There’s nothing more representative of the smokestack economy, nothing more analog, even essential, than steel.
The steel industry itself is complex, global in scope, and comprises all manner of offerings: flat steel, rolled steel, steel used in structures. Agricultural firms need steel, water companies do too, and there’s no end of manufacturers who need the commodity.
And as we might expect in the smokestack economy, inefficiencies are hallmarks of sourcing and paying for it all.
Shep Hickey, CEO of online platform Bryzos, told Karen Webster that “There are certain sectors that have a decent amount of stock available and the pricing may not be all that volatile. Then there are other sectors that are in the midst of a supply shock, and it’s hard to find what you need.”
Add in the supply chain shocks that have dominated the pandemic right up into the present day, and firms scramble to find supply. In fact, if there’s any certainty in the steel industry, it’s that uncertainty reigns.
The landscape is ripe for a digital transformation — as Hickey noted, FinTechs have come a long way in just a few years. Technological capabilities have improved enough so that any number of players can congregate on the online platforms to get business done.
See also: Tech Solutions for Payments Are Central to Optimizing Supply Chain
The platform operates as an online steel marketplace that facilitates trade between buyers and sellers.
Those buyers and sellers operate across several verticals, including energy, automotive and infrastructure. In terms of the mechanics, the online marketplace facilitates anonymous transactions to both parties until the deals are done and closed (through Bryzos’ checkout and documentation processes).
The Payments and BNPL Components
There’s a buy now, pay later component, where liquidity is improved as payments are advanced by Bryzos’ financial partners to the sellers — and collected later from the buyers.
Hickey likened the model to a real-time network of supply that gets the steel where it needs to go and to the firms that need it.
With those mechanics, Bryzos, he said, seeks to make sourcing and buying a bit less unwieldy. The platform model also addresses credit and terms — and improves on the industry’s dynamics. It doesn’t make sense amid the traditional channels, he added, that a distributor can be willing to buy steel and then be willing to buy the steel “again” if the buyer defaults.
Every dollar of revenue is a dollar of liability, in other words. The sellers are less concerned with the speed of the payment than they are with the certainty/guarantee of the payment.
The Old Ways
It’s a marked improvement against the traditional distribution model that has been around for decades — where a contract is struck and paid for, and the steel is delivered four months hence.
With the online channels, “You can almost think of it as crowdsourcing,” said Hickey, “and you’re paying what the market is really bearing right now — and reaching across the supply chains.”
Read also: Transaction Disputes Rise as Supply Chain Disruptions Persist
Against that backdrop, he said, the actual steps taken during a transaction are not all that different than what is seen with other eCommerce models (just think of the deals getting done in a different “room”).
As payments become more intuitive, and easier to do online, it’s only natural that analog industries — dominated, previously, by invoices and paper checks — would follow suit.
“We’re in the middle of the bell curve as far as acceptance of eCommerce in a general sense,” he said of the steel players. COVID has been a tailwind as more employees work from home and the workplace is skewing younger and more digitally savvy.
Education and Persistence
None of this is to say that fashioning an online marketplace for an analog arena is an easy task.
Hickey recounted to Webster that Bryzos, which has 950 firms transacting across its digital channels, had to gain critical mass over a long gestation period.
Liquidity is critical for an online marketplace (and lack of liquidity has killed digital platforms in decades past).
Hickey, whose pre-Bryzos career has roots in the steel industry, recalled the pressures of having to convince initial groups of buyers and suppliers to take the leaps of faith required to join the platform.
“But as people see the need for business done this way, it has its own virtuous cycle,” said Hickey. After all, suppliers want to maximize capacity and efficiencies. And buyers want to maximize their purchasing efforts. Online models, he said, foster price optimization and even democratize the industry a bit.
“In normal markets,” he said, a bit tongue in cheek, “a supplier will sell to their ‘kids’ and their ‘kids’ friends. In markets like this, they just sell to their ‘kids’.”
He said that the greenfield opportunity is significant, as Hickey estimated that roughly 1% of the industry (as measured in sales and in the hundreds of billions of dollars the industry spends each year overall) is transacting across the platform.
“We’ve found ways to create enough value through BNPL and operational efficiencies that … buyers and suppliers are gaining the trust and confidence that this marketplace works for them,” he told Webster.
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