Digital Trading Map showing the new geography for business today.

Digital Trading Map

The best way to understand this diagram is to imagine yourself or your company at the centre of the map. The large 'D' shaped image shows your company systems configuration and its interfaces with the outside world. The other smaller 'D' shapes represent companies in your supply chain and mirror the arrangement of your systems configuration (they have been left blank for clarity). The Oval shape within the 'D' shows three layers:

1) The interface with the outside world whether human or machine

2) The e-Commerce server which handles all web communications

3) The core, established business systems.

The outer ring is split into two segments, one facing forwards up the supply chain represented in your company by the sales and support or 'sell-side', the other faces backwards down the supply chain composed by your purchasing, out-sourced and partner areas (buy-side).

All forms of communication are shown, the traditional face-face,telephone and fax are now multiplied through a variety of internet technologies.

The importance of the internet technologies is that they 'write' straight into the core business systems through the web server. Customers and their computer systems can buy directly from yourcatalogue. Your CRM system can automatically record customer details, habits and preferences. The personal data about previous customers is valuable for targeting them later on, using electronic direct mail for product updates and cross-selling. Modern CRM tools are allowing big companies to tailor personal services to hundreds of thousands of electronic customers.

Your ERP system will automatically launch new production orders that will in turn send out internet purchase orders to the suppliers' computer systems. Web Customers now expect immediate order acknowledgements by email, the tracking number for their order and prompt response to any subsequent questions.

The newest internet technologies are more efficient because the expensive face-to-face costs can be reduced. Contact (Call) centres can be empowered with interactive web tools and intelligent call handling / escalation systems, these forward web customers to specialist staff who close the deal on-line using a variety of tools:

1) Remote browser control

2) Chat box questions and answers

3) Voice communications down the same line (VOIP)

4) Video Meeting streaming down the internet

The order is recorded at the moment of sale directly into the system. There are none of the delays or mistakes associated with the 'old' methods of batched sales order inputs.

Similar benefits can be realized in the supply chain with the reduced cost of communication.

Distributed Commerce

The distribution network shows four distinct trading models, sometimes this variety of routes is called 'distributed commerce'. These are all paths to the end user/customer shown in the circle on the right hand side of the map. The circles splits sales into three categories:

1) Business Expenditure includes all purchases by commercial companies whether goods or services or support much of this is forecast to become machine to machine 'silent commerce'.

2) Web communities are groups of buyers with similar interests, they could be casual web clubs or formal business entities.

3) Consumers, individuals with domestic expenditure.

Distribution Network including TradingModels #1 to #4

The trading models are listed in order of profit preference for your company.

Number one is a direct route, manufacturer to consumer. This gets your product to market quickest which is useful for fashion critical markets. It delivers the best margins because there are no middlemen to pay. It also allows you direct CRM data

Number two trading model relies upon the web presence of infomediaries and TTP's. Your product can be targeted to each web surfer according to their personal search criteria and interests. The web integration of sales helps reduce cost, often the product will be shipped direct to the consumer (not via the TTP). The reselling margin for the TTP will be low, related to the small added value. The order can still be accepted with some CRM data which makes this route to the customer very worthwhile.

Number three model is about supporting the traditional infrastructure of wholesalers and retailers, some customers only want to deal with the 'bricks and mortar' outlet. Brand confidence is often helped with a high street presence. Sometimes there are useful value-adding services provided by 'Bricks and Mortar' that compliment and encourage these sales. The extra costs in the distribution chain means that profit margins are squeezed.

Number four can represent a near perfect market place for your goods. If it is difficult to differentiate product from your competitors' then you are in a commodity environment. Your profit margins will be less predictable, depending upon market conditions, it may be good one season but in the following one, at a time of over-supply you may be forced to sell at below cost. This has got to be a least preferred route unless you are trying to penetrate new markets or are selling a 'replacement' product.

price lists are extinct!

These different models show how varied the customer interaction can be in todays e-commerce environment, they also show how pricing and profit margins are set according to different but co-existing marketplaces. The 'old' practice of a fixed term published price list is now obviously both impractical and inflexible. Companies with integrated systems are using pricing strategies that are played out day by day in the marketplace.

Supply Network

The supply side of the map shows two tiers of suppliers where the second tier does not deal directly with you but supplies components to your first tier supplier. The task for your buyers or supplier development people is to encourage the take up of these systems as far back down the chain as possible.

Mass Customisation

The reduction of inventory, increased responsiveness and lower transaction cost in your supply chain will help you keep your current customers, also it will help you win new business. The complete automation of Bills of Materials re-ordering down the supply chain opens up the possibility for realising the 'Nirvana' of manufacturing theory. A new business built using bar coding and internet technologies should be able to compute much greater product variation and even individual order customisation in an assembly line facility. The end goal of a batch size of one can then be turned into reality.

For commodity products you should be using marketplace portals, these will ensure lowest pricing especially in times of commodity glut. It may be easier to join a portal built by a larger company which will promote a trading method for all of your chain, you might find that it opens the doors to a better range of suppliers and even new customers.

For other products and services you need to reverse the thinking of 'sell-side' commerce. Suppliers that make good profits can invest for the future to support you better. If there are a choice of ways to buy then think about what is best for them as well as what is most convenient for you.

Try to set up direct machine to machine purchasing and then negotiate a price reduction from the implicit cost saving. Promote the latest internet communications technologies so that your supply chain can better understand both the needs of your company and your customer.

Interactive web purchasing lets you understand the deal better and reduces the costs of face to face communications. The use of buyers web sites with 'secure meeting rooms' enable fast and private project collaborations with your supply base.

Why not let us audit your supply chains or recommend a portal strategy

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