News Article 02/01/2001

Ideas About e-Procurement

02/01/2001 - Digital Ship

Dimitris Lyras, managing director of Lyras Shipping, provides some ideas about maritime e-business.

There were a lot of assumptions over optimistic assumptions made about e-commerce during the early part of the year, and a lot of unduly pessimistic assumptions made at present. My conclusion is that there is a lot more thinking to do to predict the outcome of this new way of doing business, and in my opinion many underemphasised ways of being successful.

Some say that there are too many web services in shipping and that only a few will survive. On the basis that there is over $500m per day of goods and services to trade in shipping, in the medium term the industry will have to find some really good excuses to avoid placing a good 10% of this in electronic exchanges. So is $50m per day too little to go around all the internet companies? Well, 1% commissions from this would possibly keep 30 people adequately remunerated.

We keep hearing that you need no more than say 4 chartering exchanges. Why is this so? In the bulk trade, in each loading region a charterer has a pool of say 60 vessels to chose from; how relevant are ships that are not in this loading region to the charterers and owners wishing to do business with each other?

If you agree that ships and cargoes outside a finite region are not relevant, then each loading region can be a separate market covering a finite set of cargo types and parcel sizes. This means there could be hundreds of healthy chartering exchanges covering specific trades.

Another strange assumption people are making is that if you provide a marketplace that covers 1000 vendors, and 1000 owners, this exchange will be more attractive to owners and vendors than one a tenth of the size. Not so, I believe. It would be so if it were a second hand parts exchange. It would also be so if one took hours to physically travel to the venue to do business. Neither is true in maritime e-commerce.

Facilitating business
Marine businesses, by definition, are facilitation organisations. Worldwide procurement, worldwide commercial networking, price level transparency and group purchasing are not new. B2B portals can do it better but the services already exist, along with some tenacious service providers.

For business to business transactions, the convenience offered by the internet for shopping and networking are not as phenomenal as they are to retail customers. In a company there is not usually one user who is also the decision maker, so sale procedures involve internal company workflow, which is difficult to satisfy within the simple "log onto the web site" approach.

No doubt ingenious marketing is key in the success of B2B ventures. This boils down to the ingenuity of marketing of each group and the way in which they can build alliances to enhance their services.

One is likelier to succeed when asking a client to join a pool of 100 vessels to group purchase lubricants, than to spread the same resources over 10 purchase items e.g. ropes, bunkers, lubricants, paints etc., and only manage 30 ships in the group for each item. In general, specialisation is a much greater asset in electronic networking than in physical networking, while variety is somewhat less attractive in e-commerce and more important in physical marketplaces.

Building intelligent browsers
It would be plausible to say that the internet has revolutionised how people and businesses find each other. Before computers, people commenced interaction personally and in business by communicating and sharing knowledge through a dissemination process whereby they exchanged information about each other's goals, resources particulars and history. This gave a clear path to possible further mutually beneficial interaction. People either introduced themselves in gatherings, or there were intermediaries introducing them.

In e-commerce and electronic networking, do we introduce ourselves or do others introduce us? Actually others introduce us. The essential intermediary on the internet is the layer of software technology between individuals seeking to collaborate.

We don't find the web sites and portals, the browser and our computer finds them. One may say that the browser does very little. Once we know the web site we can enter the URL and the browser goes directly. If this is a satisfactory level of work for the browser and we need it to do nothing more, then why don'we call the web service on the phone and talk to somebody directly?

The answer is it would be expensive to occupy people to answer all calls to a web service. It's a do it yourself environment. If so, then why is this layer of technology between the participants being so under utilized? Why does the browser do nothing but locate the site? Could it not save more time if it did a bit more work for us?

B2B networking saves people answering phones to provide services, provides a common notice boards without the need to travel to see them in a public sites, provides quick exchange of text and graphics which is difficult by phone and provides co-ordination without people needing to meet. But why on earth can we not have a browser make better introductions for us? There is a fundamental human need that e-commerce can satisfy that is totally ignored.

The human pattern we are missing is that people store and divulge a lot of information in consummating transactions, but our electronic aid, the web browser, knows almost none of this information. Businesses hold tremendous relevant information that influences transactions and networking, but again the browser, the intermediary, stores almost none of it.

If you sent a human intermediary to introduce you to service providers, would you not expect the intermediary to approach them with your company's relevant goals, resources particulars and history? Wouldn't that need to be accompanied by current actions and co-ordination details?

Having a browser that is separate from one's information system interacting on the web with potential business collaborators seems be an unnecessary obstacle to the expansion of electronic networks.

If every company has to re-enter spares ordering particulars, all its fleet particulars, all the features of its vessels, on every plausible B2B network, does this not constitute a threshold of entry? And all this before savouring any results? If you add to this the even greater threshold of linking to back office workflow procedures, to e-mail and to the clients' working day in general, is this not an absurd level of impedance?

Why would a customer find it attractive to get out of his own personal productivity system and into the portal, navigate the layout of the portal and have trouble bringing data back into the company system? Does it make sense that navigation within the portal is outside the users own environment, the environment that the user is accustomed to?

Why not have a personal assistant for each user parked on the web, that the user uses to navigate his in house system and all the portals he or she chooses to interact with, an electronic version of the user on the web. If we expect e-commerce to grow fast the browser needs an image of the user and his or her company wherever it goes.

An electronic assistant also eliminates the need to disturb the client when the client can be approached in the context of her next area of attention. Why be isolated from what the customer is doing and why disturb the customer with untimely communications and intrusions? It makes networking infinitely easier to get off the ground by linking people's actions, not their e-mail addresses.