E-commerce: Buying resin online

Even though portions of the plastics industry may not currently be part of the "wired" realm, most intelligent predictions of the near future say that the World Wide Web will become a large part of doing business. In other words, the possibilities for business-to-business uses for the Internet are growing exponentially as this channel for commerce expands from such original luminaries as Amazon.com and eBay.

Proving this is as easy as logging onto the digital world. Online purchasing and auctions (known as e-commerce or e-business) are already here, allowing customers to buy and track orders for everything from resin to injection molding machines (yes, machines). Web-based design collaboration is another reality that lets all members of a project evaluate designs in real time without traveling.

A new CAD company, think3, now sells its software over the Internet on a yearly subscription basis. Other software vendors are taking advantage of the Net by becoming application service providers (ASPs) that work on 3-D CAD files sent electronically (performing IGES file repair, finite-element analysis, and so forth), and then send results back. Customers pay only for the service, not the software.

Web Acceptance
IMM spoke with several movers and shakers in the world of e-commerce, all of whom agreed that once designers, molders, and moldmakers become familiar with doing business over the Internet, it will become second nature. "We believe that acceptance of the Internet will be much like the adoption of ATMs in the banking industry," says Tim Stojka, chairman and ceo of PlasticsNet.Com, a centralized Web marketplace for the plastics industry. "Few people today miss waiting for the bank teller."

Fred Buehler, director of e-business at Eastman Chemical, views the Web as a complementary channel to relationships that exist within the industry. "There are some routine kinds of information that don’t require human beings when it is online and you can get it directly," Buehler says. "This gives our existing sales reps and channel partners more time for creative functions such as tech support and finding out what the customer needs."

Eastman has spent the past year building e-commerce capabilities into its website (launched last July) by looking at the ways it has served customers traditionally, and then layering the technology to meet those needs. "The site makes it easy for customers to do business with us, and as we add functionality, it will fundamentally change the way we serve their needs," Buehler says.

Today, about 200 Eastman customers are buying resin online. Most of the positive feedback can be summed up in one word: convenience. "Material data sheets and technical support on a 24/7 basis are valuable time savers," he says. "In a single interface, we can now deliver all of the services that were formerly scattered throughout the company—order placement, order tracking, even access to materials information and analysis. Our intent is to continue to build on this based on customer feedback, something that has become our obsession."

Online Customer Experiences
Ed Organec Jr., vp, Precision Plastic Products (Portland, CT), has been ordering resin online for about 18 months. The small to midsized custom molder serves medical, marine, automotive, and aerospace markets. Precision’s experience with online ordering at GE Polymerland has been positive from the start.

"It has changed our purchasing dramatically," says Organec. "I don’t have to call, then be put on hold or wait for the call back. I can order instantly, anytime—at night, at dawn, whenever." Organec also cites benefits such as real-time inventory, instant pricing, and the ability to track where the order is at any given time. "Ordering this way has improved our efficiency. It’s convenient and more streamlined."

Among Precision’s competitors, Organec sees online ordering slowly becoming more common. "I’m surprised at how few molders really do this, especially some of the larger companies," he adds.

Online ordering is a natural fit, according to William Weinert, purchasing manager for Rexam Closures & Containers (Evansville, IN-based proprietary molder for Rexam plc). "We’ve been ordering resin from Eastman.com since April 1999, and the system fits well with our long-term commitment to reducing internal paperwork and conducting business electronically," he says.

Rexam views online ordering as a service that saves time, money, and record keeping. Says Weinert, "We can obtain data sheets, place orders, and review the order history in record time. It offers us ease of use and reduction in paperwork. And Eastman is continually upgrading the site based on customer input, making it more user friendly."

Weinert had an initial concern as to who would incur the cost of e-commerce, which has been laid to rest. "So far, suppliers haven’t passed along the cost," he confirms.

Amazing Growth
Resin distributor Polymerland began online resin sales more than two years ago, but only in the past year has the website begun heating up. Hank Harrell, marketing leader, explains, "By the end of 1999, we were doing $5 million per week in revenue. Contrast that with sales of $10,000 per week in January of last year. We’ve seen tremendous growth, and it’s coming from a broad spectrum of customers."

Projected revenues for 2000 are $1 billion, "and that’s a conservative estimate," says Harrell. "By 2001, we will be in the $1.3 billion range, and at least 50 percent of our business will be transacted online. No one is forced to buy resin from us this way, so the rate of growth we’ve experienced this year indicates customers are choosing this channel for a reason—when they try it, they like it."

One-click ordering may be one reason for online resin-buying popularity. At this site, customers select a grade (or use the Material Selector database to find a material that meets specs), quantity, and delivery date, and the order is sent. The data is driven directly into Polymerland’s back-end system, which sends an e-mail confirmation. The back-end database is then updated, regardless of the ordering mechanism—even the phone order information is logged. Customers can then view a complete history for all orders, track and trace shipped orders, check material availability, and modify orders.

Like Eastman, Polymerland is focused on feedback, and designs future enhancements around customer comments. "One of the beauties of the Internet is that it is so ‘feedback friendly,’" explains Harrell. "Some requests can be done within 24 hours, while others are longer-term but help to drive direction of the site." For example, Polymerland is working with parent company GE Plastics on an auction site that will enable them to sell excess GE inventory, a feature expected to be online sometime this year.

Virtual Marketplace
PlasticsNet.Com is taking the convenience of online buying to the level of virtual marketplace. It offers customized software that allows molders to buy equipment, molding supplies, and resin from alliance members gathered on their site. "In effect, our sales force meets with a molder, takes catalogs from current suppliers, loads them onto a desktop, and customizes the procurement software to reflect often-ordered items and pre-agreed pricing," says Stojka. "Orders then placed on our site integrate back into the molder’s ERP system."

In return for the service, Stojka’s firm takes a nominal transaction fee. The software, however, is provided free of charge, at least for the time being. "Our site is a neutral marketplace," he says. "We’re just trying to aggregate suppliers, not promote one over the other."

Recently, the site added more than 1000 products from General Polymers, and eventually all of the distributor’s resins will be available online. Stojka also predicts that all major resin suppliers will be on the site soon. A total of 53 suppliers are currently affiliated, including those offering injection molding machines.

For resin purchases, customers have the option to buy via their pricing contract or go into a surplus auction, where pricing may be more attractive. Stojka foresees an exchange eventually, not unlike the stock market, for resin buying. From machinery suppliers, there is a catalog area offering replacement parts, and another called ‘exchange’ where manufacturers can sell large pieces of equipment in an auction format. Machines have already been purchased this way, and the site has included equipment valued at $500,000.

A partnership with MatWeb keeps material data sheets current and on record for any resin or compound. More recently, a partnership with e-Credit, a software company, promises to automate financing online so that customers can get real-time credit feedback for major equipment purchases. In the past, the process could take weeks, but with the e-Credit offering, response times will be cut down to hours or less.

Multi-supplier mega sitesSignificant news for molders on the resin-buying front came from five major resin suppliers recently in the form of a letter-of-intent announcement. BASF, Bayer, Dow, DuPont, and Ticona have agreed to form an online marketplace, and plan to use the site to give injection molders a neutral platform from which to buy a broad offering of resins from any participant. The as-yet-unnamed website will not replace any of the suppliers’ separate order sites, but will be another avenue for purchasing resins.

According to Craig Naylor, DuPont’s group vp for engineering thermoplastics, the motivation for getting these five suppliers together came from studying what molders need. "If you want to be a total solutions supplier to a molder," he says, "you need to have a full complement of offerings. The trend toward competitors cooperating in online ventures is a major change in many industries—medical, consumer care, and automotive. The difference is that most of them are procurement solutions. This site will be a buying and selling marketplace."

By comparison, Envera, another proposed site organized by a consortium of petrochemical, resin, and financial suppliers, aims to build a marketplace for the entire supply chain. Envera.com will theoretically assemble financing, shipping, online bidding, and resin purchasing in one place. Startup is estimated for 3Q 2000, and current participants include Eastman, BFGoodrich Performance Materials, and Solutia.

Yet a third mega site, focusing on elastomers, is planned initially by seven suppliers of elastomeric materials: Bayer, CK Witco, DSM Elastomers, DuPont Dow Elastomers, Flexsys, M.A. Hanna Rubber Compounding, and Zeon Chemicals. Called elastomersolutions.com, this marketplace plans to bring together processors, materials and equipment suppliers, service providers, and others in 3Q 2000.

Competitors cooperating to better serve customers is a basic tenet of agile manufacturing (see June 1996 IMM, pp. 25-28, "Are You an Agile Competitor?"). Although this philosophy has been around since 1991, it’s only recently that major manufacturers such as Ford, GM, and DaimlerChrysler have adopted its principles. DuPont’s Naylor suggests that this trend will continue, with a more customer-oriented twist. "The Big Three are attempting to create a procurement website, not a customer-focused marketplace. With our venture, the driving force is the customer."

Why did the virtual partners in this venture choose injection molders as the site’s sole customer base? For one, there are thousands of injection molders in the U.S. alone, and it is a very diverse industry. "Where e-commerce tends to deliver the most value is when you have a fragmented market," he adds. Also, for midrange engineering plastics, the single largest process is injection molding. In fact, global sales of resin to injection molders is estimated at $50 billion. "It was a no-brainer," he says. "This customer set made the most sense."

Is the proposed website simply another distributor? Definitely not, Naylor explains. The venture is primarily focused on the transaction process, and doesn’t include physical distribution. For the time being, all of the resin suppliers will contract with their existing distributors to physically fulfill orders.

In addition to resin, the site will include sales of molding equipment, tooling, maintenance supplies, packaging materials, and related services. Projected startup is Oct. 1, 2000. The venture will operate as a separate independent business with projected initial investments estimated at $50 million.

Suppliers involved in these ventures are seeking feedback from molders on what features they'd like included in the website. To register your vote, visit the feedback section of any of the following websites:

www.basf-corp.com
www.bayer.com
www.dow.com
www.dupont.com
www.ticona.de