Results: A Survey on Digital Commerce in the EU Steel Industry
Vanilla Steel conducted a sector-wide survey, exploring current trends and the roads towards digitalisation which the European steel industry will take in the foreseeable future.
We interviewed 392 participants from different companies in the steel sector - 63% of which were C-level employees.
96% of the companies which participated in our survey were based in Europe with the majority of them being large companies with more than 250 employees, split between producers (31%), large steel service centers (27%) and stockholding traders (25%).
Where is the highest potential of digitalisation?
According to the survey, the greatest potential for savings through digitization in the steel industry lies within purchasing and sales (rated 4.2/5) rather than the production (which received a score of 3.4/5).
This confirmed our previous research, which showed that the production side of steel has already experienced a lot of optimization in the last 40 years and even though there are many wins to be captured in production processes the real potential of digital services lies in steel trading.
Compared to other industries of similar size and importance to the world economy, steel & iron rank quite poorly based on Turnover rate (Costs of goods sold ÷ Average inventory), which is a good measure for efficiency and relates directly to supply chain costs.
Where does Europe currently stand in the global market?
Even though Europe has been leading the effort of digitalization and decarbonisation, when it comes to steel trading, the region is lacking behind Asia. The Chinese and Indian steel sector is reporting up to 15% in e-commerce sales, while our survey showed that currently most metal sellers in Europe are looking at under 5% of sales through digital channels. The European steel sector is lacking behind other industries worldwide as well, as the share of B2B E-commerce across all industries is more than double (10.7%) that of the European steel sector.
The trend however is positive and the shift towards digitalisation is taking place. Our findings show us that in 5-10 years 10-25% of steel trade is predicted to go through online channels, with some participants reporting plans of turning 75-100% online.
The online channel which is expected to grow the most in the next 5-10 years are B2B marketplaces, which are benefiting from low entry barriers.
What is slowing down digitalization in Europe?
The challenges which the European steel sector is facing are diverse, but a pattern can be found.
The results of our survey show that the following three reasons have slowed down digitization in the companies of the interviewees the most:
Diving deeper into the first factor, employees report that their resistance to adapt digital solutions and innovations comes from
The positive side? These challenges are purely personal and can easily be overcome by the right management and training in the company.
Digitalisation will improve personal communication and connections
Working in the steel trade has always implied a certain level of personal connection and business relationships. This has been confirmed by our survey, as end-users reported that transparent communication is the most important criterion when choosing a new business partner, rated higher than material quality, competitive prices and fast delivery.
Digital solutions will allow for higher levels of transparency by implementing Live order tracking, Consistent experience across all sales channels, Live prices, Live customer support and Live product availability (When end users were asked “What are the most important criteria for transparent communication?” these responses received respectively 32%, 15%, 10%, 10%, and 9%).
The future of metals in Europe
As the backbone of European industrialization, it is expected that the metals industry does not adapt as fast to digitalisation as other, less mature and more flexible industries. Where current business trends are being established in other industries is where the biggest opportunities lie within steel.
Our survey showed us that in the next 5-10 years the European steel industry is expected to see the biggest impact in Predictive Sales / Demand Forecasting (38%) and Personalized customer journey (30%), with B2B marketplaces (15%) following in third place.
Similar to other industries which are leading digitalisation and innovation (for example in retail and entertainment), Predictive Sales / Demand Forecasting will be heavily influenced by big data, which starts at data collection and sorting. Artificial Intelligence and advanced algorithms will support the sorting of data, which will lead to more educated decisions and improved turnover rates throughout the entire supply chain of steel.
Similar processes and advancement in artificial intelligence will support personalized customer journeys and assisted decision making, which in turn will cut time off decision making and improve accuracy and efficiency.
This will also reflect on the environment. 45% of our interviewees report that better forecasting will lead to less waste and another 25% state that digitalization will help with better comparability of carbon footprint between suppliers.
In conclusion, our survey provided us with valuable insights into the state of digitalization in the European steel industry. The results show that there is still a long way to go for the industry to catch up with other sectors in terms of adopting digital solutions. However, the trend towards digitalization is positive, and while there are challenges to overcome, such as personal resistance to change and a shortage of qualified workers, the potential benefits of digitalization in terms of efficiency, transparency, and improved turnover rate make it worth pursuing. The future of the European steel industry looks promising, and most importantly - digital.
The full results of the survey are sent by email to the participants who requested them. If you did not have the chance to participate in the survey but would like to see the results, please send us an email at firstname.lastname@example.org.