Price transparency presents significant challenge in the exchange of secondary materials consumption. Procurement professionals do not have the same access to price information as they do for primary materials and commodities. Augmenting this issue, confidence in the quality of the material is not as strong as it is for primary materials due to established control and assurance processes. More transparent and immediate material information is needed to establish a competitive secondary materials marketplace.
Creating an open platform where real time price, quantity, and quality information can be accessed by secondary material sellers and buyers would provide the data they depend on for procurement. If that platform could also facilitate transfers in a secure and transparent environment, that marketplace would be much more powerful.
Mjunction, a joint venture by Steel Authority of India Limited (SAIL) and TATA Steel, is currently the largest e-commerce platform for primary and secondary steel in the world1. Established in 2001, this Indian marketplace conducts between 700 and 800 auctions each month2, making it one of the main actors in online materials marketplaces. Initially focused on steel, Mjunction rapidly expanded to new business lines and now offers e-Finance, e-Selling, e-Sourcing and e-Knowledge services for various goods such as steel, coal, automobiles and tea3.
The success of this marketplace can be partly linked to their e-Sales process. Their e-auction service ensures buyers and sellers a “transparent pricing based on the market situation”4. This system, in addition to providing information regarding the availability and quality of materials, allows both parties to benefit from a trusted environment and pursue their exchange safely. The forward auction system awards the highest bidder the material. In this process, buyers and sellers can see the price and the number of parties involved in the exchange at any time. They also can be assisted by “tele-executives” during the process5. This mechanism allows members to save time in the negotiations, while being ensured of a fair price. Additionally, Mjunction provides logistics and inspection services. Quality ensured materials are delivered by Mjunction all over the country6.
Establishing the e-auction service was neither quick nor easy. Mjunction had to initially overcome credibility issues and prove their platform was reliable and scam-free. After consistent efforts, the company’s program matured by 20067. The program is now supported by “standard operating procedures” developed to run the auctions8.
Mjunction illustrates how secondary materials can be exchanged at a fair price agreed upon by buyer and seller. Mjunction was a pioneer in the e-auction system for steel9 and maintains its leadership. This system can be a model for other online marketplaces.
7. Biswatosh, Prarthan, Vidyanand, Architects of the Indian Cyber Mandi, How Mjunction institutionalized e-auction in steel trade and other verticals
8. Biswatosh, Prarthan, Vidyanand, Architects of the Indian Cyber Mandi, How Mjunction institutionalized e-auction in steel trade and other verticals
Image source: http://www.mjunction.in/