Now, with access to capital drying up, a high-tech game of musical chairs is afoot, said moderator Kinsley Sykes, senior manager of the Metals Practice at Andersen Consulting. "The music is stopping and people are filling in the seats. Some companies have a marginal position or are being left out," he said.

Sykes expects a "mad dash for alliances" as companies join forces to survive. "There's some pretty accelerated Darwinism going on."

Rather than being disintermediated by e-commerce, Sykes suggested that metals distributors may prove crucial in "the last mile--getting goods and services to the final consumer."

Russ Delaney, Macsteel: Complete supply chain integration is the long-term goal of Macsteel's e-commerce strategy, said Russ Delaney, executive vice president, commercial management and group marketing, for Macsteel Service Centers USA.

Macsteel is working with e-STEEL to establish its own branded Web site, MacNet. Macsteel's primary objective in allying with e-STEEL is efficient, direct procurement. "Every ton we sell, we have to buy," Delaney noted.

MacNet will help Macsteel maintain control of its customer base, increase customer satisfaction and retention, and generate more revenues from existing customers, Delaney said.

Customers want to be able to go into a portal, enter a word and automatically get into MacNet, and from there, into the mills' systems. "Until we're able to do that, our growth is going to be limited," Delaney said.

"What e-STEEL brings to the party for us is, we'll be linked to a global hub, but customers will deal with Macsteel directly," he added.

Allen Robinson, Esco: By April, Esco Corp. will have implemented a new ERP software package, which Allen Robinson considers necessary to "fulfill our commitment to e-commerce development as a seamlessly integrated component of our business methods."

Robinson, e-commerce manager for Esco Corp.'s Distribution Division, stressed that any successful e-commerce strategy for metals distribution will require information sharing.

"Customers and suppliers will expect to be able to dive smoothly into your proprietary business data as it resides on your internal computer systems. More, they will expect to actively manipulate your data to define and control processes and events within your organization."

This spring, preferred buyers at the Esco Steel Store, on Esco's Web site, will be able to get automatic quotes, inventory checking and replenishing, scheduling, expediting, tracking, documents, records and financing.

"More and more of your customers will seek open access and more of your competitors are preparing to offer it to them," Robinson said.

David Neil, Energy Steel: Energy Steel Products' e-commerce strategy, contrary to most, is to emphasize value-added sales rather than price, said David Neil, president of Unalloy-IWRC & Energy Steel Products.

The No. 1 threat to Energy Steel's business, Neil said, are online auctions. "We've had bad experiences with auctions. We weren't comparing apples to apples when asked to participate."

Energy Steel believes that quality and delivery still count. In launching its own Web site, Neil said, the company pondered "if we run the risk of being so wired that we lose the value of customer relationships we've spent years developing?" They decided to refocus their sales effort on selling value-added processes, using the Web as a tool, knowing they might lose customers that are strictly price buyers.

Within two weeks of going live, Energy Steel's Web site secured about $100,000 of new business on-line, all from overseas, Neil said. Energy Steel has derived several other benefits from its standalone e-commerce site: improved cycle times, increased accuracy, reduced transaction costs, freed up sales resources, unlimited access to new markets, and an inexpensive vehicle for advertising and promotion.

Plans for 2001 include Web enablement of the company's legacy ERP system. "We're going to real-time processing of direct order entry into our system, inventory look-ups, sales order status, and purchase expediting for both external and internal customers," Neil said.

Jim Collins, Metals USA: Because Metals USA sells service as much as products, its approach was to create a business unit that uses e-commerce as a tool to lower costs, differentiate itself in the marketplace and attract new business, said Jim Collins, president of Metals USA Inc.'s i-Solutions Group. There is no one magic answer, he said, so i-Solutions uses a five-part program:

n "Order Online" is a private exchange between Metals USA and one (unnamed) customer, featuring fixed pricing for defined items that can be ordered electronically.

n "Metal Link" is for computer-to-computer commerce between Metals USA and multiple customers. This process is being developed with one customer, but Collins estimated the company will be doing volume business through Metal Link in the first quarter.

n "Metal Prime Vendor Online" is an electronic catalog of 6,000 items and a variable price configurator calculator. When a customer goes on-line to shop, the system calculates the selling price for him and order fulfillment follows. This feature is currently unique to the Department of Defense MRO contracts that Metals USA manages.

n "Suppliers Online" uses multiple Web sites to integrate Metals USA and other metals suppliers for non-standard products.

n The "Customer Care Center" supports front-end applications for customers and suppliers with toll-free phone assistance.

Metals USA's Web commerce strategies are now netting the company nearly $10 million in annual business.

Bob Mraz, TW Metals: Trial and error marked TW Metals' early e-commerce efforts, said Bob Mraz, vice president of sales and marketing.

"About five years ago, we installed our computers in some customer locations and asked them to learn our system. This died a quick death since they were having difficulties learning their own systems," he recalled.

Subsequently, TW Metals began focusing on EDI. "As EDI progressed, so did we. We now have more than 300 trading partners on EDI with whom we buy and sell," he said. Through TW Metals' Customer Interface program, metal buyers work with the distributor on a one-to-one basis, having their MRP, planning and order- entry systems drive TW Metals' processes.

"We rely on direct customer interfaces for about $50 million of business a year," Mraz said, and the savings are substantial because no sales force intervention is required. After developing an electronic order-entry system, the company has landed four multimillion-dollar supply contracts with the Defense Department, programs that are expected to expand.

TW Metals also is involved on the buy side. In the past 2-1/2 years, the company has bid successfully on more than $94 million worth of products through FreeMarkets and other on-line exchanges, Mraz said.

The company has participated in auctions as a seller, too. Initially, profit margins declined, until the company focused on its strengths.

"There are no second places in Internet trading. You have to be dominant, an expert in the products and services you deliver, and in those areas you'll find new customers and profitable business," Mraz said.

 

 

"Capital used to be available. If you could write legibly on a napkin, you could get capital," he said. Now, many players have run out of money, and new capital is only available to those who can demonstrate liquidity and profitability.

Meanwhile, the strong are consuming the weak and these survivors are combining market shares into larger chunks. "Being able to get traction, profits from operations or more funding are what folks are focusing on."

Integration, cost control and process control are proving challenging issues for an industry that has long struggled to achieve them even without e-commerce. Metals e-commerce could evolve in several ways. "Where this may end up is a collaborative hub in which different exchanges take on different roles within the industry, whether by geography, by product or whatever," Sykes said. "Those exchanges will then interact with each other as well as with their customers and suppliers."

The key question for the trading exchanges, Sykes concluded, is which will end up having the right business model, which are best positioned to take charge of the on-line markets, and which create real value for themselves, the buyers and the sellers.

Doug Schuster, MetalSite: "We've seen companies coming and going already. We've seen a lot of confusion as to who will be the clear winner," said Doug Schuster, vice president of marketing and strategy for Metalsite. "Relevant business models balanced with a good vision will win. Staying power will be important. Generating revenues will be the key to survival."

In a given month, MetalSite moves more than 80,000 tons of product through about 6,000 transactions between 150 sellers and 3,000 bu yers.

"How many of you service centers have more inventory than you want? How would you like help to move that inventory?" Schuster asked the crowd. Using MetalSite, a service center can maintain its private customer relationships while finding public opportunities. One of the greatest opportunities is for service centers to sell to other service centers, he noted.

David Centner, MaterialNet: Founded two years ago with a buyer-centric business model, MaterialNet has since become "a sophisticated e-procurement technology with a very flexible architecture," said David Centner, president of MaterialNet.

Its Web-based desktop application is designed for use by purchasing managers to do all transactions, whether it's a spot purchase, a contract purchase, a release against a previously negotiated contract or awarding a piece of business to a preferred supplier.

"We like to think of ourselves as a service center's best friend," Centner said, because the software allows purchasing managers across a multiple-location distribution company to conduct transactions, while each manager and the head of purchasing can see this activity throughout the organization. This "enterprise visibility" allows a multi-location service center to aggregate opportunities, foster price equality, maximize buying against contracts, make purchasing more efficient, and better forecast for the purchasing budget, Centner said.

Alan Gamble, Metal Suppliers Online: Alan Gamble, chief executive officer of Metal Suppliers Online, was one of the first. He launched his site with his own funds and expertise in early 1997 and began logging on new users.

"Then in 1998, others began to move into our space. First it was MetalSite, then e-STEEL, MaterialNet and others. Today, there are probably more than 100 [trading sites] in the [metals] space," he said.

As the competition grew, MSO "decided to run with the big dogs," securing $1 million in initial financing [last April]. But by the time MSO was ready to go after its first full round of financing, Wall Street had turned bearish on Internet companies. "We spent the better part of five months presenting our business plan to anyone who would listen," he said. By the end of September, it was apparent MSO was not getting any fresh capital, and by mid-October, the company was forced to lay off most of its staff. Paradoxically, Gamble said, his site is still up and busy.

Robert Trotter, MetalSpectrum: The most meaningful measure for e-commerce enterprises today and tomorrow is value creation; value is the way the marketplace keeps score, said Robert Trotter, vice president of sales for MetalSpectrum.

"In a true marketplace, we believe there has to be the ability for the seller to sell on attributes other than price," such as availability, packaging and delivery, he said.

A partnership of leading metal producers and distributors, MetalSpectrum is well funded and positioned to outlast its competitors, he added. MetalSpectrum believes the industry needs a good sell-side marketplace with strong buy-side characteristics.

"There has to be a public marketplace to provide the level of liquidity and efficiencies associated with doing business on-line. Who is going to become that public marketplace? There may not be room for even three," Trotter said.

Bob Mann, Global Steel Exchange: GSX terms itself a second-generation business-to-business exchange, and is trying to fill gaps left by its predecessors. "Some great supermarkets have been built, but the shelves are somewhat empty," said Bob Mann, interim president and CEO of Global Steel Exchange. "We did not find exchanges that could meet our needs for trading steel internationally."

International metal trading organizations Cargill, Duferco, TradeArbed and Samsung formed a consortium with an extensive customer and supplier network worldwide, and funded GSX from their own resources.

"There are still tremendous inefficiencies involved in international trading," Mann said. "We felt that Web-based technologies could do it so much better."

GSX defines its strategic mill partners very rigidly, Mann said. They have to be prepared to enter capital investments in the building of the exchange, pay penalties if they don't meet minimum volumes, and provide the intellectual capital and domain expertise to make the exchange work.

According to GSX estimates, existing carbon steel exchange sites today handle about $700 million worth of on-line volume. "Based on the commitments of the founding partners of GSX and its strategic partners, we have a signed-on liquidity in the first year of about $2.3 billion. We feel that's the only way we'll begin to make a marketplace."

Richard Glaser, e-STEEL: e-STEEL is becoming a transactional technology partner on a global basis, with initiatives under way in Australia, Japan and Europe, said Richard Glaser, e-STEEL's director of North American sales.

It also is working with U.S. Steel and National Steel on major integration efforts. Integration is where the real value is, Glaser said, automating the process for contract business.

Glaser sees e-STEEL as a hub for private marketplaces, too, providing the infrastructure to serve sellers' own buying communities. "By offering private marketplaces, we allow these companies to capitalize on the money we've spent, [and offer] speed to market. It's a more standard solution than having a hundred people go out and develop their own marketplace."

e-STEEL's platform also supports collaborative management systems, whether vendor managed inventories or raw material acquisition programs. One such system has been designed for Ford Motor Co. It connects Ford's entire value chain with real-time standardized data. "Ford anticipates saving a lot of money on this," Glaser said. Once true integration is a reality, some powerful features will evolve, such as demand aggregation and data mining.

Another e-STEEL feature is its Product Configurator, which describes about 150 steel attributes. "To do a complex steel transaction on-line and then take advantage of integration, and get that information back into ERP systems, you need a lot of product descriptions," Glaser noted.

e-STEEL's Steel Markup Language (SML) translates data from a user's legacy system into form that can be communicated over the Web. In the future, "we will also have the ability to talk to other metals exchanges and exchanges in other industries," Glaser said.