03 June 2002 00:00 [Source: ICB]
Many companies are still in the early stages of using the
Internet, viewing it principally as a means of automating business
transactions. John Baker looks at how e-business has been evolving
in the chemical industry
The chemicals industry has been looking at e-business for half a
decade. Much of the basic manufacturing IT hardware is in place,
after an intense period in the late 1990s introducing ERP systems.
Much of the software for Internet-based commerce is also available
and Internet standards for the chemicals sector are close.
But still many players are at first base, unsure about which way to
go, and perhaps more importantly, how to achieve quick financial
returns on e-business investments.
The collapse of the Internet bubble and failure to attract
liquidity to open exchange spot markets has seen a consolidation in
companies using this model. ChemConnect has emerged as a leader
after mopping up many other exchanges.
The much vaunted industry consortia model, whereby e-business is
transacted by linking to a service provider established by the
producers and distributors themselves, is making slow advances.
Work progresses at Envera, Omnexus and Elemica, for instance, but
there are reports of slower than expected progress and tension
within some consortia.
Many producers and distributors are keen to get ahead, and having
put a foot in each camp, are also taking direct initiatives
themselves, either through establishment of private exchanges or
through one-to-one projects to link up with major suppliers and
customers. ICI and DSM have both been using this approach in their
businesses, to secure a conversion to online transactions.
The perception now amongst a great many adopters is that the
Internet is largely an enabler in automating business transactions
and cutting costs. Vendor managed inventory (VMI) is also in range
for many companies, but the days of seeing e-business as a new,
all-conquering channel to market, a new way of conducting bulk
chemicals business, or even as a method of far-reaching supply
chain integration are gone, or seem still far off.
Speaking at the recent SmartChemicals Forum's 'deep customer
integration' summit in Brussels, Stephen Doyle, senior vice
president of Aspentech's Internet business group, emphasised the
practical steps taken by ICI Paints to use the Internet for raw
materials procurement and VMI in the US. The two firms signed an
agreement last June, with ICI opting to use Aspentech's Aspen
private e-procurement solution.
The aim at the outset was to improve supply chain efficiency
between ICI and its suppliers, to reduce inventory and lower
transaction costs. ICI Paints operates eight plants and has 400
suppliers in the US and by April this year had signed up 37 to use
the Internet-based system, with around two suppliers/ week being
added. Transactions are running at around 1500/week, said Doyle.
ICI hopes to cut the number of suppliers to around 70.
Commenting on the public versus private e-marketplace approach,
Doyle earlier this year stated that, although most of its customers
were looking at both, 'we strongly believe that private Internet
markets are what our customers want to do today'. But, he added,
Aspentech feels that much of the industry's learning is still ahead
of it. 'If the industry's e-business evolution is split into four
stages - online presence, basic commerce, advanced commerce and
collaborative commerce - then most companies are through stage one
and working on stage two. But are just starting to evaluate the
costs and benefits of advanced and collaborative commerce.'
Also at the SmartChemicals Forum summit, DSM gave an insight to its
approach to e-business. It has essentially established the
infrastructure required for e-business, linking its various ERP
systems across the business units - SAP, JD Edwards and others -
using an enterprise application integration (EAI) software platform
from webMethods. This acts as a 'message broker' between the ERP
systems and DSM's e-business offerings, such as its DSM.com site,
its position as a member of Elemica, and other B2B presences.
The task now, according to Jaco Fok and Ton Geurts, programme
managers for DSM's corporate e-business initiative, is to get
individual business units within DSM to implement the technology
with their suppliers and customers. This is, they stressed, now
largely a change management problem, a process they are managing by
giving specific targets to employees involved.
Purchasing and sales manages are encouraged to approach their main
clients and on a case-by-case basis negotiate bringing the business
between DSM and the client online. At the same time, says Geurts,
other aspects of the contract and way of working can be discussed
and improved on, say by introducing VMI or information exchange, so
that the payback is not just in terms of automated processing, but
also derives from more efficient business practices.
Both ICI and DSM have taken distinct initiatives in e-business,
getting the first part of the supply chain on board, either
upstream or downstream of their own operations. Further supply
chain integration, past immediate transactional partners is still a
very long way off in the chemicals sector, as the SmartChemicals
Examples from the retail sector, where major players such as
Walmart are active in pulling along information all through the
supply chain, were regarded as just too far out of range at
present. Indeed, many questioned whether the model was even
applicable, given the lack of a powerful leader in the chemicals
chain, and the fact that so much buying is done amongst the
The question of trust and reluctance to share planning information
transparently is also a major obstacle.
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