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Guest Editorial

D2D market

Written by By Abhay Mathur, Metal Networks.AI

An innovative distributor-to-distributor marketplace will enable metals suppliers to raise their game

MM 1020 guest leadOctober 2020 - Metals distribution is characterized by a commoditized market and a highly fragmented industry. Given this fragmented nature, the entry of large virtual B2C or B2B marketplaces, like Amazon, that broker transactions between manufacturers, service centers or distributors on one side and retail or business customers on the other, appears inevitable.

The emergence of such a behemoth could reduce stocking distributors and service centers to mere warehouses and low-price providers and create an unsustainable business model. It would almost certainly result in lower margins for the distributors with the e-commerce broker pocketing a significant percentage of the margins through commissions and transaction-based fees. This is unlikely to be welcoming news for most small or midsize distributors.

Specific stock

The fact that we have not yet seen an Amazon overrun the metals distribution business has to do with the complexity of the metal products and processes, a huge variety of products and product variants, multiplicity of standards and non-standard nomenclatures, and low prices with slim margins. This is also the reason that most distributors focus on volumes, specialization in certain types of products and processing services, and—most importantly—high-touch customer service that relies on deep product expertise. The intricacies of this business pose a difficult, if not unsurmountable, challenge for virtual B2C or B2B e-commerce sites.

The solution to countering threats from predatory e-commerce conglomerates lies in employing technologies that empower metals distributors of all sizes to do what they do best while helping them retain valuable domain expertise that underpins the high-touch customer service experience. The good news is that we now have solutions that leverage cutting-edge artificial intelligence (AI) and machine learning (ML) technologies to enable distributors’ existing e-commerce and procurement processes while helping to capture and retain expert knowledge.

Metal Networks.AI will soon launch a distributor-to-distributor (D2D) marketplace that facilitates buyout transactions. Buyouts are a common practice where distributors purchase from each other to fill customer orders when they are out of stock. This process uses traditional methods of communication (emails, calls, spreadsheets, etc.), making it inefficient and time consuming. Research shows that it takes anywhere from 24 to 72 hours to complete a buyout, while the customer waits.

The Metal Networks platform is powered by an AI-ML–powered JAQI search engine and cloud-based RFQ tool that shrinks the end-to-end buyout process down to under a few hours, while providing advanced data analytics. The search engine makes it much faster to find products, and the RFQ software quickly obtains bids from a large pool of distributors that carry the specific items. Advanced analytics help the distributors to identify buyout trends and patterns. These provide valuable insights and support smart stock versus buyout decisions that optimize customer service and inventory levels, while maximizing deal size and profit margins.

The product roadmap also includes overstock listing and auto quote features to facilitate liquidation of slow-moving inventory while preserving margins. Unlike other marketplace platforms, this platform is purely subscription based and accessible only to distributors, service centers and suppliers (not end users). The subscribers do not pay any commissions or margins, so there is no erosion of gross profit. Metal Networks is a technology provider, not an e-commerce player, so it won’t pose a threat to marketplace participants.

Another attractive aspect of this solution is that it does not require IT integration and does not collect sensitive data, meaning onboarding is completed in less than 15 minutes. The platform allows distributors to benefit from the latest technologies within a short time, without paying a premium. We believe this D2D marketplace is coming at an opportune time for distributors already seeking smart ways to bring efficiencies to the sales floor and overcome challenges posed by the pandemic and weak market conditions. MM

Abhay Mathur is the chief product architect at Metal Networks.AI. He is a metallurgical engineer with over 30 years’ experience in developing and marketing technology solutions for the metals industry.

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