e-commerce a hit with resin suppliers
By Cindy Macdonald, associate editor
Developments in e-commerce exploded like millennium fireworks at the end of 1999, with many major resin suppliers and distributors announcing alliances and investments in e-commerce.Early indications ...
Developments in e-commerce exploded like millennium fireworks at the end of 1999, with many major resin suppliers and distributors announcing alliances and investments in e-commerce.
Early indications are that plastics processors are eager to use Internet resources to buy resin and interact with suppliers. GE Polymerland saw the value of transactions on its website (1) rise dramatically from $10,000 per week to over six million dollars per week by the end of 1999.
A more correct term for the current flurry of activity might be e-business, because it’s not just about buying resin (see sidebar, E-terms defined). Among plastics industry suppliers, e-business is developing along two streams. First, there is the use of the Internet to create an extranet, giving customers access to the supplier’s network of information and providing a new medium for communication with the supplier. This use of the Internet as an interface generally allows customers to place orders, access account information and track shipments. MyAccount@Dow (2), as the name implies, is one example of e-business using extranets.
The second stream of developments is e-commerce on the Internet through third-party services. There are many business models for these services, but two relevant to the plastics industry are e-marketplaces that act either as a catalog with online purchasing capability, or as an auction to bring buyer and seller to a negotiated agreement online. These e-marketplaces are also called virtual or vertical marketplaces, net markets, hubs or portals.
E-marketplaces aggregate many suppliers that serve a common market, and present these suppliers to a community of buyers.
PlasticsNet.Com (3) is probably the most familiar example in the plastics industry of this type of marketplace.
BEING EVERYTHING TO EVERYONE
The addition of e-business capability is pushing some resin suppliers and distributors closer to a state of being everything to everyone. Witness General Polymers, Div. of Ashland Distribution Co.(4), which recently made nearly 1000 Ashland-distributed plastic materials and services available through PlasticsNet.Com. (Currently, the option to purchase through the e-marketplace is only open to U.S. customers, but General Polymers anticipates the service will be available to Canadians in the second quarter.)
At the same time, General Polymers and other Ashland businesses have developed their own extranet that allows customers to electronically place and track orders, among other things.
“We have a lot of customers that are accustomed to traditional methods of purchasing. They buy based on a relationship with an individual who cares for their needs,” says Dave Bening, general manager of General Polymers. “We will continue to provide that type of service, as well as offering the convenience of electronic ordering and tracking.”
“And through third-party organizations,” adds David Armstrong, director of e-commerce at Ashland Distribution, “we’ll also be there for customers that want to purchase through a catalog-type of format at posted prices.”
“E-business is a channel of communication, like the telephone or fax,” says Armstrong. “But it also provides the opportunity to track data and information that will allow us better anticipate needs, be more efficient and deliver new services to customers.”
EXTRANET, EXTRA VALUE
“We look at e-commerce as a key element in our total customer interface effort. MyAccount@Dow will enable us to expand our reach to customers we typically could not service face-to-face. The site also adds value for customers by giving them timely and convenient access to information specific to their business,” says Mack Murrell, Dow’s global director, customer interface initiative.
MyAccount@Dow is a customer-specific extranet that provides registered customers with online access to transactional e-commerce functions, including order status, account history, order entry and payment information.
“Customers are validating the added value that e-commerce brings every time they use it,” says Hank Harrell, marketing leader with resin distributor GE Polymerland. Polymerland.com has over 800 customers using its extranet regularly for e-commerce transactions.
Users get a broad product line of engineering thermoplastics, a direct interface with the fulfillment network, and the convenience of 24-hour access, he explains.
The information is comprehensive, and real-time. “It gives the customers a window to our warehouses, and lets them plan their business better,” says Harrell. “One of the biggest benefits to customers is that it allows them to cut costs through better order management. Because they have real-time access to information about our stocks and deliveries they can reduce their own inventory safety buffer.”
Another benefit of the extranet for both GE Polymerland and its customers is the automation of mundane tasks. “We used to get over 20,000 calls per year requesting reprints of resin certification,” says Harrell. “Now we’ve put that function on the website, so customers can request reprints by lot number without speaking to a representative.”
Much of what sales representatives and customer service representatives have traditionally done is disseminate information, he notes. Now they can put more emphasis on other value-added functions.
The capabilities of Eastman’s extranet (5) revolve around customer service, says Fred Buehler, director, e-business at Eastman. Registered customers can place orders, check status, access railcar management information, access materials safety data sheets, and request technical help among other things.
“We don’t want to have to train customers to use this new channel. We want it to be so intuitive there’s no training required.”
One unique aspect of the Eastman corporate website is a universally-available demonstration of customer-only extranet functions.
The site was launched in July 1999, and Buehler says the response has exceeded expectations. He would not divulge figures related to e-commerce transactions, but noted that if you were to chart the rate of growth, “the line would be almost vertical.”
Beuhler believes it is “inevitable that over time a great deal of our resins and compounds will be available through vertical e-marketplaces.”
THE E-MARKETPLACE: MORE THAN MEETS THE EYE
“We focus on the whole procurement process for processors,” says John Marshall, resin product manager with Commerx Inc., developers of PlasticsNet.Com.
He explains that PlasticsNet.Com has three pillars: content, community and commerce. The company built content and community first, by partnering with suppliers and publications, so it could attract users to visit the website. Once the content and community were established, e-commerce followed in 1997.
PlasticsNet.Com has ambitions to automate procurement for plastic processors. It sells resins, compounds, additives, equipment, components, maintenance and safety supplies, and other items necessary for a processing business.
Through the PlasticsNet.Com marketplace, buyers enjoy the ability to order multiple products from multiple suppliers during a single buying session; consolidation of all transactions on one purchase order; online order tracking; and the ability to create a personal catalog of frequently ordered products.
Unlike a bricks-and-mortar distributor that purchases products in advance and stocks them locally, PlasticsNet.Com actually purchases products from the supplier after the buyer purchases from them. But, like a bricks-and-mortar distributor, PlasticsNet.Com purchases the products at a prenegotiated purchase price discount.
“We have some buyers that use the site to purchase all sorts of supplies because it’s so easy for them,” says Marshall. “The ease-of-use turned out to be a higher benefit than we anticipated.”
There are two purchasing platforms on PlasticsNet.Com. In the fixed-price area, the buyer views a standard catalog or listing of items wit
h pricing unique to his/her company. For example, if a company has negotiated an agreement with Ashland/General Polymers, the buyer will see that pricing reflected in the catalog when he/she logs on. Other users will not see that pricing.
The other purchasing option is The Exchange, a dutch-auction format. Items, such as resin, are posted for sale, with a fixed price. The price drops by a pre-determined amount at fixed intervals, so buyers can choose to buy immediately or wait for the better price and risk that the item will be sold before that time. Marshall says this format works well for commodity items.
Because e-commerce is so new and unfamiliar, PlasticsNet.Com actually has a field sales force visiting processors and helping them to integrate use of the website with their procurement practices. These field sellers will help buyers with tasks such as account set-up, and routing and approval mechanisms.
THE HOT NEW WAY TO BUY
Use of the Internet for e-commerce in resins is growing from both sides, buyers and sellers, lending weight to the tremendous growth predictions for business-to-business e-commerce. Resin suppliers are investing heavily to present buyers with this new purchasing channel; simultaneously, the user community is growing. “I think its going to become the way we do business,” says GE Polymerland’s Harrell.
Canadian Plastics’ survey of injection molders (see page 25), reports that the percentage of respondents using the Internet to access business information jumped from 52 percent two years ago to 78 percent in this year’s survey. If you’re not using the Internet for business, you’re in a shrinking minority. CPL
Internet: A system of linked computer networks, international in scope, that facilitates data communication services. When you see internet written with a lower case “i” it usually refers to a group of local area networks (LANs) that have been connected by means of a common communications protocol.
Intranet: A secure environment within a single organization that enables communication using internet software and technology.
Extranet: An extension of intranets that enable business partners to interact electronically. Provides limited access to an organization’s internal networks.
e-commerce: Conducting business online. Basically any way a company can derive revenue online is thought of as e-commerce.
e-business: 1. Improving business processes using internet technologies. 2. Leveraging your intranet, extranet or the Internet to bring together customers, vendors, suppliers and employees.
Excerpts from the www.ibm.com, and a presentation by Timothy J. Szal, senior consultant, e-business,
IBM, and from www.netlingo.com.