Products & Services
Earnings at manufacturing firms are frequently affected by inventory write-downs due to softening of the market or increased cost of in-process materials (IPMs), technology changes (obsolescence), or production losses stemming from a short supply of IPMs. The loss in production not only affects earnings, it also causes serious erosion of market share.
This in turn affects cash flow, which can then seriously threaten the viability of any manufacturing firm. Long-term viability of a manufacturing firm is also affected by restricted or closed markets, which result in artificial—that is, inflated or depressed—prices.
Even though there have been rapid gains in productivity in most aspects of manufacturing due to advances in technology and management techniques, the buying-selling process has generally lagged behind because of a lack of modern tools. One of the essential reasons for this deficiency is the high cost of owning and maintaining the infrastructure required to create a common global platform necessary to eliminate the risk of doing business globally.
The acceptance of the Internet as a serious tool for commerce has removed most of the barriers to the creation of a common global platform. E-commerce, along with our implementation of advanced risk management concepts in manufacturing, has opened a new opportunity for manufacturing firms.
ABC Marketplace addresses these business uncertainties by providing an open market for manufacturers and distributors that will mitigate much of this uncertainty through risk management.
ABC Marketplace has developed a state-of-the-art, Web-based, double auction system that uses highly sophisticated and efficient algorithms to automate continuous bid and offer matching with real-time clearing. Our platform includes an integrated automated physical delivery system and automated currency translation system with currency exchange and banking.
ABC Marketplace provides the following services:
- A spot and forward buying-selling platform for a new class of commodities
- A risk management vehicle for the manufacturing and distribution business
- The convenience and efficiency of a trading platform with integrated clearing service
- The incorporation of currency translation into commodity prices
- The convenience of working over the Internet
- A unique platform that brings together buyers, sellers, investors, and speculators across many continents and time zones
- Business hours from Sunday 9:00 P.M. through Friday 7:00 P.M. EST
- Product index and global market data
An illustrative scenario:
The standard method of buying or selling generally fixes the price for delivery sometime in the future. In mid-January 1998, the spot market price for 16 MB EDO DRAM in the U.S. market was $3.10 (OEM quantity). If the order for 20,000 devices with delivery date of 30 days was placed (or received) in mid-January, it is expected that a payment of $3.10 x 20,000 = $62,000 be made by mid-February 1998. The open market price at that time was $2.65.
In mid-February when the delivery is made, the spot price is $2.65 and the contract is worth $53,000. The difference of $9,000 resulting from the price drop is due to the risk that the manufacturer or consumer took by assuming the price stability.
ABC Internet Marketplace allows the manufacturer and the consumer (OEM) to pass on this unwanted risk to an intermediary who is willing to take such risks. Forward pricing is a mechanism by which the risk element is passed on to an intermediary. In this example, on January 16, 1998, the spot price was $3.10 and the 30-day forward price was $2.88 (per device with minimum quantity of 1000). The 30-day forward price is the adjusted price for 30-day delivery. The order (buy or sell) for 20,000 devices is executed based on 30-day forward price. The new contract price is then $57,600 ($2.88 x 20,000). The difference between the order date price $62,000 and delivery date price $57,600 is narrowed from the original $9,000 to $4,400, and the savings is more than 50 percent.
Product Points
ABC has a comprehensive system platform for trading:
- 1. Product development and trade: The products for trade are developed on the basis of market share, multiple sources of production, universality of consumption, and uniformity of product specification.
- 2. Financial clearinghouse: This facility ensures funds are available between the parties, clears the trade, and maintains the performance bond.
- 3. Commerce: Spot transaction of products is a link to global warehouses. The clearing-house guarantees the delivery of items being traded. For this purpose, modest-size warehouse spaces will operate as bonded warehouses. The warehouses will be outsourced to major carriers.
- 4.Safeguards: ABC Marketplace ensures customer satisfaction by incorporating several essential safety measures, including:
- a. Guaranteed trade: All trades are sent to an automated clearinghouse to check the matched orders between the buyer and the seller. The clearinghouse verifies the amount of the contract and credit, and debits the buyer's and the seller's accounts. The clearinghouse routinely computes the required performance bond that needs to be maintained by the buyer and the seller for enforcing the contracts. (Adjustment on the amount of performance bond will be made daily.)
- b. Guaranteed delivery: All spot or cash transactions are based on items available in our designated bonded warehouse. Forward and futures contracts that result in deliveries will be available five days before the contract expiration date. The point of delivery is the nearest designated warehouse to the buyer.
- c. Quality assurance: All original suppliers are ISO 9000 compliant, and their goods are routinely inspected, certified, and graded by internationally recognized quality inspectors.
- d. Warranty: The original manufacturer's warranty will be sent to the buyers.
Patents and Intellectual Properties
ABC Internet Marketplace does not use or depend on any external intellectual properties. However, since ABC is the first to market these products, many of our proprietary technologies will be patented. These patents and technologies will keep us ahead of any future "me-to" or mimicked implementations.
How Abc Marketplace Operates
ABC Marketplace provides an open market for manufacturers and distributors to address their business uncertainties through risk management. It provides up-to-the-minute prices and availability of manufactured products.
ABC Marketplace performs three basic functions:
- Discovers a true market price for products
- Provides a vehicle for risk management
- Provides real-time global market data and a technology index
A continuous double-sided auction allows that a "true" price of a product be established. A hedging mechanism helps the manufacturer to plan a stable production schedule and to competitively price the product.
ABC Marketplace has developed a state-of-the-art, Web-based, continuous double auction system that uses highly sophisticated and efficient algorithms to automate bid and offer matching with real-time clearing. Our platform also includes an integrated automated physical delivery system and an automated currency translation system with currency exchange and banking.
Two internationally respected market leaders in package delivery services and global banking manage our delivery system and banking services.
ABC Marketplace provides all this functionality through an automated communication network system for online transactional and analytical processing, and uses the Internet as its backbone.
Customer Benefits and Value
ABC Internet Marketplace will build a reputation for superior customer service and attention to customer satisfaction. Its essential benefits include the following:
Wide Range of Services
ABC Internet Marketplace has the ability to provide a variety of services within its overall service of commodity trading. ABC Marketplace will allow customers to buy and sell products. ABC Marketplace will also be positioned to provide instant global market data to manufacturers, thereby enabling them to extract the most commonly used historical data on process and trade volume. Buyers and sellers can use the market data instantly, and as soon as a transaction clears it will be instantly available on the ABC Web site.
Integrated Services
ABC Marketplace provides an interface with the existing Web-based account management of a financial institution for an online clearing that is an integral part of the trading platform. By so doing, the clearing functions will include the creation of virtual fiduciary accounts for traders, cash management, and international treasury management and audit trail.
Personalized Services
Each ABC customer will have access to a service representative who is solely responsible for the customer's account. In addition, following any trade and clearing, there will be value-added services such as currency conversion and integrated delivery management that can be applied to e-commerce applications.
Abc Market's Unique Selling Points
Customer Solutions
ABC Marketplace provides customers with solutions to managing business risk. We are the first future trading platform to include:
- A two-sided continuous auction forum (bid and asks)
- Real-time spots and forwards pricing for in-process materials (IPMs)
- Integrated trade execution, clearing, and settlement
- Integrated currency exchange at the interbank rate
- An integrated physical delivery system for spot market transactions
One-Stop Trading
The system provides seamless integration between order matching, order execution, and clearing (leading to order confirmation) in an online environment. The concept of real-time clearing is central to the process of global trading. A centralized clearinghouse enables the marketplace to operate worldwide with maximum efficiency and at a low maintenance cost.
