It is undeniable that China has become a giant in the world’s industry for the past years. This exposes Chinese players to a massive amount of raw materials consumption for meeting their pace of production. There are many kinds of raw materials used for production in Chinese industry, and timber is one of the most sought after.
Timber is used by various industries in China, most notably furniture and construction. These two are the main consumers of timber, contributing to an annual consumption of nearly 600 million cubic meters.
Unfortunately, given that China’s ecological condition is quite fragile and not naturally qualified, the Chinese businessmen are forced to seek for timber resources abroad. This has greatly increased the level of timber import by Chinese industry.
Monopoly Stands in the Way
In 2016 alone, China’s import of timber totaled about 106.4 billion yuan.
This should have become an enormous business opportunity for industry players in China, only if 85% of the cross-border timber trade is not capitalised by Putian Zhongmen. Putien is a family business, which makes them difficult to integrate other enterprises into their supply chain, adding further financial pressure to smaller businesses.
This monopoly has forced other industry players to seek for alternatives, one way is to sell timber direct-to-consumers; the question is how?
Setting up a direct-to-consumer supply chain system of course.
Why Direct-to-Consumer Route is Favoured?
Less parties involved in distribution would mean less costs required. By eliminating the third parties, brokers and agents from the distribution system, consumers have the edge in pushing for lower timber prices.
This fulfils the principle of economy, where the least capital to be traded with gains the most profit.
Supply Chain Integration
Mulian (木联）Technology has started to build their capabilities in supply-chain integration, by involving logistics services and financial services, to establish a solid cross-border trade industry chain. This is exhibited by the development of the Timber Terminal app. The App has approximately 700 certified enterprises as its users so far. Enterprise sign-ups top 200 per month, total enterprises sign-ups are over 3600 enterprises.
Mulian services 91 WeChat groups, totalling 27,000 members, focused on raising publicity and increasing usage of the App. In addition, Mulian also runs QQ groups and WeChat Official accounts, which houses another 13,000 members.
Mulian Technology uses the App to provide the latest market quotations and other financial services. Timber terminal App also provides market, goods release, order release, e-commerce IOUS and other services. The introduction of these technologies has helped consumers to pick timber at their own prices. Consumers could then pick up the timber they purchase at one of numerous service points, including Xi’an, Huai’an, Xining, Yinchuan, Yuanping, and Lanzhou. There are also other service points in Manchuria, Erlianhaota, Putian, and Tianjin.
Integrated Financial Services
From 2017 to the present line, the timber terminal app's cumulative brokered transactions top more than 150 million yuan, April 2017 business transactions amounted to 10 million yuan, transactions hit 30 million yuan in May 2017.
In terms of financial services, Mulian cooerperates with Ping An Bank, Lan Jinling, Transfer Wood Finance, OuYi finance and other institutions. Warehouse pledged inventory is 4.5mil cubic meters, credit service agencies top 134, total loans top 7.76 million yuan.
In addition to opening up intermediate circulation, Mulian also connects to the end-user. They have reached a supply agreement with Hebei Construction Group Co., who in future will provide support for construction of Xiongan District, this will be an important channel of direct sales.
Mulian does not want to focus the App on just being an e-commerce platform. They want to be able to go deeper into overseas upstream supply terminals, ports, intermediate trader circulation, direct cross-border traders, woodwork processing plants, production enterprises, and not least, carpentry facilities of construction companies.
There are currently 7 B2B timber trading platforms in China, including Alibaba and Huicong. However Mulian has found out that, because the traditional timber trading business environment is very non-standard, its hard to promote transactions just conducting online matchmaking alone.
Some other ways to promote transactions among timber traders include real-time warehouse management and reporting system, which can attract end-users to suppliers based on volume of their inventory.
Changing supplier-consumer relationship
Mulian also sees the timber e-commerce landscape changing from an online match-making, third-party deal-facilitation platform, to gathering of teams online to secure more resources upstream. This digitalisation of the entire supply-chain has the potential to "clean-out" the supply chain and allow the industry to go through a phase of "vertical-chain cleansing", thereby leaving more dollars on the table for suppliers and users alike.
The objectives of Timber Harbour App are;
It is expected that by 2019, the industry will see an increase in cross-border transactions that involve only between suppliers and consumers, cutting out the middlemen.
Chen Zhiquan, the president of Mulian Technology, is a 20 year veteran in the timber trade. Zhao Xiaoqing, CEO, has been with IBM for 7 years, is responsible for product design and technology development of database and ERP system.
Timber terminal has gone through Series A financing.
From the author: theAsianIR is a Singaporean digital agency implementing Direct-to-consumer business models for companies in traditional sectors to do business with consumers digitally. Planning and executing disruptive business on behalf of these companies in the form of apps, softwares and websites, cutting out the middlemen, theAsianIR has clients across wholesale, retail, logistics, f&b, built-environments and real estate. Sign up to our newsletter on our website to get tips and exclusive deals about future-proofing your business.
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