Leading the
digital
transformation of
metal distribution
May 2017
Disclaimer
This presentation contains forward-looking statements which reflect the current views of the management of Klöckner & Co SE with respect to
future events. They generally are designated by the words “expect”, “assume”, “presume”, “intend”, “estimate”, “strive for”, “aim for”, “plan”,
“will”, “endeavor”, “outlook” and comparable expressions and generally contain information that relates to expectations or goals for economic
conditions, sales proceeds or other yardsticks for the success of the enterprise. Forward-looking statements are based on currently valid
plans, estimates and expectations. You therefore should view them with caution. Such statements are subject to risks and factors of
uncertainty, most of which are difficult to assess and which generally are outside of the control of Klöckner & Co SE. The relevant factors
include the effects of significant strategic and operational initiatives, including the acquisition or disposition of companies. If these or other
risks and factors of uncertainty occur or if the assumptions on which the statements are based turn out to be incorrect, the actual results of
Klöckner & Co SE can deviate significantly from those that are expressed or implied in these statements. Klöckner & Co SE cannot give any
guarantee that the expectations or goals will be attained. Klöckner & Co SE – notwithstanding existing obligations under laws pertaining to
capital markets – rejects any responsibility for updating the forward-looking statements through taking into consideration new information or
future events or other things.
In addition to the key data prepared in accordance with International Financial Reporting Standards, Klöckner & Co SE is presenting nonGAAP key data such as EBITDA, EBIT, Net Working Capital and net financial liabilities that are not a component of the accounting
regulations. These key data are to be viewed as supplementary to, but not as a substitute for data prepared in accordance with International
Financial Reporting Standards. Non-GAAP key data are not subject to IFRS or any other generally applicable accounting regulations. Other
companies may base these concepts upon other definitions.
No.2
Agenda
1. Transformation towards a digital industry platform
2. Current status of Klöckner & Co´s transformation
3. Setup and mission of kloeckner.i
4. Focus of kloeckner.v
5. Further initiatives to support the digital transformation of Klöckner & Co
No.3
01 Current linear steel supply chain is highly inefficient and totally intransparent
NO EFFECTIVE INFORMATION AND DATA EXCHANGE
ON AVAILABLE INVENTORY, LEAD TIMES ETC.
SUPPLIERS
STOCKHOLDING
Klöckner & Co
CUSTOMERS
Other Distributors
LONG DELIVERY TIMES, INCORRECT DELIVERIES AND HIGH INVENTORY LEVELS
No.4
01 Klöckner & Co transforms the classic value-chain into a digital platform business
STOCKHOLDING
Klöckner & Co
Other Distributors
Cumulative
quantities
SUPPLIERS
Aggregated
Supply
information
Aggregated
Demand
information
INDUSTRY
PLATFORM
3 RD P A R T Y S A L E S - /
SERVICE-/IOT PLATFORMS
POS Data / Analytics
Application Programming
Interface
No.5
Industry 4.0 and others
CUSTOMERS
01 The digital transformation of Klöckner takes place in three essential steps
Suppliers
Klöckner & Co
Customers
Value
Industry platform
Service portal
Digital tools
Customer
side
INDUSTRY
PLATFORM
• Contract portals
• Online shops
• Order transparency tools
• Kloeckner Connect
• Shop-in-shop
• Integration of thirdparty providers
• Marketplace for
complementary
products
• Marketplace for steel
and metal products
• Marketplace for
additional industrial
products
• Regional expansion in
Europe and North
America
Increasing number of EDI-connections
Time
No.6
01 The digital industry platform provides advantages for all participants
INDUSTRY
PLATFORM
Customers
Suppliers
Stockholders
No.7
Intransparent pricing, high process costs
and complex supplier management
Broad material availability reduces order-to-cash
cycle time and higher price transparency allows
improved purchasing
Insufficient utilization of production assets
Aggregation and early notification of demand
allows optimized production and utilization of
asset-intensive production assets
High inventories in order to provide product
availability towards customers
Online access to an enlarged customer base,
reduced process costs and improved prediction
of demand
01 Key is the strategic positioning of the industry platform
•
Amazon and Alibaba will prevail as the winners with horizontal, i.e. cross-industry, platforms for standardized products
and services
•
On vertical platforms, established companies like Klöckner can leverage specific industry expertise, longstanding
relationships with suppliers and customers and specialized logistics
Chemicals/building
materials, etc.
Steel and metal
Standard
products
Standard
formats
Full product range
and additional
services
• Specialized
services
• Laser cutting
• Profiling
• Fabrication
• Surface treatment
• Specialized
steel logistics
Horizontal platforms
Vertical platforms
Standard items
Klöckner industry platform
No.8
Amazon Business
Alibaba Group
01 Successful online platforms are growing exponentially
The platform is initially intended to attract more and more customers, then more and more distributors and third party
providers and ultimately more and more suppliers  networking effect
Online platforms
DISTRIBUTORS
Sales
SUPPLIERS
Traditional
business models
THIRD-PARTY
PROVIDERS
Time
CUSTOMERS
No.9
01 Incumbents like Klöckner have several advantages in building a successful industry platform
Access to
customers and
suppliers
No chicken-and-egg problem by having a big customer and supplier base
Deep industry
know-how
Klöckner knows how to handle the supply chain and understands the expectations of
customers and suppliers
Reliability and trust
Klöckner is since decades trusted by the industry and a reliable partner of its customers
The challenge is to leverage existing assets and capabilities and moving fast at the same time
No.10
Agenda
1. Transformation towards a digital industry platform
2. Current status of Klöckner & Co´s transformation
3. Setup and mission of kloeckner.i
4. Focus of kloeckner.v
5. Further initiatives to support the digital transformation of Klöckner & Co
No.11
02 Digital transformation of Klöckner & Co futher advanced
• New office space in Berlin rented for kloeckner.i to enable further growth
Internal
organization
Digital portals
• Staff of more than 45 digital experts in the fields of innovation & product,
software development, digital marketing & sales and business intelligence &
analytics
• Service portal Kloeckner Connect as central access point for onlineshops,
contract portals and order transparency tools very well received by customers
• Transition from service portal to industry platform starting this year
• Sales share via digital channels gradually increased to 14% in Q1 2017
Online sales
• Margins* of onlineshop sales on total cost basis in Germany twice as high and
on marginal cost basis 8x higher
• Further acceleration of online sales growth expected through integration of third
parties with additional products and customers through OCI interfaces
New digital
partnerships
• Innovation partnership with arago, a pioneer in artificial intelligence
• Cognizant, a leading provider of information technology, selected as strategic
partner for IT services to support digitalization of operations across Europe
*Related to the German onlineshop and can not be projected on the full digital-generated sales
No.12
02 Comprehensive rollout of service portal and digital tools by the end of 2017
Service portal
launched
Implementation in 2017
launched
Implementation in 2017
Contract portal
Online shop
launched
Implementation in 2017
Order transparency
tools
launched
No.13
Implementation in 2017
02 Service Portal and Onlineshop for spot buyers
• Service portal Kloeckner Connect:
• Central access point for customers
• Integration of various digital tools
• Onlineshop:
• Offers full price and delivery time transparency
– even for customers without registration
• Open for selected 3rd party sellers/distributors
in 2017
No.14
02 Contract Portal for customers with continious demand
• Efficient digital contract management for customers
• Clearly structured overview of prices, volumes and
maturity dates
• Order-Release 24/7 by mouse click via PC or tablet
• Option to contact Klöckner & Co sales agent for
new contract negotiations
• Fully integrated into service portal Kloeckner
Connect
• Reduced workload for internal sales force
• Digital management of customer activities including
the option to set notes
• More efficient process execution
• Integrated into third party platform Axoom
• Next step: OCI interface to ERP systems of customers
No.15
02 Order Transparency Tool supports order and document management
• Intuitive customer friendly interface
• Order management
• Clearly structured overview of all orders
• One list for better clarity and information
• Displays specific details including the delivery
status of each line item
• Whole order history accessible
• Document management
• Instant access to important order and product
documents
• Option to download the delivery note, shipping
note and invoice of each order
• Access to the mill certificate corresponding to a
line item
No.16
02 Connection of Klöckner & Co platform to Internet of Things
• Participation in AXOOM order and resource
management software project initiated by
TRUMPF
• High digital competence enables Klöckner & Co
to participate in the project as steel supplier
from the very beginning
• Klöckner & Co Contract portal already
integrated into the AXOOM interface
• Final solution allows fully automated demand
recognition, order and delivery process – the
machine orders at Klöckner & Co
• First tests with pilot customers have already
started
No.17
02 Artificial Intelligence supports Klöckner & Co’s digital strategy
• Innovation partnership with Arago focused on
leveraging artificial intelligence (AI) to further
drive digital transformation
• Implementing problem-solving AI platform
HIRO into Klöckner & Co’s IT environment
• By amplifying human IT knowledge through
continuous learning and built-in selfoptimization HIRO will automate IT operations
• HIRO platform will initially be implemented in
two US-based data centers of Kloeckner
Metals Corporation (KMC)
• KMC will serve as a blueprint on deploying
Arago’s AI for Klöckner & Co globally
No.18
02 Joint ERP project with software company Sage
• Special Klöckner & Co version of Sage ERP
system pre-configured for steel and metal
processors
• Klöckner & Co customer survey showed pent-up
demand for ERP systems – especially for SMEs
Klöckner & Co
ERP
Sage
Customers
• Solution enables customers to manage their
business processes professionally including an
automated order process via online access to
the extensive product portfolio of Klöckner & Co
• High market potential due to big overlaps
between Sage and Klöckner & Co regarding
customer base and business regions
• Sale together with Sage has already started
No.19
Agenda
1. Transformation towards a digital industry platform
2. Current status of Klöckner & Co´s transformation
3. Setup and mission of kloeckner.i
4. Focus of kloeckner.v
5. Further initiatives to support the digital transformation of Klöckner & Co
No.20
03 kloeckner.i driving the digital transformation
Founded as a dedicated startup (digital lab) in Berlin in 2014
Over 45 digital experts in Innovation & Product, Software Development, Digital Marketing & Sales and
Business Intelligence & Analytics
Application of innovative startup methods such as design thinking, lean startup and rapid prototyping
enables accelerated implementation
Far enough from Klöckner to act independently, yet close enough to leverage expertise as well as access
to customers and suppliers
No.21
Separate business unit to maximize speed but integrated approach to leverage existing
03 assets and capabilities
Know-how transfer
Resources
- “Steel Guys”
- Business know-how
- Assets, NWC
- Digital natives
- Intellectual properties
Processes
- Lean start-up
- Design thinking
- Agile, failure culture, trial-and-error
- Formal and informal,
reliable processes
- Perfection, waterfall method
Playing field of
incumbents
Incremental innovations
as well as improvement
of efficiency and costs
Focus
- Low or no marginal costs
- Generating increasing transaction
fees through network effect
- High marginal costs
- Margin optimization
KPIs
- Shipments
- Gross profit per ton
- EBITDA
- Total orders per day
- Gross margin
- Pay-per-click total conversions
Transformation
No.22
Playing field of
fast moving
start-ups
Exploration of a new
business model
03 Lean, agil and customer centric innovation process
No.23
03 kloeckner.i not only works but is also organized like a startup
Innovate
Digital innovation & disruption
Digital products & software
development
Digital Sales, marketing &
support
Business Intelligence &
Analytics
•
Design Thinking
•
Operate products and tools
•
Online Marketing & Sales
•
Data Science Lab
•
User Testing
•
•
Customer Satisfaction
•
•
Co-operation with
branches
Lean and agile Software
Development
•
Roll-Out support for
digital solutions
Provide data based
decision support
•
Manage and operate
online analytics
•
Campaign Monitoring and
measurement of results
Partners:
No.24
Support decisions
Scale digital business
Build & operate
-
•
Usability and optimization
•
Quality Assurance
•
Tracking and Monitoring
•
Coordination with Group IT
•
Customer Service
diva-e
etventure
Google Cloud Platform
SAP Hybris
TLGG
-
Arago
Sage
Trumpf/AXOOM
Contorion
Google AdWords
Jump Start Program
- DFKI (German Research
-
Center for Artificial
Intelligence)
Fraunhofer Institut
KIANA Systems
03 kloeckner.i is technically independent and operates on a seperate platform
Frontends
Fast development and testing with an MVP middleware
Website
Klöckner & Co core IT
kloeckner.i
iOS App
Android App
Back Office API
Middleware
Business logic
MySQL
Rabbit
MySQL
MQ
Messaging
•
No.25
Public API
SAP
Systems
Web server
MySQL
MySQL
Data bank
management
MySQL
Elastic
MySQL
Search
Search
Seperate database and other infrastructure
Services
Website
iOS App
Robots and
Machines
Agenda
1. Transformation towards a digital industry platform
2. Current status of Klöckner & Co´s transformation
3. Setup and mission of kloeckner.i
4. Focus of kloeckner.v
5. Further initiatives to support the digital transformation of Klöckner & Co
No.26
04 kloeckner.v invests in B2B business models which add value to the platform
No.27
04 Strengthening our industrial platform via startup investments
We leverage Klöckner & Co’s
cross-industry network to
kloeckner.v portfolio
provide exceptional growth
companies profit through
opportunities and eliminate
kloeckner.v invests in
access to Klöckner & Co‘s
key business risks in a
best-in-class startup
industry knowledge and
conservative market
teams with innovative,
the kloeckner.i digital
environment.
disruptive, and scalable
expertise.
business models that
complement or extend
our digital strategy.
No.28
Agenda
1. Transformation towards a digital industry platform
2. Current status of Klöckner & Co´s transformation
3. Setup and mission of kloeckner.i
4. Focus of kloeckner.v
5. Further initiatives to support the digital transformation of Klöckner
No.29
05 Initiatives and tools support the cultural change required for digital transformation
Digital enabling of employees through online courses
during working hours; the courses are developed
specifically to suit Klöckner’s needs
Non-hierarchical communication solves the problem of
interruptions in horizontal and vertical communication
Many additional initiatives in the holding company and in
the country organizations to engage employees
No.30
05 Yammer allows with only a small set of rules a hierarchy-free network-type communication
Very limited bottom-up communication
Limited sharing of
ideas
Limited horizontal
communication
Delay, misinterpretation and filtration of topdown communication
No.31
No limitation of
reach
Sharing of ideas
across all levels and
locations
No filtration and
misinterpretation
No delay of
communication flow
Our Digital Academy is the most sought-after group within Yammer with first-class
05 education for all employees
No.32
The course curriculum (excerpt) offers a wide range of lectures to increase the digital
05 skills throughout the workforce
Videos:
Courses:
1)
FIRST COURSE: Design Thinking
1)
What is Digital Transformation? –
Explained in less than 90
seconds
2)
SECOND COURSE: "Navigating through
Digital Landscapes"
2)
Digital Transformation
Introduction
THIRD COURSE: Klöckner Digital
Transformation Course – a 4 chapter course
3)
Video with Prof. Kollmann and
Gisbert Rühl
4)
“The Digital Society”
5)
“The Digital Economy”
6)
“Digital Platforms”
3)
Additional courses / learning nuggets:
1)
Gisbert Rühl – AskYourCEO on Yammer
2)
Feedback courses
No.33
05 Continious flow of initiatives to engage employees
Germany
US
•
“Digi Days” as initiative of the German
country organization to support the digital
transformation in each branch
•
Chief Digital Officer appointed
•
Set up team of project manager and
innovation drivers
•
Appointment of a digital coordinator and
dedicated online sales teams in each
branch
•
Closely interfacing with KCI in Berlin and
KMC business units
•
Frequent digitalization workshops in all
warehouses across Germany
Europe
•
Chief Digital Officer for One Europe
appointed
•
Europe-wide cross functional approach for
digitalization through designated digital
managers and teams in each country
No.34
Group
•
Digital pricing tools helped to benefit
stronger than in the past from rising prices
•
Share of sales generated via digital
channels reached 14% in Q1 2017
05 Klöckner & Co is also supporting the integration of refugees as main sponsor of ReDI
• Free of charge programming training and
networking opportunities for refugees
• Provision of laptops and workstations in coworking spaces across Berlin
• Volunteer teachers and mentors are all employed
in renowned IT companies
• Klöckner & Co as main sponsor and provider of
free office space for ReDI
• First graduate of ReDI School hired for
kloeckner.i
No.35