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5. How to plan for Pan-European B2B trading
Main Findings:
- There are many considerations that are needed to be taken in to account for effective B2B trading
- Many of these are complex and costly for an organisation to consider doing well internally
- The complexity of the situation should not stop organisations from considering creating a Pan-European trading environment
Trading across Europe may seem to be too complex, based on the issues identified above. However, with careful planning, Quocirca believes that any organisation in Europe can make use of the resources available across the whole of Europe, and can therefore be a major player and be highly effective against their competitors in the market.
The main areas where Quocirca believes that an organisation should focus are:
- Reach
Europe offers great reach. As shown in the opportunities section of this report, reaching out from a single country approach to a Pan-European approach gives the possibilities of a minimum of a 6-times economic market increase, and a 15 or more times reach to the number of possible companies in a supply chain. However, organisations must not get confused between quantity and quality – it is still necessary to ensure that the quality of goods brought in to the organisation is of the right level.
- Costs
As the market conditions continue to look poor, organisations take the inevitable focus on direct and indirect costs, and the cost of raw materials and incoming supplies always ranks high on this list. Therefore, being able to choose from a broader range of suppliers not only provides a greater opportunity to find lower costs, but also provides opportunities for greater price negotiation.
- Logistics
Moving goods around within a single country tends not to be too taxing. An agreement can be forged with a single logistics company, with pricing being driven down based upon volume of goods transported and single supplier agreements. However, when we look at the possibility of trading across over 50 different countries, the capability of a single logistics company to effectively provide services over such an environment is highly suspect. Therefore, a more dynamic approach is required to ensure that cost-effective logistics, often involving multiple organisations in a single supply chain, can be managed.
- Language
Single language B2B transactions can be bad enough, for example where one party wishes to work in imperial measures and another in metric. However, when we expand this to include multiple different languages, the possibility for misunderstandings and errors are amplified enormously. With the extension of the EU into non-Latin language countries, the problem is even further amplified – for example, can incoming electronic forms and communications be even rendered correctly on your PC screen?
For the majority of organisations, even trying to maintain full capabilities in more than two languages would be problematic, costly and add time to any transaction. It is necessary to ensure that any issues with language are minimised – and this generally points towards a need for incoming and outgoing communications to be effectively translated to the reader’s language.
- Financial considerations
Although the Euro is the main currency of the EU, twelve other currencies are in use within the 27 member states. When we look at greater Europe, we see a total of over 40 currencies that need to be dealt with.
Even within the EU, the individual currencies are not irrevocably linked, and each currency floats against the others on the open markets. Therefore, a contract agreed a few months in advance may lead to a different amount of money being realised at the end of the transaction.
Alongside this, there also has to be taken into account the relative financial stability of certain countries’ financial institutions. Whereas an organisation may feel safe carrying out financial transactions with a named institution in its own geography, how secure should that organisation feel in carrying out a financial transaction with an institution it doesn’t recognise in a country that it is unsure about?
- RFI, RFQ, RFP and Contract exchange
Even if you manage to identify a suitable list of suppliers and customers across Europe, exchanging information with them remains a problem. The majority of organisations are still wedded to email and facsimile information exchange, which can rapidly get out of control and create an audit nightmare when things go wrong. Also, the mixed laws around document retention can add further to the problem and proving audit across a complete value chain involving multiple countries can be difficult – to say the least.
However, the main issue still comes down to language. The lack of capability for the vast majority of organisations to provide documents in the reader’s language means that either poorly translated documents are provided where errors and omissions are manifest, or that documents are provided in the writer’s native language, and the translations carried out by the reader leads to misinterpretations and problems.
- Transaction management
As organisations have moved towards more electronic forms of contract and transaction management, the perception has grown that this will solve many of the issues of transaction business across borders. However, Quocirca has found that the evolution of standards in this area has not been to the overall benefit of organisations.
As an example, let us look at the case of a food retailer looking to source food items from around Europe. It may be looking for citrus fruit from Spain, salad goods from Greece, tinned items from Poland and meat products from Denmark. Firstly, it has multiple languages to deal with – two of which are not fully Latin character based. Then, it has three currencies to deal with (four, if we assume that the retailer is UK based).
Then, it has to look at its own IT systems. If the company has been trying to move with the times, it may well have some electronic data interchange (EDI) capabilities. It may well be that it has UN/EDIFACT transaction capabilities, or even AS2. However, it could well be the case that one of the suppliers may have software that is ANS ASC X12 capable, or more likely is incapable of providing much in the way of EDI-based capabilities at all. Managing information flows in this way becomes costly, and errors will occur.
All this while, the retailer has to ensure that it adheres to the EU general Product Safety Directive, the EU Privacy Directives and the UK Food Safety Act, as well as PCI/DSS.
Therefore, it is necessary to investigate the means of dealing with different information interchange methods in an effective and efficient manner.
- Visibility of product
The majority of in-geography organisations will be able to provide a catalogue of products or services, or will be capable of reading such a catalogue provided by you as the possible supplier. However, this may not be so simple for an organisation outside of your organisation’s country. Web sites may be in the native language only, creating issues in navigation and in the identification of the right product. Physical, paper-based catalogues may be difficult to source and expensive to mail, and may take too long to reach the recipient. Faxed copies may be of limited use due to low quality.
Just how do you ensure that products can be shown to people, or seen by yourself, in a meaningful manner? Electronic catalogues are the best means of doing this, but do require a common means of navigation, particularly if these goods are being searched as part of a competitive environment. The use of common catalogues is growing, but individual companies cannot maintain these themselves, needing to look to outside organisations for this capability.
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