Garak Market Electronic Auction System Seoul Agricultural Marine

Garak Market Electronic Auction System Seoul Agricultural & Marine products Corporation(SAMACO)

Table of Contents 1 Introduction of SAMACO 2 Changes in Transaction System 3 Electronic Auction 4 5 Future Operating Plans Questions & Answers

1. Introduction To manage and operate public wholesale markets founded by Seoul Metropolitan Government Directing and supervising auction company, intermediary wholesalers and related traders in market Maintaining the markets’ facilities and supervising distributors Training distribution specialists and improving the distribution structure Operating Seoul Organic Food Center for School Meals Established Markets Managed Organizations Staff 1984. 4. 10(Capital : 693. 6 mil USD, Land & Goods : 669. 3 mil USD, Cash : 24. 3 mil USD ) Garak Market, Gangseo Market, Yangjae Market(3 markets) Headquarters and 1 branch, 1 business office 302(2 executives, 184 office staffs, 74 field/ technical staff, 42 clerical assistants) 1

2. Changes in Transaction System 2000 1995 1991 1985 ~1985 Electronic Auction System All products auctioned through finger signal auction system Finger signal auction system for certain products started(apples, pears) Garak market(SAMACO) opened All agricultural products sold by clients (consignment sales) 2

2. Changes in Transaction System Changes in Auctioning Electronic Auction System n o i t c u ignal A S r e g n i F 3

2. Changes in Transaction System Problems with Auctioning by Raising Hands Unfair transactions (Collusion by Intermediary wholesalers and the auctioneers) 1 Difficult to understand the Finger signal auction system, suspicions of unjust transactions 2 3 Lower bid than the maximum due to mistakes by auctioneer 4

3. Electronic Auctioning Why we choose the electronic auction system Elimination of unfair transactions electronic auction system Rapid and Simple 5

3. Electronic Auctioning Goals in pursuing The Electronic Auction System Fair and transparent transactions Open Prices Prevent transactions from collusion Fast transmission of auction results 6

3. Electronic Auctioning Progress of Electronic Auction System 2003 Sales ledger correction system implemented Sep 2000 Began executing electronic auctioning for 14 items May 2000 Governmental subsidies for auction company to support electronic auction system Sep 1998 Auction results distributed via internet 1997 Initiation simulation of electronic auction system 1994 Electronic auctioning principle legislated 7

3. Electronic Auctioning Progress of Electronic Auction System Category Samaco Intermediary wholesaler Shipment Auction company Producer Shipment Shipping agreement Buyer Product Shipping Bid Auction & non-auction transaction system Auction Physical Flow Bid selection Move to intermediary wholesaler Register shipping doc information Cash Flow Verify invoice, Register invoice Move to intermediary wholesaler Register sales detail Sales Settlement Report sales details Product Shipping Settle payment Bill payment Verify sales other than listed Confirm payment Send payment Confirm payment 8

3. Electronic Auctioning Composition of the Electronic Auctioning System Shipping Registration Shipping Information Verify Invoice Shipper Auction Company Prepare sales ledger Shipping Site Wireless receiver Electronic Auctioning System Sales settlement System Response Information Display Panel Transmission Server Display Panel Intermediary Wholesaler Samaco Intermediary Wholesaler Consumer Wholesale market Department store. Large scale buyer who Retailer does business outside the market Shipping information System Real-time auction data Settlement data Correction data Distribution information System Electronic auctioning resources DB Relevant organization Real-time auction settlement data Korea agricultural and marine products educational cultural information center 9

3. Electronic Auctioning Process of Electronic Auctioning ction Hall u A o t g in p 1 Ship 2 and Verify Invoice ledger s le a s e r a p e r p 10

3. Electronic Auctioning Process of Electronic Auctioning 3 Place a bid l bid on u f s s e c c u s e h Display t board in t 4 e ll u b ic n o r elect 11

3. Electronic Auctioning Process of Electronic Auctioning 5 wholesaler ry ia ed rm te in to ts uc od Move the bid pr 12

3. Electronic Auctioning Process of Electronic Auctioning shipper o t e g a s s e Send m ults 6 on their bidding res of product’s price c li b u p e th to n e p O age 7 and quantity on Samaco’s homep 13

3. Electronic Auctioning Process of Electronic Auctioning shipper o t e g a s s e Send m ults 8 on their bidding res ct’s price u d o r p f o c li pub epage Open to the m o h ’s o c a m 9 and quantity on Sa 14

3. Electronic Auctioning Method Auctioneer Provide the standard price to start auction Electronic Auctions Place a bid Intermediary wholesaler shipper Ship agricultural and marine products, prepare invoice 15

3. Electronic Auctioning Video Clip of Electronic Auctioning 16

3. Electronic Auctioning Finger signal auction system vs electronic auction system Electronic Auctions Finger signal auction system Takes 22’ per transaction Needs 3 persons Takes more time to distribute the auction results/ immediately distribute the auction results Takes 14’ per transaction Needs 2 persons Information disseminated Immediately after auction 17

3. Electronic Auctioning Strengths and Weaknesses of Electronic Auctioning Strengths More trustworthy Faster operation Participate in auction without being influenced by others Service improvement Easy understanding by auction participants Weaknesses Resistance from Intermediary wholesalers Lower bid than finger signal auctions system Cost for settlement program Maintenance and repair costs will incur Aged Intermediary wholesalers will not easily adapt to the new system 18

3. Electronic Auctioning Implementation Cost of Electronic Auctioning System Implementation details of electronic auctioning system Implementation cost : 550, 000$~650, 000$ per 400 wholesalers Details Development cost : Electronic auctioning system implementation, homepage build out, linkage with other systems such as sales management system Solution purchase : Database management system, Reporting tool, WAS etc. Equipment purchase : Server, bidding machine, controlling machine, electronic bulleti board, communication facilities, etc. Others : Bidding table, etc 19

3. Electronic Auctioning Electronic auctioning percentage at Garak Market Electronic Auctioning Rate 100% Vegetabl es Fruits 90% 80% 50% 2005 2006 85% 2007 2008 2009 94% 76% 70% 60% 81% 82% 88% 98% 60% 67% 40% 30% 20% 10% 0% 2002 2003 2004 2010 2011 20

3. Electronic Auctioning Factors in the success of electronic auction system Governmental Acts and Subsidies Nov. 1994 : Legislated “For auctioning or bidding, in principle it should be done Electronically” the Distribution and Price Stabilization of Agricultural and Fishery Products Act May. 2005 : Subsidies from the government for the electronic auction system (603, 636$) Thorough advanced preparation and strong will to execute Implementation cost : 550, 000$~650, 000$ per 400 wholesalers Feb. 1998 : Performed demonstrations and test operations by auction company Feb. 1999 : Strengthened evaluation management such as the rate of electronic auctioning In evaluating auction company 21

3. Electronic Auctioning Results of Electronic Auctioning Secure transaction transparency and fairness Auction results are provided on a real-time basis through the internet Increase task efficiency By implementing electronic auctioning system, looking up the bidding prices and payment settlement are done rapidly and accurately The intermediary wholesaler can buy the proper quantity to sell 22

3. Electronic Auctioning Results of Electronic Auctioning Technical Problems Frequent Interruption in auctioning As there are differences in electronic auctioning systems by auction company, it is difficult to control auction details Sensitive system that can be changed by climate and deterioration Due to uneven surface at the auction house, when moving the auction block, the system may become instable due to shocks 23

3. Electronic Auctioning Problems with Electronic Auctioning Operational Problems Price variation by shipper More severe competition Problems in processing products when Intermediary wholesalers do not bid Intermediary wholesalers’ resistance for decreases in sales margin 24

3. Electronic Auctioning Problems with Electronic Auctioning Problems following shipping from production location type Inadequate shared selection and condition by produce location Difficult to adjust shipping considerations Other Issues Relatively limited and confined facilities due to inadequate preparations for auctioning Inadequate circumstances for sample auctioning 25

3. Electronic Auctioning Efforts to improve transparency And fairness in electronic auctioning Real time distribution of the results of electronic auctioning executed through the internet Distribute 2 hours after auction close(Sept. 26, 2000 ~ Mar. 31, 2002) Distribute immediately after auction close(Apr. 1, 2002) Customized information service implemented(May 2004) : Settlement price Real-time text message service Improving the Electronic Auctioning System Corporate internal search system for auction results implemented(Oct – Dec 2002) Real-time sharing and search function of auction results prepared between the SAMACO and auction company(June 2003) 26

3. Electronic Auctioning Shipper Display Panel Receiver Bidding information Successful bidder selected Retailer Auctioning system Auction Block Transmit successful bid information Price information Large discount store, Department store Transaction records Managing Transaction order Intermediary wholesaler Samaco Distributi on Informati on System Distributi on Informati on Other Institution Distributio n Informatio n Service Information User Bidding informatio n text service Shipping Informatio Shipper n Consumer 27

4. Future Operating Plans Wholesale market trusted by farmers and consumers Establish a transparent and fair wholesale market transaction order Establish transaction order at transaction sites Constant monitoring of transaction courses Assess whether the results of the transaction reflected any unfairness RFID type Transaction participation certificate Recording system of the auctioning process Fair transaction detection system 28

4. Future Operating Plans RFID type transaction participation certificate Goals Preventing those unauthorized from participating participate in transactions and substitution participations Effective screening of improper auctioning participation using IT devic Prevent customer complaints Utilizing RFID type transaction participation certificates Establishing site transaction orders at auctioning sites through inspection of RFID cards on site Verifying transaction participants at wholesale market corporations 29

4. Future Operating Plans RFID type transaction participation certificate Establish order in the auctioning process Expected Impact Efficient auctions enabled through RFID reader device Easy verification of suitability to participate in the auctions 30

4. Future Operating Plans Auctioning progress Recording system Goals Establish internal/ external reliability over fairness and transparency of the auctioning process Improper activities over auctioning prevented in advanced from the auctioning company and participants by recording the entire auction process Recording Method 1 camera recording the auctioning computer, 1 camera recording the auction 31

4. Future Operating Plans Auctioning progress Recording system Prevention of unjust acts towards the auctioneer and participants Expected Impact Verifying auctioning rejection, collusion, as well as unauthorized or substitute participants during the auctioning process Checking the auctioning process when there is complaint from the producer 32

4. Future Operating Plans Auctioning progress Recording system Purpose Implement a detection system for improper auctioning activities through data mining of auction data Used as a method to prevent reoccurrence when unjust acts such as improper bidding or fixing of bidding price are suspected for verification and to prevent further occurrence. Fair transaction detection system diagram Establish transaction data collection system Establish rule management system Bidding information Rule Management Winning bid information Detect abnormal transactions /improper data Settlement information Correction information Report & Dash Board Analyze abnormal transactions /improper data 33

4. Future Operating Plans Fair transaction detection system Efficient detection and prevention of unjust transactions Expected Impact Establishing fair transaction orders in distribution of agricultural and marine products Secure transparency in and improve reliability of transactions of agricultural and marine products Securing basis for providing data for rapid statistical analysis 34

4. Future Operating Plans Fair transaction detection system Global Leader in Agro-distribution Auction recording system Advancements in distribution Information analysis system 35

Questions & Answers