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“Digitization – the Kiss of Death for Traditional Trading Business?”

Is Digitization the kiss of death for historically grown Trading business?

Talking about “Trading Companies” most people think of Retail and Wholesale Distribution business. But Google tells you adds that “Today “trading company” mainly refers to global B2B traders, highly specialized in one goods category and with a strong logistic organization.” It’s almost impossible to find academic and practical publications on General Trade Business, a very special trading business format, mainly existing in the US, in Asia and some in Europe.

There are a number of categories of Trading Businesses, so independent Trading Companies like Cargill, or Trading subsidiaries of traditional General Trading companies like Mitsubishi or Mitsui in Japan, called Sogo Shosha or Samsung in Korea, called Keiretsu. Beside those you find Trading processes in many companies and in various industries, so Fashion Companies, Oil and Gas, Chemicals, High Tech, Mining and Mills, Building materials and so on. Means there are two view points – the General Trade company with a focus on Trading Business and the Trading processes. Anyway the Trading process is a key process of all of them.

The main characteristics of the trading process are the association of the sales order and the purchase order, an excellent competency and exclusivity in sourcing and selling and a strong historically grown contact base, which is mandatory for effective global sourcing. Furthermore they usually provide a contract based tracking and analytics, especially for logistics execution and fulfillment.

Intransparency of the trading transactions of the General Trader towards suppliers on the one hand and customers on the other hand has always been a prerequisite of the traditional business model of a trader.

Transformation to the “Intelligent Trading Company”

With all businesses having the opportunity to access internet and ecommerce capabilities, new disruptive Business models have appeared like Alibaba and Amazon Business and endanger Traders’ exclusivity. It looks like Traders have to think about reinventing their business model leveraging digital technologies. There is an opportunity to transform to B2B2C Marketplaces, where they are able to get a 360 view on customers and win customer insights, which helps them to anticipate customers’ next demands for materials, products and services. Also Traders need a real time view on inventory and the whole supply chain including Third Parties. Personal or exclusive sourcing contacts are substituted by virtual Global Sourcing networks.

Looking on the e2e process of a Trading company of today they have new requirements to stay competitive:
– Understand the needs of the customer and the customers’ customer
– Understand the needs of the supplier
– Analyze customers, products, suppliers, and B2B transactions
– Extend their business offering through value added services managing many or even all business activities concerning the deal as e.g. import/ export activities, logistics planning, execution, tracking and so on
– Effectively plan and efficiently execute business transactions
– Advanced material requirement planning
– Simulation of price calculation and expenses
– Continually learn and anticipate to proactively offer the customers/suppliers new interesting opportunities

With SAP as a strategic partner they have the opportunity to reinvent themselves, transforming their traditional business model to an intelligent enterprise by leveraging SAP technologies and solutions.

Sources:
https://en.wikipedia.org/wiki/Trading_company

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