Klöckner & Co: Steeling for a Digital World Startups are…

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Klöckner & Co: Steeling for a Digital World Startups are…

Klöckner & Co: Steeling for a Digital World Startups are disrupting entire industries, but incumbents still have the benefit of experience. How can legacy businesses make the most of their expertise and prepare themselves for the digital future? […] Amazon cannot substitute for legacy brand recognition, experience and expertise, and customer relationships built up over years and even decades. —XOM marketing brochure, 2019 “Following my first journey to Silicon Valley in 2014, I visited Harvard Business School, and came away believing that I needed to disrupt myself and the company,” said Gisbert Rühl, the CEO of one of the world’s largest independent steel and metal distributors, Klöckner & Co. “The world was changing and we had to rethink the way we were operating.” To catalyze Klöckner’s digital transformation, Rühl set up two organizations. First, at the end of 2014, came kloeckner.i (KCI), a new team set up in Berlin away from headquarters to provide expertise to support the company’s own digital transformation and which subsequently expanded to provide consulting services to outside clients. Then, in February 2018, Rühl launched XOM Materials (XOM), an independent industry platform—open to all qualifying steel, metals, and plastic buyers and suppliers—that would improve customer access to suppliers and products, increase transparency, and reduce transaction costs (see Exhibit 1). KCI and XOM aimed to transform the supply and service chain of the industry and promote greater price transparency and efficiency in the $350 billion steel, copper, plastic, and aluminum market. In late 2019, Klöckner reported that 29% of sales now came from online transactions compared to 20% in Q1 2018, and described itself as the steel industry’s digital transformation pioneer (see Exhibit 2). However, the road to XOM’s adoption had been longer, harder, and more expensive than expected. The materials market lacked—and had traditionally resisted—digitalization, especially among smaller players. As 2020 opened, the team wondered how it could dramatically increase uptake. Klöckner & Co Located in Duisburg—part of Germany’s industrial heartland—Klöckner & Co (henceforth, Klöckner) was founded in 1906. After its IPO a century later, the company expanded aggressively and took over 24 other firms. As leading steel and metal distributor, Klöckner in 2018 supplied more than Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. 820-035 Klöckner & Co: Steeling for a Digital World 2 100,000 customers from 160 production facilities and warehouses in 13 countries, mostly in Europe and the Americas, earning €69 million on €6.8 billion in revenues that year. Klöckner offered coil processing, forming, and manufacturing of pressed parts; computer numerical control turning and milling; two-dimensional and three-dimensional tube cutting; laser and water-jet cutting; steel processing and high-grade structural steel thermal cutting; and surface treatment— including shot-blasting and primer-painting, as well as sawing, drilling, and rounding-off. When Rühl took over as CEO in November 2009, sales were €3.86 billion. In response to the 2008 financial crisis, the company had first cut costs, postponed acquisitions, and paid down debt, but Klöckner subsequently raised money to take advantage of depressed prices of potential acquisition targets. Ten days into Rühl’s term, the company signed a preliminary contract to acquire Becker StahlService, one of Europe’s leading steel distributors. Several more acquisitions followed rapidly, notably Macsteel Service Centers, a leading U.S. flat steel distributor making Klöckner a top-three distributor in the U.S. and in Europe. However, by fall 2011, it was time to retrench, and by late 2013, Klöckner had sold or closed 70 locations and let go more than 2,000 of about 12,000 staff. By the mid-2010s, Rühl felt that the traditional Klöckner business model of buying steel in large quantities, storing it, and distributing it was under pressure. “It is hard to manage a company that is in a cyclical business,” he noted. “The steel prices, and as a result also the share price, move up and down with the economy. Beyond reorganizations and cutting costs, it is difficult to have a direct impact. And because we are in a commodity business, operating at the lower end of the cost curve, every marginal improvement is given up to the customer.” In the background was the threat that competitors would expand into business-to-business (B2B) markets. This threat included the risk that dominant business-to-consumer (B2C) marketplace platforms such as Amazon, Inc., would move into B2B, as well as the risks from platforms such as China’s Alibaba, which had started in B2B and expanded across industries as they grew. Still others focused on the B2B metals market: China’s Zhaogang (founded in 2012) initially provided buyers a database on steel products and prices from multiple suppliers and was growing rapidly. Finally, global overcapacity and an uncertain trade environment added pressure, and a down cycle loomed for 2015. Taking Klöckner Digital In 2014, Rühl made digitizing Klöckner’s supply chain part of the company’s long-term “Klöckner & Co 2020” strategy. He believed that digital business activities and services—in theory, at least— promised strong growth and greater profitability. About halfway into his planned 10-year tenure in 2014, Rühl attended an HBS seminar taught by Professor Clayton Christensen, whose 1997 book The Innovator’s Dilemma introduced the world to the idea that market leaders can be “disrupted” by new entrants providing products or services that might be less complex than those of the dominant players. The steel industry was one of Christensen’s original case studies. After the seminar, through an introduction from financier and KKR co-founder Henry Kravis, Rühl went to Silicon Valley and met venture capitalists Marc Andreessen (Netscape founder); Alex Karp (Palantir co-founder); and Jim Breyer, who had invested in over 40 early-stage companies. Back home later that year, Rühl first launched a digital effort at Klöckner’s corporate headquarters; it was aborted three months later. He recalled: “We tried to innovate in Duisburg, but we could not think disruptively against our own business model from there. So we rented a table in a co-working space in Berlin; I tapped two young people in the company and told them to move there.” One of them Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. Klöckner & Co: Steeling for a Digital World 820-035 3 was Tim Milde, who had held multiple leadership roles in steel and metals distribution. He built out the team and served as a managing director of what became KCI, from its inception in 2014 until 2017. The first focus of the KCI team was to create tools to digitize the Klöckner supply chain. KCI created an online shop for ordering existing Klöckner products and services around the clock—a revolution for steel distribution at that time. By 2017, KCI had 60-70 employees who enabled Klöckner to build proprietary platforms offering the full range of Klöckner products and services, along with complementary third-party offerings. Other Klöckner digital tools included a contract portal, a parts manager, and an order-transparency tracker. In the process of digitization, the KCI team learned about customer pain points. “Clients would tell us that they did not want to deal with multiple different web shops when looking for products,” Milde recalled. Launching an Open Platform Rühl was very supportive. He hoped to build a platform that would be open to all vendors in the industry, including Klöckner’s competitors. “XOM’s vision is to become the leading digital ecosystem for commodity trading by solving the pain points of its participants in the cumbersome processes in materials transactions,” he recalled. However, the German Federal Antitrust Office (the Bundeskartellamt) was concerned that managing an industry-wide platform could unfairly benefit Klöckner. “When we set up XOM,” Rühl recalled, “the Bundeskartellamt was just starting to think about how to work with industry platforms, and was concerned about the potential for collusion or market manipulation. It took time because we were all learning as we went.” The Bundeskartellamt stipulated that XOM could not allow Klöckner to gain access to data (e.g., pricing or client information) from participating competitors, thus requiring XOM to maintain near-complete confidentiality towards Klöckner. XOM also had to refrain from advising suppliers on price-setting, and all firms would have to identify themselves clearly with credentials such as a tax registration number before they could access the platform. Regulators were not the only ones who needed convincing. Rühl found it difficult to communicate the potential value of an open platform within the company. “The board wasn’t convinced at first,” he explained. “People at Klöckner understood in the abstract that a true marketplace platform had to be open to the whole industry—but it was still challenging to accept the idea that our fiercest competitors would be on it.” In 2017, Rühl gave the go-ahead to invest in this effort and XOM formally launched in the beginning of 2018. At the time, the $235.9 billion iron and steel market in North America and Europe alone was forecast to reach $305 billion by 2023; copper was expected to grow from $39.9 billion (2017) to $49.6 billion (2023); building and construction plastics from $53 billion (2017) to $63.7 billion (2023); and aluminum from $55.3 billion (2017) to $69.8 billion (2023).1 Being Independent—Yet Connected To house his new venture, Rühl returned to a place where he had previously visited a couple of startups: a historic brick building in Berlin’s Ackerstrasse, across the street from art galleries and hip cafes—and 600 meters from where the Berlin Wall once stood. KCI’s office was about 10 minutes away. “Not too close and also not too far,” said Rühl. The space could eventually hold 200 employees. Many factors explained this setup. Rühl believed that allowing XOM to be independently managed was essential. Klöckner acted as a traditional investor in XOM, holding 100% of the board seats, but the two companies did not share data beyond the typical financial reports an investor would require— growth plans, gross merchandise value supported, pain points for customers, and uses of funds. For Klöckner, XOM was a customer-facing sales channel and a procurement platform. Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. 820-035 Klöckner & Co: Steeling for a Digital World 4 Being physically separated from Klöckner enabled XOM to function more like a typical startup, with its own agenda and plan for development. Being in Berlin also made it easier to learn from other startups and to recruit digital natives. One of these was serial entrepreneur Marek Sacha,a who joined as XOM’s CEO in August 2018, to focus on business development, technology, and investor relations. Milde then shifted to the COO role, focusing on finding new users and on making XOM’s platform a global marketplace. The Steel Supply Chain At launch, XOM focused on the steel industry but hoped to eventually facilitate every kind of transaction in the materials supply chain, where market characteristics were often similar. Steel was produced either from iron using the basic oxygen furnace process, or by recycling scrap steel using the more modern electric arc furnace approach. Steel finishing involved shaping steel into bars, pipes, rods, sheets, wire, and an enormous variety of other forms/configurations at various scales, depending on customer needs. Some products were standardized, but many were made to customer specifications. Large steel mills offered comprehensive services and were often located close to raw material sources. Mini-mills were smaller facilities usually located closer to customers. Customers not buying from mills used service centers, which were distribution warehouses that could also do some pre-processing. Some held several months’ worth of inventory to respond quickly to customer demand. In 2018, China and India produced most of the world’s steel, at 928.3 million and 106.5 million tons of crude steel, respectively.2 Leading global players included the Franco-Indian ArcelorMittal, the China Baowu Group, and Japan’s Nippon Steel.3 According to Milde, some Chinese, Russian, and Scandinavian steel companies had invested more in information technology than European or U.S. players. Because of the global steel business’s size and importance to security and defense, tariffs and national industrial policy shaped the markets. European and U.S markets, for example, tended to impose high tariffs to protect domestic players. Despite the presence of national giants, the steel industry was highly fragmented. Historically, customers had access only to a limited number of mostly local suppliers because of limited access to information and high transportation costs. Steel prices were volatile and there were no published price lists—the same item might be sold at a much better price if bought at a different time, or at a higher volume by a larger client. The industry’s logistics were also complex. Offerings ranged from sheet metal that one might buy at a hardware store to 20-ton coils that could only be moved by a large crane. Ships or trains moved heavy products ordered in bulk; difficulties arose when transporting one coil on a truck for long distances. Large, heavy, commodity steel products could typically only be delivered from local distributors, while other products, such as higher-value stainless steel, could be shipped over longer distances. Even so, some vendors only delivered to certain postal codes because products were so heavy to move. To succeed, XOM would eventually need to include distributors in every region. Steelmakers often relied on tailored technical solutions and special digital tools to meet their manufacturing and processing needs. Customers commonly interacted with their suppliers personally. As a result, supplier networks often were built up over decades—especially in the case of customerspecific requirements. Most transactions occurred via email, phone calls, or faxed exchanges of a In 2014, trained mathematician Sacha left McKinsey to launch a series of startups, including Rohlik.cz, a Czech-based grocery delivery service similar to Instacart, and Cera Care, a London-based digital health care platform. Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. Klöckner & Co: Steeling for a Digital World 820-035 5 spreadsheets. Potential buyers solicited price quotes from suppliers, manually compared quotes, and placed orders with their chosen vendors. This process was time-consuming and could be prone to error. Most prices were quoted with delivery, so that customers could not distinguish material costs from transportation costs. Once orders came in, Head of Operations Ben Papenfuss explained, someone would walk through a warehouse to see if the requested item was in stock. Such a conservative approach, Rühl believed, led to high levels of inventory, long delivery times, and processing mistakes. (See Exhibit 3 for process schematic.) Building the XOM Ecosystem Rühl and the XOM team were convinced that the industry was ready for simpler digital processes with seamless data handling. On the company’s platform, buyers received tailored quotes directly, in a format that made comparison possible and easy. Customers could also view a broader geography of suppliers than they might previously have considered. Suppliers, in turn, could use XOM to expand into new markets. As an example, Milde described one Eastern European firm that hoped to start selling in France and Spain—where they had neither name recognition nor existing contacts. “They came to us to help them sell to other countries,” he noted. “Being on XOM could enable vendors to seem less risky to potential buyers in new markets.” Initially, XOM’s major sources of value creation was in improving price transparency and reducing the labor inherent in making, processing, and tracking orders. The platform could also reduce search frictions and potentially reduce the need for suppliers to customize products for specific buyers (e.g., if buyers were able to find new suppliers that could provide specific parts directly). Better matching allowed both customers and suppliers to reduce their net working capital, at least in principle. In the long run, XOM’s members might also be able to obtain more specific data about their customers and automate their supply/procurement processes. Smilen Hadzhikostov, XOM’s Head of Growth, noted that this “could enable sellers and even buyers to spend more time on higher value added tasks and strategic planning.” (Exhibit 4 shows how XOM proposed to reduce pain points and Exhibit 5 features screenshots of the platform.) A buyer registered on XOM’s platform could search for an item to receive a standard price and a list of potential vendors or suppliers. The buyer could then send requests for a customer-specific price to their vendors of choice. After comparing different sellers’ offers, buyers could order products directly through the platform, after which the seller would confirm and deliver the order (see Exhibit 6). XOM also made reordering products easy. Sacha noted, “Customers need trusted, reliable supply partners without delays. There’s a lot of relationship-specific capital—and it’s certainly not all about price.” XOM maintained three levels of confidentiality. Some information was considered public, such as the names of vendors participating in the marketplace and the products available. Registered buyers could access further information, such as base product prices. However, sensitive price and availability information was available to registered buyers only after they established a business relationship with a seller. XOM connected buyers and sellers while preserving the confidentiality of the terms and conditions of their agreements. For example, a buyer would see a base price for a product, but would then have to inquire to see a vendor’s specific price. Prices quoted and seen by registered buyers would be legally binding, with final contracting also occurring online. XOM charged a service fee on transactions based on type of material. Some vendors also paid a licensing fee and set-up fees (for a web shop, for example). The XOM team believed that charging a Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. 820-035 Klöckner & Co: Steeling for a Digital World 6 licensing fee helped bind vendors to the platform and encourage use. The license fees depended on the service and its level of customization. Selling the Service The original team, including Milde and Hadzhikostov, had high hopes. “Originally, I expected that a huge amount of vendors would come on as soon as we started the platform because they had nothing to lose,” said Milde. “We had thought that the smaller players would be most interested because the platform would simplify their business and increase volume. You pay nothing until you sell. If I had a materials company, I would upload my product information and see what happens.” Despite the value propositions that the XOM team had identified (see Exhibit 7), the platform turned out to be a much harder sell. The sales cycle to onboard suppliers often took conversations and presentations over multiple months. Some vendors did not want to sign on because they felt comfortable with the status quo. “In Germany especially, we deal with medium-sized distributors— many of them run by men in their fifties who come from a different time and have done the same things for years,” said Papenfuss. “Not many are technologically savvy. We are trying to establish a marketplace in an environment where there’s nothing like this. They ask, ‘Why should I do anything to make my business more transparent?'” According to Sacha, “Whether a company is open to digitization depends on management. If the Csuite is tech-savvy, they push digitization throughout the company and tend to be more willing to join our platform. At the other extreme are executives who remain skeptical about having a digital selling channel entirely. Nevertheless, players in the industry are starting to understand it’s not a question of ‘if’ but ‘when.'” Also, some Klöckner competitors had doubts about the robustness of the separation between XOM and its parent, or felt they could not trust the platform’s quality. Noted Sacha: Larger competitors often believe that they can do this better on their own; they try to develop proprietary solutions, which ends up being not only time-consuming but also very expensive. Other competitors are afraid that Klöckner might have access to data they put on the XOM platform, which is obviously wrong. But the initial skepticism is disappearing, and XOM is coming to be recognized as a totally separate business entity. After finding it challenging to onboard smaller vendors, “we focused on growing the business from where the larger players were,” Sacha explained. “Having major suppliers on the platform could make XOM relevant to both large buyers as well as small or infrequent buyers. We even have a special eProcurement product for the large-volume buyers that helps them maintain direct supply relationships with producers while reducing time and effort spent by their procurement teams.” Large early adopters included a market-leading Finnish stainless steel manufacturer, joining in February 2018. A leading German plastics producer joined in July 2018. Europe’s largest industrial B2B purchasing and marketing association, with almost over a thousand medium-sized trading companies as members and activities in nearly 30 European countries, came onboard for a pilot in December 2019. Onboarding Users Once a sale was made, there was a lag before actual onboarding to use the platform. To speed adoption, XOM leaders had decided to integrate with each client’s system, rather than institute a single back-office platform that clients would have to adopt. Yet XOM managers conceded that, even after integrating with client systems, onboarding was “not plug-and-play”—despite producing tutorials on how to use the platform, XOM staff typically still had to guide new users individually. Clients’ sales Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. Klöckner & Co: Steeling for a Digital World 820-035 7 teams had little or no experience with online sales, and new suppliers needed help determining which products to list, as well as how to list and price them. In one instance, “we had an onboarding case that took longer than expected,” Hadzhikostov recalled, and we had to help the supplier. The data is usually in different file formats or sometimes only offline, so it is a matter of time and effort on both [of our] parts to bring it online. Preparing the data on the supplier’s side, and their willingness to cooperate with us, is what is important for the onboarding process. It is sometimes hard to build the offline processes in a digital form, but the learning from each new supplier helps us improve scalability. Post-onboarding challenges included managing user expectations. Some new users compared XOM with retail e-commerce, in which transactions occurred as soon as people signed on. Because transactions were very large and less frequent, XOM and other B2B marketplaces could less easily conduct 24-hour-long A/B tests to learn how a new functionality was working. One (Seller/Buyer) to Many (Buyers/Sellers) Vendors leveraged the XOM marketplace in different ways. Rühl explained, “Some suppliers don’t want to bring their existing customers into a marketplace but are happy to open up a ‘branded store’ on XOM, potentially facing new customers.” Some had large e-shopsb; others maintained smaller eshops; and some used the platform as a portal. This e-shop model typically connected one seller to many buyers. Papenfuss noted that companies that used e-shops became easier to onboard to the platform as they got used to the process of selling online; XOM was thus considering developing more e-shops. Another feature that Papenfuss and his team were working on was a system that would enable a buyer to issue requests for quotes (RFQs) electronically–soliciting price bids from many sellers at once. He believed that this feature might make it easier to attract users to use the site: Vendors don’t want to deal with prices in terms of setting up mechanisms so that you can buy something with one click. They want a process by which their customers can call in to place an order. But at the end you wind up with many buyers and many sellers who can then be transferred into the open platform. The first step is to digitize with closed solutions and then integrate them all in an open solution. You know it is time to make the transition to the open platform when you reach critical mass and when you understand how to do pricing. While undisclosed pricing could be unusual for a platform, XOM managers saw the option of requesting prices as an intermediate solution between complete opacity and full transparency. “It was helpful because it lowered entry barriers to onboarding vendors,” Papenfuss noted. “Once someone is onboarded with product, it is easier to get them to change processes for other things as well. But for a successful marketplace I would like to see the price. Most e-shops have prices, not list prices.” b These sales outlets (online stores) provided goods or services over the Internet. Other terms included webshops, e-stores, Internet shops, webstores, online stores, online storefronts, and virtual stores. Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. 820-035 Klöckner & Co: Steeling for a Digital World 8 Taking Stock When XOM launched its platform in March 2018, just four vendors joined. In early 2019, it had 10 vendors. By mid-November 2019, the site had 40 vendorsc and 455 registered buyers, buying €13 million in gross merchandise value. In mid-December, the 50-vendor mark was crossed, and XOM offered around 600 registered customers in Europe and the U.S. some 20,000 products made of steel, other metals, and plastics. In total, these 50 distributors (10 of them in Spain) generated more than €25 billion in annual sales, some of which would now be digitized via the platform. By late 2019, 33 of the 50 were selling on the platform. Like most B2B marketplaces, XOM had a relatively low average order frequency and a high average order value. Some buyers still placed orders with XOM vendors using offline channels. Yet XOM managers felt that their marketplace could be relevant for those transactions as well. In particular, XOM managers believed that having an online presence had helped some vendors with offline sales: the platform functioned as a billboard that signaled digital modernity and built brand awareness. In addition to clients and talent, XOM aimed to attract outside investors. Since 2019, XOM offered investor participation via convertible loan notes. The company planned to close a substantial financing round with third-party investors after its products gained further maturity. XOM also expanded its geographic reach. In 2019, XOM established a subsidiary in a WeWork space in Atlanta, Georgia, where Klöckner’s U.S. headquarters were located. “Many of our potential clients are located in the region,” Sacha explained. “There is talent in both the materials market and digital space available, and very good universities. The Klöckner presence is also an anchor to enter the U.S. market.” U.S. markets were more familiar with digital solutions, potentially lowering XOM’s barriers to adoption. Even so, he added, “While we can use the same technology in the U.S. as in Europe, this requires a dedicated sales team with U.S.-market expertise. And we can only move forward state-bystate due to the local nature of the steel business.” Additional challenges included building the brand and maneuvering within the U.S. regulatory environment (“Not to mention inches versus centimeters,” Sacha joked). Every U.S. state collected its own sales tax and could vary in the way it regulated digital marketplaces. Entering other international markets, such as Russia, was a more ambitious effort that would require strong local partners. Outlook As 2020 opened, Sacha, Milde, and Rühl remained confident that XOM could maintain its competitive advantages. In part, this was because both XOM’s attributes and the nature of the industry presented entry barriers that barred easy replication of XOM’s success. Klöckner remained a major asset, as did Rühl himself, who was very active internationally—chairing the Mining and Metals Community every year at the World Economic Forum, for example. “Digitalization needs to be driven from the top. And we need access to the companies’ C-suites in order to convince their CEOs,” Sacha noted. “Klöckner’s network helps open doors for XOM.” Another potential entry barrier was that operating a marketplace like XOM’s required both market expertise and technical product know-how, and few people were experts in both the steel and digital businesses. For example, Marco Kunze, who took over as XOM’s Chief Technology Officer in July 2019, had digital experience in the B2C space— he had helped scale a B2C shop aggregator. Recruiting and keeping IT talent in the red-hot Berlin c XOM considered 28 of them to be “live vendors.” Two were in plastics, the rest were in steel. Authorized for use only in the course MGSC 5101 at Cape Breton University taught by Patricia Morrison from 1/9/2023 to 4/5/2023. Use outside these parameters is a copyright violation. Klöckner & Co: Steeling for a Digital World 820-035 9 startup sector was a daily battle, resulting in significant turnover. In early 2020, the XOM team had grown to 50 employees—including 30 software engineers—in Germany and the U.S. XOM was working on offering data dashboards showing sellers and buyers information about their activity on the platform—revenue, orders, most frequent trading partners—in order to optimize their online sales and procurement processes. XOM managers also wanted to help users of the platform secure transportation services and digitize the entire service chain. Eventually, XOM hoped to go far beyond providing quotes and facilitating matching. As a XOM vision paper noted, XOM buyers and sellers “can access value-added services ranging from financing and insurance to materials modifications and logistics. Also, when a buyer is demanding a large commodity volume, which is hard to bear by a single seller due to other factors (e.g., credit limits), the quote can be split by XOM between different suppliers to achieve the lowest price for the required volume.” Regardless of its own attributes and Klöckner’s resources and capabilities, XOM’s growth depended on the digitization of the overall market. And while in other industries there was an established market, with suppliers and consumers used to aggregating product information online, many materials vendors had just a couple of hundred products, many tailor-made. A solution developed for one supplier might not be relevant to others. There was still a fair bit of manual work, and price transparency was low. For example, clients needed to have a way to automatically and frequently update prices and stock levels of their individual products. They also had to be able to track orders online. XOM needed to develop online verification systems such as quality certificates to allow coun