Introduction

Brokerage of industrial commodities often involves an information asymmetry, where brokers possess superior knowledge of market dynamics, pricing, and import/export risks. A global engineering firm recognized an opportunity to disrupt the traditional broker-centric model and sought to understand the relationships between suppliers, buyers, and brokers in the commodity markets. The company aimed to leverage digital technology to eliminate brokers from commodity transactions, fostering direct and transparent digital relationships between buyers and sellers.

Building Transparency

To address the challenge, the firm focused on two commodity markets with significant transparency gaps in pricing and global supply. Teams were assembled to conduct market research, develop technology solutions, design user experiences, and plan commercialization strategies. Two digital technologies were built and tested to validate the hypothesis of digitizing broker services:

1. Two-Sided Marketplace: The team created a two-sided marketplace that facilitated direct transactions between buyers and suppliers, removing the intermediary broker. This platform streamlined the transactional process and provided transparency in the commodity market.
2. SaaS Platform for Digital Relationships: A Software-as-a-Service (SaaS) platform was developed to cultivate digital relationships between buyers and suppliers. The platform offered commodity pricing insights, import/export quality analysis, purchasing analysis, and communication tools to enhance transparency and collaboration.

Market Testing and Results

The market testing phase yielded significant interest, particularly in the SaaS platform’s capabilities. The platform’s ability to reduce import/export risks for specific commodities resonated with potential users. This positive response allowed the company to shift its focus towards:

1. Reducing Customs Complexities: The SaaS platform’s capabilities were enhanced to address complexities at the point of customs, facilitating smoother cross-border transactions.
2. Next-Generation Purchasing Insights: The platform evolved to provide advanced purchasing insights, enabling buyers and suppliers to make more informed decisions.
3. Strengthening Buyer/Seller Relationships: By fostering direct digital relationships, the company aimed to deepen connections between buyers and suppliers, thereby reducing reliance on traditional broker services.

Conclusion

By leveraging digital technology and focusing on transparency, the global engineering firm successfully disrupted the industrial commodity brokerage model. The implementation of the two-sided marketplace and SaaS platform allowed for direct and efficient transactions between buyers and suppliers, eliminating the need for intermediaries. The positive market response and demand for the SaaS platform’s features validated the company’s approach. With a strong commitment to building transparency and cultivating digital relationships, the engineering firm achieved its goal of driving innovation in the commodity market and revolutionizing how industrial commodities are bought and sold.