (such as FreeMarkets, which does reverse auctions of industrial materials and equipment).
• Catalogs - These seller-driven sites digitize paper catalogs to provide easy search and one-stop shopping. Many are starting to add richer services, such as meshing with software that handles a company's back-end operation - from order taking to tracking inventory. SciQuest.com in life sciences and PlasticsNet in polymers and resins focus on specific industries, while Grainger's OrderZone.com sells supplies across many industries.
• Collaboration Hubs - These emerging sites go far beyond the transaction phase to help companies get projects done, from design through manufacturing to distribution. Bidcom, for instance, provides a single online workplace for large contractors to collaborate with architects, store blueprints, work through permit processes and purchase building materials.
• Communities - Like online trade magazines, these sites offer information and communications for specific industries. They largely generate advertising revenue, but most are moving quickly to take commissions for sales referrals and to stimulate trading on their sites. VerticalNet, with a collection of 56 such communities in industries from solid-waste management to pulp production, leads this pack. Buycastings.com is in the process of establishing a community for metal casters, their buyers and suppliers.
• Exchanges - Much the same way they do in stock markets, buyers and sellers meet - usually anonymously - to agree on prices on commodities such as energy or telecommunications capacity. Examples include Altra Energy for natural gas and eLance for matching freelancers with projects. They can be independent dot-coms or backed by major industry players, but their neutrality is key.
• Procurement Hubs - Driven by buyers, these sites direct suppliers to particular companies or industries online in one place. Software makers Ariba and CommerceOne lead the charge in helping large companies set up their own procurement sites. Lately, large traditional companies such as the Big Three automakers have joined forces to form hubs.

The extreme flexibility of these marketplaces, which may be customized to serve the full supply chain of virtually any industry, will establish them as the pillars of the new B2B eCommerce economy. Gartner-c Group predicts 7,500 to 10,000 B2B marketplaces to emerge by 2002, while Giga and IDC project that B2B marketplaces and exchanges will allow companies to save between $180 billion and $480 billion in transaction costs and related expenses by 2003.

If one considers metal castings an engineered product and not a commodity then a combination of a community and an exchange similar to Buycastings.com would be the most effective way to participate in the e-marketplace to enhance your future digital competitiveness. Whether you are a buyer, producer or supplier in the metal casting industry, you can realize several benefits by subscribing to and using an e-marketplace like Buycastings.com. Two of the biggest benefits include cost reductions from the present way of doing business and introduction to potential new customers worldwide.

Strategy for Metal Casters

Metal casters and their suppliers seeking to establish a B2B business presence should concentrate on several objectives, including:

• Partnering with the correct e-marketplace that has domain expertise for the metal casting industry to create and exploit their web businesses knowledge;
• Taking advantage of partnering with the first mover in your industry as the "first-in usually wins" in e-marketplaces;
• Having a single point of access to all markets of opportunity - allowing easy access to all possible target customers;
• Focusing on bottom-line business results, including increased revenue, lowered transaction costs, and lowered administration costs; and,
• Developing a highly personalized, customer-facing online presence that maximizes electronic branding opportunity and creates competitive differentiation.

Metal casters who act quickly and focus on their core objectives can soon begin participating in the B2B e-commerce explosion and secure their competitive future.