Megatrend digitalization – act now or lose out later! (Part 1/2)

Dr. Stefan Girschik, Michael Grysczyk, August 20th 2020, Muri near Berne (CH)

Digitalization is today’s game changer and has a huge effect on value-added processes, supply chains and entire industries. It requires us to completely revise our mindset and adapt to new ways of working. It offers plenty of opportunities, but also a number of risks that should not be underestimated. Thus, digitalization in the polymer trade was one of the top priorities from the very outset when the Swiss trading company REHAU GmbH and its subsidiaries merged with the international polymer distributor MB Barter & Trading AG in 2018. Even prior to the foundation of the new Meraxis Group in July 2019, both top management and investors agreed that digitalization, along with recycling, would be one of the central pillars of the new corporate strategy, or rather, that there would have to be no "ifs and buts". We were able to draw on several years of experience in the digitalization of a global industrial group and in any case were well aware of the stumbling blocks. We embarked on our journey following the motto: "There’s nothing wrong with making mistakes – just learn from them and don’t repeat them”.

The first step on our road towards more digitalization was the foundation of our agile ecosystem, the Meraxis Elevator, a strategic initiative that was launched at an early stage in our company building and strategy process. Ever since, we have been growing our main focus areas in close cooperation with carefully selected partners and insiders.

In this blog, we like to take you on our journey towards digitalization in polymer trading and share our insights. Welcome to episode one on risks and opportunities…

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What opportunities does digitalization offer us...?

  • eCommerce: Digital sales channels create new business potential

The systematic development of a digital sales model is a direct opportunity with interesting scaling and success potential. The extended range with lower processing and acquisition costs are obvious advantages and quick wins.

  • Big Data / AI: "Data is the new gold"

The days when only data necessary for immediate business was created in the company’s own ERP system so as to simply handle the operative business as efficiently as possible are long gone. The professional collection and management of data along the value chain (e.g. delivery data, product/material data, market data, customer & application data ...) and the intelligent combination and evaluation of this data using advanced technologies can lead to decisive competitive advantages, higher customer benefits and of course to completely new business opportunities. One example with great potential in our eyes could be the smart combination of digitalization, recycling, and the circular economy.

  • Operational Excellence: automation of manual processes and connectivity

Of course, the optimization and automation of operational processes remains one of the biggest levers digitalization has to offer. If all core processes (first priority) as well as support processes (second priority) are regularly put to the test that, in the sense of an end-to-end logic, goes beyond the company's boundaries, vertical and horizontal interconnectivity offers an enormous potential for efficiency gains. In B2B trading companies, the automation of logistics processes along the value chain and digital connections with customers, suppliers, warehouses, and forwarders in particular continue to offer enormous opportunities for optimizations in both costs and services.

  • Differentiation and speed: positioning as "first mover"

Many B2B industries and their trading companies are still very traditional or even conservative: a slightly old-fashioned brand image, no established online sales channels, a lack of cross-company transparency in the supply chains with regard to conditions and order processing, hardly any digital marketing and no digital services often still characterize industrial practice. This offers numerous opportunities for differentiation from the competition. Trading companies in particular can reinvent and position themselves as an innovative, long-term partner by means of comprehensive services for customer and supplier networks. This can also increase their appeal as an employer for young professionals, a particular challenge and task for distributors, since talent is scarce and demanding.

And what risks come with digitalization...?

  • Loss of competitiveness and market position

Along the polymer value chain, and especially in the trade sector, it is no secret that there is a high pressure on margins, especially in the commodity sector. This is intensified by the continuing trend of globalization and increasing price transparency due to the boom in e-commerce and constantly improving market information platforms. Any company that fails to use digitalization in a targeted and systematic manner in its corporate strategy, whether to become more efficient, reduce costs, or even to differentiate itself from the competition in the long term by offering innovative services in addition to its product portfolio, sooner or later risks losing its competitiveness or even its market position.