For companies that need to source production raw materials, the raw material markets can be intimidating. Particularly for small businesses, achieving price transparency for buyers and managing credit risk for sellers have been significant challenges.
These are some of the reasons why, when the CME Group
This nascent digital transition therefore caught his attention. “On the first day of trading, I made $ 1,000 just because of my knowledge of the electronic side,” Wisnefski said. At the same time, he was fascinated by how digital technology was also starting to transform our personal lives. “Amazon
This platform, the MaterialsXchange (MX) lumber e-commerce system, went live for the first time last October. In May, it had 10 mills and wholesalers as active users. The business behind this is a fully started effort. All of the founders have invested in the startup, along with their friends and family members. Wisnefski is now the CEO of the company.
“It’s important to understand, we haven’t created a new market,” Wisnefski said. “We just digitized it. We have built a great user interface which has been very well received. It’s a three-legged stool: you match the buyer and seller on the interface, which makes it very similar to buying inventory or hardware. We move the goods. And we transfer the dollars.
Ashley Boeckholt is the company’s chief revenue officer and has spent her entire life in the lumber business, starting young in her family’s lumber yard on the outskirts of Chicago. “People in the lumber industry are surprised it’s that easy as it is,” he said. “People outside the lumber industry are surprised that we’ve done things the old-fashioned way again.
Deacon Lumber Company of Independence, Missouri, is one of the customers of the new platform. Owner Stinson Dean said, “I trade physical lumber – buy low and sell high. Liquidity is the key. These guys allow me to take advantage of price discovery and do more with less. It really trivializes wood.
Dean says it’s especially appealing to small businesses like his. “Everyone in the supply chain is consolidated – over the last 20 years, they’ve all redeemed themselves. It’s the same on the demand side – the top five or six have dictated it, and that could make lumber one of the most volatile commodities traded. MX helps small businesses like me be on an equal footing with large ones. And that gives me access to clients that I wouldn’t otherwise have.
According to Dean, the backgrounds of the founders of MaterialsXchange are essential. “These guys have a great relationship. They are in a good position to disrupt the industry because they understand the industry.
MaterialsXchange recently partnered with Raven Logistics for rail shipping solutions. “Raven has transparency from their carriers on fares,” Wisnefski said. “They provide us with the current rate on any channel prior to the transaction.” MaterialsXchange is working on more in this regard on the trucking side. “As we grow, it will also give us the opportunity to find and correct inefficiencies in the trucking market. “
The team sees ample additional opportunities. In the timber market, they believe that the information their platform collects can further improve the functioning of the supply chain. “Sawmills turn round logs into square products, things they’ve been making for 150 years. They may or may not be the best fit for the end product, ”Wisnefski said. “One of the things we’ve been working on is helping to identify in real time what end users really need and what they’re willing to pay for it. Over time, this would make the market more efficient.
But wood has always been just the first step for the team. “We have the technology to create digital transactions where they don’t exist today,” Wisnefski said. “We see other obvious opportunities – rebar, for example, and recycled paper and corrugated cardboard. The name of our company is what it is because we know the materials that are traded like commodities. We are open to any market that makes sense. Our technology is independent of the materials bought and sold.
But they are in no hurry. “There is no timeline yet in other markets,” Boeckholt said. “We have been approached by other lumber industries that we are not yet working with, so we have a lot to do.
They are happy with their progress so far. “It’s pretty cool to be at this point in our career,” said Wisnefski. “We’re using technology to create a real solution for people, and we’re doing good for the industry at the same time. “