With the pandemic prompting most sectors to accelerate their rate of digitalisation, businesses are already seeing benefits, including improvements in efficiency, ease of use, and business continuity. However, digital transformation isn’t just necessary as a means to adapt and keep up with other businesses, but to combat other pressing concerns in industries, such as environmental risks and a mismatch of supply and demand.
The commodity value chain is running into increasing problems today, with both climate change and the pandemic disrupting global supply chains, making it harder to source and trade materials. With suppliers unable to match demand and further risking damaging the environment with the potential to encounter another crisis in the future, digital transformation presents a solution to streamlining the commodity value chain.
Supply and demand
The pandemic has slowed down the commodity value chain, restricting travel and trade. As a good portion of sales used to take place face-to-face at various events and conventions, the pandemic has thrown a wrench in people’s ability to meet and conduct deals, exposing inefficiencies.
The market has also struggled as a result of climate change, which has raised prices and disrupted the availability of commodities as a result of interruptions in production and transportation. These commodities therefore become in demand. For example, there have been microchip shortages due to a combination of the demand fuelled by the pandemic for automotives and electronics, and the pandemic affecting microchip production. This has led to a crisis in the car market today, with used cars in the UK going for the price of brand new ones.
Another example of an area of the market that has been struggling to match supply and demand is that of metal commodities. With metals a finite resource, the prices of metals such as copper, aluminium and nickel have shot up. Combined with the rising inflation across the globe, the price of copper has increased by over 50%, and aluminium over 100%[1].
Furthermore, there is an increased demand for metals with large-scale investments in renewable energy. For example, wind farms are powered by copper, and the price of lithium has gone up to almost 500% since the start of last year due to its use in batteries. Automotives and computers are not the only sectors affected by the scarcity of metal commodities, and businesses may struggle to reach their ESG targets as a result, impacting sustainability goals globally.
In order to purchase metals, many businesses are reliant on acquiring vertical supply chains or using advisory intermediaries – without either of these options, businesses will struggle to access metals and reach their carbon-zero commitments. Something must change for suppliers and buyers to be better matched.
Digitising B2B marketplaces
The digitisation of B2B marketplaces will enhance the current market, with intermediaries encouraging accessibility in markets and widening distribution to a global level instead of sustaining traditional verticals. By increasing market competition and efficiency, digital B2B marketplaces will also allow for greater market transparency, creating an open market and democratising the purchase of commodities. Furthermore, digital marketplaces are able to transact vast amounts of money securely and efficiently, streamlining the trade of commodities.
Data science will play a part in revolutionising B2B marketplaces, enabling predictive technology that will help marketplaces recommend the right products to the right buyers at the right time. This both increases the sales of marketplaces and satisfies customer demand by recommending alternatives, solving the issue of supply and demand found in traditional marketplaces. Marketplaces can also use data science to adapt their auction methodologies based on past auction performance, giving marketplaces an edge against their competitors and reaping financial benefits.
Data science can also be used to improve efficiency. In order to avoid further global supply chain crises, using data science to analyse supply chain tiers allows data scientists to identify weak links that could potentially affect supply issues. By pinpointing areas to improve before efficiency is harmed, organisations can thereby use data science to mitigate future issues that may occur.
Apart from optimising liquidity, digitising B2B marketplaces will also support the infrastructure to better quantify and help evaluate climate change risks in production and transport, and importantly finance the growth of renewable energy by making necessary commodities more accessible.
By embracing change, marketplaces will benefit from the promise of profits and sustainability. To work towards this future, there must be a transformation of today’s marketplaces, and a commitment to building an infrastructure that is sustainable, equitable, and resistant to future crises.
