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1.       If I were a small chemical company I would not really have any concerns about joining Elemica. Joining Elemica can almost totally have only good effects, like instant access to many buyers and sellers, automated electronic transactions eliminating paper and saving money and time, and a total view of the supply chain. One possible concern is that larger companies might undercut me, through profit-loss predatory pricing, to retain market share and eliminate competition.

 

2.       It is possible for Elemica to provide services to cooperators and competitors both at the same time because they only charge fees for transactions based on percentage-of-transaction price modelling; they do not actually trade in any products, only services. Also, Elemica is a disinterested third party, not uniquely tied to any of their clients. Additionally, access to firmís platform is an equal opportunity venture because it links all enterprise systems and does not exclude anyone.

 

3.       The purchase of Elemica by Thomas Bravo private equity firm only more solidifies the companyís position in a B2B framework. The addition of significant capital resources gives the company the ability to improve its financial ratios and thusly improve its stock position and also help it to acquire more market share, further penetrating into the services market for supply chains. Market share improvement can be facilitated and partially achieved through upscaling its platform servers to accommodate more and more clients (which requires capital investment).† In regards to Figure 12.9 in the text, Elemicaís fit is universal across the table both vertically and horizontally in regards to services, but void when the diagram is viewed through a product lens, because the exchange of products are not one of their core competencies.

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3.       I would recommend using an exchange over an industry consortium. There are several reasons. One, is that steel as a raw material has a relatively non-volatile cost over time; in other words, the price is relatively stable, unlike say, fuel or energy as a commodity. This matters because a more volatile priced commodity favors the price security of a consortium and a more stable priced commodity favors the cost-savings advantage of an exchange, where there is a more global and flat market that tends to drive price downward, thus saving money on the spot market. However, yes, there is the fact that there will be more ordering costs using an exchange because there will be a higher number of orders placed, but the higher cost savings due to reduced prices paid will more than offset this; this means that a minor disadvantage is that more managerial control for the ordering process will be required as a result.

 

A second reason, and perhaps just as important, is that the process of using an exchange is a more proven model than the relatively new consortium model. The probability of process failure is higher with a consortium. This has the additional risk of an inherent time risk because of the need to make a contractual agreement for source of supply with a consortium arrangement; in the event of failure, an additional risk is the inability to buy on the spot market precisely because of just such a commitment, and this would likely result in financial penalties resulting from breaking the agreement in the event of failure to buy on the spot market to prevent a work stoppage, or loss of revenue due to work stoppage in the event of failure and the resulting potential loss of customers and market share, and in a worst-case scenario, possible firm failure.

 

Thirdly, we are a relatively small manufacturer with one plant. As a result, we are nimble and can deal with small fluctuations in raw material prices and a relatively larger number of supply orders using an exchange. Consortiums favor larger firms such as multinational corporations, that need to control volatile priced commodities related costs through longer-term agreements. We need to use an exchange system.† †

 

4.       I believe that a cloud-based B2B solution is best for our firm. I believe this for several reasons.

 

The most important reason is increased revenue and profit. As reported by GT Nexus (a cloud-based B2B supply chain service provider), clients connected with their Network system experienced a 46% higher performance than clients that maintained a traditional supplier and customer relationship.

 

Additional reasons to make the leap are: Improved and faster visibility and metrics, resulting in greater agility, control, unified truth across the venture, and excellence. This also means simpler collaboration, and better transparency and customer responsiveness.

 

Another important reason to switch is we could use a single enterprise platform with custom application capability. Besides information streamlining, this would allow us the ability to apply a big data capability and artificial intelligence (AI).

 

It would require further research to decide on a provider upon deciding to make a change, but one reason to choose GT Nexus is that 90% of global ship container traffic is controlled by GT Nexus member carriers. On cursory examination IBM Blockchain (which does not require cryptocurrency exchange) would appear to be the other likely candidate.

 

I look forward to your valuable feedback, and the opportunity upon a forward-looking decision to further research and refine a particular solution provider.