Buying on-line processors ask: 'what's in it for me?'.

A Plastics Technology survey shows that on-line buying of resins, spare parts, and supplies is on the rise. Most processors say it makes their jobs easier and more productive. Others want vendors to share more cost benefits.

Any North American processor can now buy many of the thousands of items needed to run a plant just by clicking on the computer. In theory, e-procurement via the hundreds of plastics-related vendor websites already runs the gamut from resins and additives to spare parts, office supplies, and even some kinds of equipment.

In practice, however, e-procurement is more tricky. Last year's bursting of the internet bubble didn't help: Many e-business sites faded away, while survivors are busy realigning their strategies. The notion that most buyers would sever existing vendor relationships and flock to internet e-business portals is now viewed as a passing mania.

Meanwhile, there's little information available on how, when, and why processors are currently using e-procurement, or how they plan to tap its possibilities. Most processors are watching the e-business trend warily, using it selectively, and grappling with the challenges it brings.

A big hurdle is that processors don't yet see the value for them. Cost savings tied to web-based ordering appear likely to go mostly to vendors. And except at a few auction sites, prices and contracts for most items are still largely set by means of face-to-face meetings, calls to service centers, or official price lists. Small wonder that many processors are asking, "What's in this for me?".

E-purchasing takes hold

To delve into that issue, PLASTICS TECHNOLOGY mailed a thousand questionnaires to managers of processing plants, and followed up by telephone. Roughly 100 responded, including some Tier One automotive molders and major film and sheet extruders. About half were custom molders, and 60% were single-plant operations with fewer than 50 employees.

They said most online action today is in prime resins, mainly engineering grades. On-line buying of maintenance, repair, and office (MRO) supplies is also strong. A burgeoning area is spare parts and tooling components. Interest in used and new machinery is embryonic.

Our survey shows a three-way split in attitudes towards on-line buying, with each position backed by roughly equal numbers. The most vocal group says e-buying makes the key procurement steps (order, confirm, track, and deliver) faster and more certain than before.

A second group rejects e-procurement, preferring to stick to phone and fax. A common refrain is that human voices are still crucial in buying. This group includes some who seem to have a "gut" resistance to using the internet.

A band of hopeful but cautious skeptics holds the middle ground. They know e-procurement is growing and welcome its potential. Yet they are adopting a wait-and-see attitude for reasons that range from internet security concerns to doubts about how e-buying can be integrated into current data-storage and transmission systems. Those systems include business-to-business electronic data interchange (EDI) and internal enterprise resource planning (ERP).

According to enthusiasts, the biggest plus for e-buying is the way it improves the efficiency of their workday. Jody Quinnel, a purchasing manager for UFE, a full-service custom injection molder in Stillwater, Minn., has to choose daily between thousands of engineering grades of plastics. About 70% of UFE's transactions now pass through the internet, some through links with its EDT system, but increasingly also through suppliers' websites and ones offering multi-vendor access like Omnexus.

"I save a huge amount of time by doing orders on-line," says Quinnel. That in turn frees her to dedicate more time to researching materials data and resolving technical issues, much of which is also done on-line.

Many respondents to our survey praised the freedom to access on-line sites 24 hours a day, seven days a week. This allows processors to order products outside the regular workday and even from their home offices, boosting their effectiveness and making their work schedules more flexible.

Linda Garrett, logistics director at the Anderson, S.C., plant of automotive molder Friedrichs & Rath, buys resin frequently on the websites of DSM Engineering Plastics, Ticona, and PolyOne. She likes the "almost instant" confirmation of orders via e-mail, and says ordering errors are reduced.

Garrett also uses the Omnexus site for the linkage it provides between the individual sites of her suppliers (all Omnexus members). "It's useful to have access to a mall site where comparisons are easy to make," she says. Omnexus develops electronic templates for clients to make ordering more simple and uniform.

Morbern Canada in Cornwall, Ont., a vinyl coater, has long bought about half of its PVC powder from PolyOne via phone and fax. But purchasing manager Brian Schwartz says a shift toe-buying has compressed its ordering, confirmation, and tracking times and reduced glitches. He says phone/fax systems are more prone to fail due to transcription errors, misplaced faxes, and unanswered phone calls.

Bertha Lacy, who buys for custom molder PEC Moark in Moark, Mo., part of Titan Plastics Group, praises supplier websites for "allowing real-time tracking of shipping and delivery information." She adds that internet orders are also easier to modify on the run. In addition, a user can retrieve a sales history or analyze past purchasing patterns by drawing on trading records now available on many resin suppliers' websites.

Sounding off on e-doubts

Critics respond that existing e-business sites are too often hard to use and are limited in scope. David Vereecken, sales manager at Ohio Precision Molding, a Barberton, Ohio, molder with 30 workers, browses the internet to gather data on resin options. He says current sites often limit the ability to make direct comparisons, one reason being that property data is often based on divergent units and tests.

James Cox, a buyer for Octex Corp., a custom molder in Sarasota, Fla., misses the human factor in e-transactions. Octex orders 10% of its resin via internet sites. But when the chips are down, as in the case of rush orders or a glitch in delivery, Cox wants a trustworthy listener on the line. "The voice is still the best instrument for conveying urgency," he declares.

A buyer for a top-tier U.S. supplier of barrier food packaging, who requested anonymity, says his company uses mostly PE, PP, and barrier resins that are custom-made on a confidential basis. Akey concern is making sure that carefully guarded recipes and prices remain secure. This source does not care to risk security breaches by buying on any internet site.

Maryland Thermoform Plastics, an 80-employee operation in Baltimore, buys cut sheet by phone and fax. CEO Scott MacDonald worries that rising e-procurement could add a layer of cost that would be passed on to buyers. Regarding third-party web sites, he asks, "Why introduce a middleman into a process that works well already?"

MTP has successfully bought office equipment on-line, but a recent purchase of desktop computers gave it pause. Some units arrived damaged, and correcting the problem proved frustrating.

Pricing mostly off-limits

At present, suppliers generally show only resin and compound list prices on their sites. For example, ABS grades are listed on some sites at $2.50/lb, whereas current market prices are about half that.

"You can't negotiate price this way," comments Christopher Robson, president of Robson Co., a four-employee custom molder in Fairview, Pa. He says a quick phone call to a familiar customer representative is still the best way for smaller processors to finalize a resin deal. However, Robson orders sensors for prototype tools on-line.

Internet buying is not central to the strategy of Pechiney Plastics Packaging in Chicago, even though it operates 22 film and thermoforming plants worldwide. Like most large buyers, it still prefers to hammer out its pricing contracts in face-to-face negotiations with suppliers.

"I don't see the payoffs at this time," says David Harrison, Pechmay's v.p. of supply-chain management. His goals are to leverage the company's buying power and reduce costs by improving existing EDI ordering and tracking systems. Yet Harrison uses FreeMarkets.com to buy corrugated packaging containers at a discount.

ChemConnect is one a-commerce firm ambitious about bringing market forces into play on the internet to provide more attractive pricing for its users. Its site includes mechanisms (a trading center and public and private reverse-auction options) for online trading in volume resins. It has also developed a-trading protocols to standardize on-line negotiation. These efforts, says marketing v.p. Michele Hinclis, create "alternative kinds of meeting places" for negotiating prices and terms of sale outside of traditional settings like boardrooms. Potential payoffs of a-negotiations are big cuts in negotiating time and cost, and lower prices that occur when market forces come to bear. In reverse auctions, for example, a buyer invites multiple sellers to compete for the lowest-price bid. ChemConnect is used mostly by large chemical producers and buyers, but a few OEMs use the site to buy resins.

"Reverse-auction resin buying sites generally bring only short-lived, one-time benefits, and we're not interested," states Matt Sosnoski, v.p. for procurement and logistics at Guardian Automotive in Evansville, Ind. He says Guardian is more interested in keeping close contact with vendors that offer strong technical and product-development support.

Dow Corning has created its new Xiameter.com on-line sales business to offer buyers of silanes and silicones "the lowest pricing anywhere," officials say. Sale of products on-line in a bare-bones arrangement (minimum quantities, no negotiating, no technical support) is said to provide double-digit savings.

E-trader PolySort Inc.'s new Public Group Purchase program aims to induce smaller processors (initially in the Midwest) to aggregate many small orders into one large purchase that could realize a sizeable discount. Resulting payoffs of as high as 50% are shared retroactively with members.

Tom Fannon, E-business director at distributor Ashland General Polymers, reports some 10% of revenue now flows through its internet site, mostly repeat orders. But he foresees future growth in e-business shifting to multi-material, consolidated sales to single buyers ("packaged deals"). The firm also has added a capability (sourceXplorer) at its site allowing clients to quickly link up with other sites for buying MRO supplies. Prices for products on these sites have been negotiated by Ashland exclusively for users of its site.

E-buying's widening scope

A promising new frontier for e-procurement is invoicing and payment. Capability for paperless transactions between multiple vendors has now been incorporated by Omnexus, Ticona, and BASF, all using Billing-Zone LLC as the service provider.

"Our approach for the first time allows benefits to be shared by smaller companies who do not have access to EDI," says Meagan Carpenter, Billing-Zone's business-development executive. EDI allows electronic, paperless invoicing and payment but is limited to one-to-one exchanges by a relative handful of very large companies.

Carpenter says the "print-stuff-and-mail" steps are eliminated, saving on paper and labor, while cash-flow management is more efficient. And the cost and delay associated with dispute rates (typically 40%) can be significantly reduced.

An increasing range of services beyond just purchasing appears to be another trend. GE Polymerland has established an on-line "virtual laboratory" for remote troubleshooting of tools and prototypes via video-conferencing. Omnexus recently added a "TechCenter" page to its site making experts available to answer users' questions on-line.

David Honeycutt, PolyOne's e-procurement manager, wants his firm's site "to provide painless, instant access to every last bit of data our customers need to make sound buying decisions," including design issues and technical service.

Kristi Ponder, manager of the Customer Service Center at Voridian, Eastman Chemical's new PET business unit, says the company is making a special effort to minimize any loss of human interaction related to e-buying by having service representatives on hand to respond to questions and guide users around Voridian's site.

A growing e-commerce arena is after market parts for primary and auxiliary equipment. Injection machinery supplier Arburg has teamed up with IBM to develop software for an e-business site for spare parts and after market services. Arburg Online allows users to access and order spare parts on a 24/7 basis. Benefits include reduced ordering times and immediate information on availability and delivery.

Mold-components vendor D-M-E saw a 34% increase in traffic last year on its site, which offers real-time ability to place orders, confirm availability, select shipping options, and review order status.

Injection machine builder Van Dorn Demag has revamped its Molder Action Network into an e-buying site for spare parts, accessories, retrofit kits, and troubleshooting services. Director Al Tolliver says around 150 active users are buying filters, generic wear components, and spares at the site. The company is also experimenting with offering new machinery on-line.

Primary equipment suppliers agree that the likelihood of new machines being sold on-line in the near future is slim. Barriers include the customized nature of most machinery, the high investment cost (and therefore risk) involved, and need for intensive technical support. They consider the internet more appropriate for listing machine specifications and selection tools like energy-use models.

NEED TO KNOW MORE?

Arburg Inc., Newington, Conn.

[phone], www.arburg.com

ChemConneot, Houston

[phone], www.chemconnect.com

D-M-E Co., Madison Heights, Mich.

[phone], www.dme.net

DSM Engineering Plastics, Evansville, Ind.

[phone], www/dsmep.com

GE Polymerland, Huntersville, N.C.

[phone], www.gepolymerland.com

General Polymers Div., Ashland Distribution Co., Dublin, Ohio

[phone], www.gpashland.com

Omnexus Inc., Atlanta

[phone], www.omnexus.com

PolyOne Corp., Avon Lake, Ohio 

[phone], www.polyone.com

Polysort Inc., Akron, Ohio

[phone], www.polysort.com/gp

Ticona, Summit, N.J.

[phone], www.ticona.com

Van Dorn Demag Corp., Strongsville, Ohio

[phone], www.molderactionnetwork.com

Voridian Co., Kingsport, Tenn.

[phone], www.voridian.com

Xiameter, Midland, Mich.

[phone], www.xiameter.com

RELATED ARTICLE: Are You a Convert?

You like e-business for its convenience, 24/7 availability, and reduced susceptibility to errors.

Are You a Rejectionist?

You prefer to stick to tried-and-true phone/fax methods because you are concerned about computer security, you believe in face-to-face negotiating, and you feel better dealing with a familiar human voice on the other end of the line.

Are You a Dabbler?

You know e-business is the future, but you're not entirely sold on it today. You dip your toe in the water cautiously, using e-buying only for maintenance or office supplies.