Is trading on the Internet just hype or reality? Are those companies basing future planning firmly in the new communication camp losing sight of reality, or are those who believe they will see a nine day wonder evaporate simply taking an ostrich position with heads firmly in the sand?
Of the variety of comments on trading over the Internet ever made perhaps none is starker than that of Andy Grove, from Intel. He predicted: “In five years all companies will be Internet companies or they won’t be companies at all.”
And change is coming rapidly. Mobil Plastics Europe’s Laura Scott reported at the company’s recent Prague seminar for customers: “It took 22 years from the day the first fax was available for it to reach 10 million users. In the case of the web browser it was 10 months.”
According to Forrester Research e-commerce was valued last year at some $251billion and by 2002 it predicts this will have increased to $843billion. Business to business trading (B2B) is by far the most important sector. Forecasts put compounded annual growth rate at 67 per cent for the sector. It could hit $2.5trillion by 2004. To most it is all a bit difficult to take in.
Laura Scott said: “The challenge is to go inter-enterprise. It leads to tremendous opportunities – reductions in costs, errors and delays. We are focused at the moment on leveraging our ERP so that customers can go in with security to see their order status. We have tight integration between our site and the back-up situation. We’ve replaced some 70 systems with one system so we are in very good shape to move very fast.”
And that movement is likely to be inter-enterprise. “Supply chains of the future will no longer be linear,” she suggests. “Supply chains will become value networks.”
It is the Dot.Com sites that claim to offer the transformation in the way the world will do business. The converting and packaging sectors have not been slow in their offerings.
Mike Steele, of Upex, told Converting Today: “Excitement about the potential of the Internet to transform business has quickly turned into a colder reality. Technology stocks have been extremely volatile, but over the last six months, their volatility has had a marked downward trend. Many are members of the ’90 per cent club’ – those that have fallen to less than 10 per cent of their peak.
“Despite this, there have been an increasing number of websites devoted to serving the printing and converting industries. Printers are spoiled for choice but, rather like the promise of 20 or more channels with cable TV, the choice is not what it seems.”
He predicted: “Many of these sites will fail, because they simply do not have anything unique to offer that cannot be obtained more easily from other sources, such as the trade press. And, unless they can generate revenues to cover their costs, in the present harsher climate for technology businesses, very few will be able to get more finance to see through a long period of losses.”
However, he believes there are two main types of sites of interest to readers. “First are the general portal sites that offer a range of information of services targeted at printers or converters. Some of these may have negotiated deals with other companies that offer special terms to users of the site. Their main merit lies in being a useful starting point for companies searching for information relevant to their business needs.”
The other type provides a facility for locating used machinery, for example. “Most are in fact not targeted just at the printer – they purport to cover the complete range of used industrial machinery.” He added: “Only sites which specialize in the printing and converting market are likely to have a big enough range of machines to prove useful when searching for a specific type. For example, UPEXchange has a pedigree going back to 1996 – a lifetime in Internet terms. It has some 4,000 machines on offer at any one time, with more than 250 manufacturers and 1,600 different models.” The site is organized to make it “very easy for the end user to find exactly the machine he wants”.
One hundred dealers with machines for sale, in most of Europe, the USA and other countries are listed. The user can search by main category of machine (for example pre-press, litho, finishing, converting or packaging). For converting, the site offers sub-categories of die cutting, creasing, bags and sacks, sheeter, label production, slitter rewinder, coating and laminating, and envelope. Once a machine is found, the buyer can contact the seller direct. There is no need for the user to go through a registration process – anyone can use the site. For those who need to sell machines, the site offers useful opportunities. Sellers can subscribe on-line – with the cost as little as £60. For sellers with a number of machines, annual subscriptions cost £300, which allows an on-line updating facility. In this way the machinery lists are kept up to date. “So users of the site are less likely to be disappointed if they locate a machine they want, only to find it had been sold weeks or months before – an unfortunate characteristic of many other sites,” said Mike Steele.
MachinePoint is a marketplace for sellers and buyers of used plastics machinery. Investment firm Warburg, Pincus released a further £2M (€3.3M) of its planned £9M investment in the company last autumn. Says the company: “Genuine business – dealer subscribers are turning over an average of 11 per cent of inventoried equipment each month – and growing visitor numbers led Warburg, Pincus to continue its investment programme and fuel further technical development and growth for the company. The third and final tranche of £2M is scheduled for April 2001.”
The site features 3,500 machines and 500 moulds, with contacts through 200 dealers worldwide, and claims 2,400 page views daily from some 10,000 visitors a month. “Repeat visits are encouraged by the continual evolution in machinery and moulds available.”
It claims to be special in two ways. First it is a specialist site and, secondly, its activity does not disenfranchize dealers who traditionally have brokered the sales in this market. On-site sales can only be transacted through dealers in order to ensure the highest levels of professional servicing.
Materials sites offer substantial potential – some more than others. Due to go live this month (as Converting Today went to press) is the corrugated fibreboard trading floor of Packaging Cell. Previous software problems have been solved and, according to chief operating officer Steve Moon, funding been secured. “Our strength is in the technology and our cash burn rate is at the absolute minimal needed.”
The important point about the site is that it is an exchange rather than an auction. “Our sellers – the converters – are not going to be involved in downward spiralling prices.” Well worth trialing on the training site, (CT has had a go) the floor now claims to have seven companies offering a commitment to buy in excess of £20M. “And we have nine others on the cusp who have agreed to run pilots,” says Steve Moon. “The important thing has been to provide the freedom to deal in the way buyers and sellers want to deal. The floor has to make that possible. And we only charge two per cent to the seller. The buyer pays nothing.” He also appreciates that detailed specification is necessary in this area. “We have detail – a lot of detail – that’s the part Pira has put a lot of time into. The other really special selling point is that this exchange allows all parameters to be negotiable. Ninety per cent of other sites allow negotiation only on price,” he claims .This means that a seller can perhaps offer better quality for the same price or maybe a better delivery date.
“To summarize our strengths, we offer proven trading exchange technology, multi-parameter matching engine, multi-parameter search engine and confidential negotiation methods. This means that once a request is logged it brings up all the offers nearest to the one the buyer wants. And the weightings of the parameters are different. For example a case may be everything needed in say weight and type and materials, but may be thousands of miles away in another country. Another plus point is the audit trail – a complete record of the transaction offered.”
“That’s on the public side. We will also be looking to run company sites where, say, a multinational will run a private site on their supply chain,” he added.
For several months, the BPIF has been researching developments in both general B2B and printing industry specific e-commerce,” said Roy Hill, chief executive. Now the federation has entered into a series of partnerships with GroupTrade, PrintRepublic and httprint euroep. PrintRepublic offers a specialized e-procurement service, but on an industry specific basis with consumable products such as film, plates and chemicals.
PaperExchange.com, which claims to be the leading global e-business marketplace for the pulp and paper industry, and Grade Finders, the publisher of the widely used buyers’ guide for printing paper, said to be used by over 25,000 paper buyers, have announced an exclusive strategic alliance. This gives PaperExchange exclusive rights to fully integrate Grade Finders’ Competitive Grade Finder into its on-line paper procurement process. As part of the deal, platform members will be able to use a new quick search facility when buying or selling printing and writing grades using the Grade Finders’ industry standard classification process. Members will also be able to access information on thousands of paper grades, including brand names and paper attributes from the PaperExchange Trading Floor.
The company has made several important announcements over the last quarter of 2000. In early August it established a new division to develop web-enabled solutions for blue chip buyers to manage their complete paper and print procurement needs more effectively. The service focuses on minimizing costs through the supply chain, for example reducing delivery charges by aggregating deliveries to various companies located in the same area. And in November it announced multiple European languages, European paper grades and all major currencies.
PaperX.com has released version 2.1 of its commerce platform, which offers on-line buying, and selling of pulp for the first time. In addition, other functional improvements include order overview screens to allow users to see all outstanding business for all grades, so “improving the users ability to manage multiple negotiations across a simultaneous mix of grades.” The company now plans further improvements by the end of the first quarter this year, including fulfilment and delivery, order tracking, contract management and on-line financial services. PaperX claims to be leading provider of e-business solutions for the European paper and board industry.
Other sites worth a look include recently launched www.inter-plex.com, where “SMEs (small and medium sized enterprises) in the packaging industry can meet and share or exchange, buy or sell potential amongst themselves. “We anticipate inter-organizational trading on items such as production capacity, excess stock and dead stocks. Participating companies will also be able to purchase as a group on common items, such as paper, film, inks, consumable items and credit assessment.” It was only available in German as CT went to press, but English is under construction. Packexpo.com is also worth a visit. It claims to be the first single source B2B marketplace for packaging – last year it added on-line ordering with the purchasing exchange available to the 5,300 packaging supply companies listed. It is backed by Packaging Machinery Manufacturers Institute (PMMI).
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