Mining Embraces E-Commerce

If $272 billion dollars doesn’t interest you, stop reading now. But if it does, consider that Forrester Research of Cambridge, Mass., estimates $272 billion to be the total of online business trade in Canada by 2005. The figure represents 18% of all B2B (business-to-business) transactions estimated for that year in this country. Ontario and Quebec ($193 billion) will lead in online commerce. The largest sector will probably be automotive supply ($91 billion) followed by petrochemicals ($46 billion). The maintenance, repair and operations (MRO) sector will also be a large one, and one that may be of particular interest to mineral producers.

B2B sites vary widely in their complexity. They may contain a simple list of supplies for sale or they may operate as hubs connecting buyers and sellers on multiple levels. They may be simple auction houses or provide outstanding value-added services. Content may be solely aimed at mining, or the mineral industry may be just a tiny component of a site offering everything from soup (for the food industry) to nuts (as fasteners).

The better B2B services clearly spell out the benefits to both suppliers and buyers. Suppliers can expect to reach a larger number of potential customers, save money on catalogues by posting the information on the web site, respond quickly to inquiries, and cut the cost of order fulfilment. Buyers can save money by comparison shopping or requesting competitive bids, reducing administrative costs, and lowering inventory. Many of the services are multi-lingual, reflecting the global reach of the Internet.

For CMJ readers, here is a closer look at three B2B sites. Also we have compiled a table including many more (and certainly not all) sites you may wish to browse. We recommend reading the “About Us” and FAQs areas at each site first.

MineOnline.com

A good place to begin learning what B2B can do for mining is MineOnline.com. The site is aimed only at the mining and exploration industries, and it offers a remarkable number of useful services. The site contains not only an e-marketplace but also plenty of value-added services. MineOnline.com and its sister-site, GeophysicsOnline.com, are owned by GeoCommerce, which supplies hardware, software and technical assistance. GeoCommerce created the sites about 18 months ago after consultation with the industry to ensure that they work the way miners want them to work.

Using MineOnline, it is possible for a buyer to research a product or service, negotiate the terms, and conclude the transaction. All this can be accomplished with only a few clicks of the mouse when dealing with known and trusted vendors. The e-marketplace boasts over 10 million products in catalogues from thousands of suppliers. Guests are welcome to browse the lists. The e-procurement service contains information from suppliers chosen by members for their individual accounts. Tools to measure workflow, simplify record keeping, and track orders are available here. The list of services continues: used equipment auctions; MRO supply catalogues; a request for proposal (RFP) centre; a growing number of linked storefronts featuring suppliers; financing; shipping; bulletin boards and discussions; both prospecting and market news; and career opportunities.

Explorationists will appreciate two features not commonly found on B2B mining sites. The geophysical data centre contains over $500-million-worth of data from most regions of the world. There is also a joint venture exchange for those seeking properties, partners and opportunities.

The e-services available from MineOnline include worldwide e-mail, personal web space, web site hosting, and a virtual private office. Such a virtual office could be indispensable to mining companies whose operations are spread around the world. This is where personnel designated by the members can access catalogues, share plans or proposals, and communicate. Instant messaging, tele- and video-conferencing, and document sharing are all available.

This site deserves a look from both those new to the B2B world and old hands. It is well designed, easy to navigate, and loads smoothly. Take the tour at the enterprise procurement solutions area and see what MineOnline can do for you. Fees vary widely. Buyers pay a one-time fee based on the amount of customization and features they desire; and there is a monthly membership fee. Vendors pay a small transaction fee and pay for services such as putting their catalogues online. Suppliers are responsible for updating all of their posted information, which they do directly from their offices.

NRX Global Corp.

For those whose jobs involve MRO, take a look at the site of NRX Global Corp., which is entirely dedicated to those efforts. By the end of this year the NRX aims to have 80% to 90% (by dollar sales) coverage of the mining sector available.

Using an OEM (original equipment manufacturer) portal, a dedicated transaction engine, and industry-specific services, the developers have created an “industrial strength” B2B solution available globally. The service is very flexible so that buyers and suppliers of all sizes can use it. Features are designed in modules so that all or only selected parts of the service can be used.

In the simplest scenario, a buyer would find the part he wants online and then telephone the supplier to place an order.

The complete solution covers the whole procurement cycle. Having identified a part online, the buyer places it in a virtual shopping cart. The cart is passed on to alternative sources for pricing, availability and other information. The alternative sources can include a mine site’s own inventory, the inventories of other mines owned by the same company, and external suppliers. To fulfil the order, a requisition is automatically generated. When it is authorized, a purchase order is created and submitted either directly to the chosen supplier or to an electronic market place, depending on the buyer’s business rules and contractual arrangements. The order is shipped directly from the supplier to the buyer.

NRX includes several value-added services at its web site. Financial, supply chain management, outsourcing, data management, training, and specialized planning services are all available to members. The site offers two case studies–one for buyers and the other for suppliers–to illustrate how the service works. They are worth a look to understand the full benefits offered.

Just as the service is flexible, so is the fee structure. NRX says the minimum cost will be less than $1,000 per month. The maximum could be as high as $10,000 to $20,000 per month for a global manufacturer delivering gigabytes of data via the OEM portal.

Quadrem

The developers of Quadrem – Mining, Mineral & Metals eMarketplace are ambitious and well on their way to reaching their goals. Their vision, “to create an open, independent, global e-marketplace that is pre-eminent in the mining, minerals and metals industries, which will deliver sustainable value to suppliers and buyers”, covers a lot of ground. But this is ground shared by a global roster of mineral-producing shareholders (including Alcan, Barrick Gold, BHP, De Beers, Inco, WMC and others equally important) and Morgan Stanley Dean Witter (the financial institution).

Quadrem promises to be truly global, reaching 100 countries and supplying all goods and services to the mineral industry. The management board will operate independently of the shareholders. Both buyers and sellers (reported “hundreds” have already enrolled) are welcome, and they need not be shareholders. All participants will have the advantage of lower costs, common catalogues, and the largest pool of buyers and suppliers, according to the developers.

Quadrem has three major e-marketplace components:

MarketSite Builder–contains user interface templates, a plug-and-play framework for third-party applications, and tools for managing the Quadrem community;

Business Services–covers auctions, catalogue/content managem
ent tools, hosted buyer and supplier applications, and value-added services (data warehousing, logistic services, financial services, product life cycle management, and advanced planning and optimization tools); and

Transaction Engine–provides routing of transactions between buyers and suppliers, and also allows transactions to be archived.

Suppliers who use Quadrem have access to their own applications and back office systems. The application provides order management, the ability to upload a catalogue, product pricing/availability information, and reporting and downloading. The back office may be integrated either directly or through middleware tools.

The applications for buyers include catalogue and non-catalogue ordering, with order checking and inventory confirmation, links to supplier web sites, requisition approval, and order status tracking. They, too, will have access to back office systems.

The Bottom Line

Fees for using B2B sites vary widely. Sometimes listings are free to the sellers, and the buyers pay commissions to the site operator based on the price of their purchases. Other sites charge a monthly fee depending on the amount of information posted by suppliers or accessed by buyers. Use of value-added services may or may not be included in these fees. All sites require some form of registration (which may be free) and member log-in procedures to fully examine their features.

If information about the fee structure for a particular B2B site is not clear, look for the “Contact Us” option, send an e-mail or call, and enquire at length. Imagine the salesman from XYZ Corp. knocking on your door and wanting $10 to tell you what his widgets cost. A traditional sale would stop right there. But B2B sites, because their users can benefit from lower selling or procurement costs, do charge users.

How buyers and sellers exchange money once terms are agreed, is another area that deserves close attention. Some sites leave the actual payment and transportation issues totally in the hands of the buyers and sellers. Others provide escrow services, wherein the money is held by a neutral third party until terms of the agreement are completed. Or the site may have a financial institution as a partner; in such cases the members are encouraged to use that service for financing, leasing and monetary transactions.

Some of the pitfalls of B2B e-commerce will be removed with the creation of an “e-commerce dispute management protocol” developed by the American Arbitration Association (www.adr.org). Signatories agree to a code of conduct intended to solve disputes before they grow into costly and lengthy litigation. Many large international corporations have already signed on, and asking a potential B2B service about this protocol is a legitimate question.

Remember this: always, always, always read the fine print found under “Privacy Policy” and “Legal Notice”. This is where the operator spells out his obligations to the site users. If you don’t understand the legalese, find someone who does, preferably a member of the bar knowledgeable about the Internet and business law.

Not all of the B2B sites will be long-term winners. The potential is there, however, to quickly reach more customers and cut procurement costs. Analysts believe that B2B will be big business and quickly (remember the $272 billion mentioned earlier?). There is no reason for Canadian mineral producers to shun such promising technology.

---