The manufacturing industry is a sector that is currently facing more challenges than most. An aging workforce leading to talent shortages, political and economic instability fueling global supply chain problems, ongoing struggles with digital transformation – the list is vast and the list goes on.
Each of these challenges contributes in its own way to additional pressure on profit margins and limiting growth in the manufacturing industry. This has caused manufacturers around the world to turn to other sources of income and embrace direct trading in ways they haven’t really done in the past.
One of the key elements of this increase in industrial trade is the use of marketplaces. Smart manufacturers have realized that launching their own marketplace is a very effective way to grow additional revenue streams, boost their business and create broader trading ecosystems.
These could potentially be transformative for any manufacturer, but it’s certainly not a matter of imitating a B2C marketplace and hoping for success. Manufacturer-driven marketplaces are much more complex than B2C marketplaces, with different requirements to make them work. For any manufacturer using marketplaces to drive commerce, there are a number of elements that they must prioritize to ensure success.
A configurable product
Manufacturing transactions are rarely simple, especially when compared to traditional retail transactions, which are usually very simple. A customer buys the product and shortly afterwards an exact version of it comes out. However, production sales are usually made to order. Sometimes this can mean that a manufacturer will not make the product until an order has been placed, often with strong specifications. At other times this may mean that there is an important element of customization in the order.
Different countries use different measurement models. In the US, the imperial system is still prevalent, while in Europe and other parts of the world, the metric system is used. Any European manufacturer selling to customers in the US (and vice versa) should take this into account and allow those customers to order in the system that best suits them. Ultimately, customers want the product to be configurable – and manufacturer marketplaces need to be able to comply.
The ability to manage non-standard prices
Pricing is another manufacturing issue that simply doesn’t exist in traditional retail models. When a consumer buys something online, the price is the price. There is no negotiation, no discount for bulk purchases and no custom pricing. This is known as a request for quote and is very common in manufacturing where standard pricing rarely applies.
In the manufacturing industry, a customer will ask for the best quote from a company based on a whole host of different variables: quantity, quality, location, frequency of previous orders, and much more. It’s a very advanced feature that doesn’t even exist in retail or any B2C market, but is essential in manufacturing.
Some manufacturers build products that are built almost exclusively with one or two core materials they already contain. But other products are much more complex and a manufacturer cannot provide a finished product without bringing in other products or materials from many other manufacturers.
This complexity of the supply chain requires even more sophistication in the manufacturer’s trading market. One substantial order can create significant supply chain needs, so it is essential that the manufacturer’s systems are interconnected so that supply can keep up with demand.
Take advantage of headless commerce
One of a manufacturer’s largest customers will likely order from many different places in the company. An order can come automatically from a company’s ERP system, it can come from headquarters or a specific location elsewhere in the specific location of the organization. An order can be placed directly at purchasing or at another department.
Each marketplace must be able to facilitate orders from multiple different interfaces and meet the preferences of each customer. If you dictate to a customer how and where they order from you, they can find another manufacturer that is more accommodating. The answer lies in the Headless Commerce architecture, which separates the front-end and back-end of a commerce application.
Headless Commerce relies on the use of an Application Programming Interface (API) to connect multiple platforms at the front end. It’s easier for developers to create personalized experiences without modifying the back-end system. This will allow customers to purchase products on their platform of choice and companies to approve orders using smart devices such as wearables or voice assistants.
Embrace change management
Embracing commerce in this way can be a major shift for some manufacturers, and they will need to be aware of the need for change management programs to address any issues. Most manufacturers are very sales oriented and struggle to get their sales teams to accept that there are parts in a deal that they have no control over.
Or there could be a sale through the marketplace, where the sales team hasn’t called the customer, so they don’t earn a commission. It is essential to address this shift together with employees, as a successful marketplace project can benefit the company as a whole.
Manufacturer marketplaces have a lot of potential, but bringing them to fruition isn’t just a matter of copying one of the many B2C marketplaces out there. B2B marketplaces are very sophisticated with many requirements, but if a manufacturer can meet this complexity, commercial success beckons.