E-COMMERCE.

WHAT IT MEANS FOR PLASTICS

The word of the moment is "e-commerce," shorthand for conducting business transactions electronically via the World Wide Web. The recent proliferation of e-commerce sites dedicated to plastics and chemicals has accompanied moves by vendors of materials, additives, and equipment to allow you to "shop on-line," verify the status of your orders, and even track the shipments until they reach your loading dock.

Because of its glamorous aura, the term e-commerce is being stretched to cover all sorts of business activities conducted via the Internet. Some are already familiar, such as visiting suppliers' websites to find product information or leave e-mail messages asking for a sales contact. Some are just a different, and frequently faster and simpler way of doing familiar things, like placing an order or posting a help-wanted ad. Some represent genuinely new opportunities, such as the ability to find out about, and bid on jobs for fabricated products from OEMs worldwide.

Surplus products, leftover materials from a completed job, and even used machinery can find new homes and generate revenue. This was a daunting task in the past. "I previously worked at a firm that would landfill polycarbonate sprues and runners instead of regrinding them because it was time-consuming to find a buyer," says Mark Fikaris, president of West Molding, Wheeling, Ill., an injection molder of bobbins for automotive and electronic markets. "They threw away 1000 1b every week. Today, using sites such as PlasticsNet.Com, they could get 50[cents] on the dollar for that material," he adds.

Likewise, a waste-management company in California sold 1000 carts full of scrap film rolls on the web that it otherwise would have paid to haul away, says Patricia Moore, who operates a site (www.caplasticsmarkets.com) in California for trading recycled plastics.

Up to now, negotiating the sale of scrap materials, excess inventory, or idle molds and machines would take an average of four personal sales calls to close a deal, with each call costing an average of $300, says the Direct Marketing Association in Washington D.C. That, plus the added time and effort to deal with paperwork for such transactions, has prompted firms to narrow the number of businesses they contact--or forego such activities altogether. Now that's all changed, thanks to the Web.

"Through our website it takes around two days or less to complete a purchase and make all related arrangements. We've calculated an average time of 7.3 days for a similar sale done by phone and fax," says Jim Morelli, v.p. of sales for PlasticsNet.Com, one of the first and largest websites created specifically for plastics-related on-line sales and service. With more complex deals, the time and costs savings can be even greater.

Doing business on the web can save 10-25% of the processing costs, reducing total transaction costs by 3% to 12.5%, says Don Churchman, v.p. of CheMatch, an Internet trading platform for chemicals, plastics, and fuel products.

Internet trading platforms create an open market that gives you a better idea of the current market price for goods, says Chris Jenkins, president of the chemicals division of Industry to Industry (i2i), a site serving chemicals and plastics markets. Contract or catalog prices normally don't reflect surpluses or shortages of material, he adds.

Love at first site

Electronic sales from the petrochemicals industry are forecasted to rise from an estimated $4.3 billion in 1998 to $178.3 billion in 2003, according to Forrester Research Inc. in Cambridge, Mass. Estimates for plastics machinery, resin, or fabricated products sales on the Web are not available.

Most plastics-related sites say their sales growth has exploded. "In January of 1999 our on-line business recorded zero dollars a week in sales. By the end of the year we were averaging $6 million a week. In January of 2000 we had a record sales day of $7.3 million," says Hank Harrell, the marketing leader for GE Polymerland's website. Polymerland, a unit of GE Plastics, is a major national resin distributor. The firm expected its web sales to hit $100 million in 1999, $450 million in 2000, and $950 million in 2001.

Website managers and users say the rise of e-business in plastics initially will not reflect new business but rather a shift in business from traditional channels. For now, what's up for grabs is mainly the 20% of plastics materials purchased on the spot market, versus the 80% bought through contracts. Some industry sources expect the Internet will encourage more spot buying, since it effectively gives processors more suppliers to choose from. Other sources think the change will be toward contract buying from a wider range of vendors, with the Internet helping buyers to get the best deals possible from more sources.

The universality of Web access through today's browser technology is what distinguishes activity from an earlier attempt to foster electronic commerce through electronic data interchange. EDI was used as a means to streamline the sales-order process, especially for large buyers with highly formalized internal procurement systems. "EDI is a great communication tool, but the fact that the system ran on a dedicated, private network and required proprietary software and hardware made it expensive and inflexible, which limited its use," says Amir Raza, a partner at Mascon, Schaumburg, Ill., a supplier of manufacturing information software. Only 2% of all U.S. businesses adopted EDI, he says. "What makes the Internet so attractive is that it is based on a standard network, and access to it requires just a store-bought computer and a standard browser," Raza says.

What suppliers are doing

Given the enormous industry-wide migration to the Web, it is not possible to cite more than few examples of the new services being offered. Among the first to go on the Web in a big way were major resin suppliers like Dow Plastics (www.dow.com), DuPont Co. (www.dupont.com), Eastman Chemical Co. (www.eastman.com), Bayer Corp. (www.bayer.com), and GE Plastics, along with its resin-distribution arm, GE Polymerland. Besides large volumes of searchable product information, technical data sheets, MSDS documents, and the like, more and more of these firms are offering the ability to confirm order status, determine material availability, track actual railcar locations, and review your order history with that vendor. Without having to call and ask a sales representative, you can always print out another copy of an order if and when you need it. Likewise, you can obtain certifications that the material you are ordering is approved by automotive or other OEMs.

GE Plastics (www.geplastics.com) and GE Polymerland (www.polymerland.com) have a new feature called Teleweb, which is basically a Help button. Click it, and within 10 seconds you are supposed to get a response from a local-area customer representative, via voice or text chat. That person will be viewing the same screen as you in order to help answer your questions. For the future, GE envisions on-line auctions and even the ability of customers to sell off surplus GE materials they have purchased but don't need.

Major machinery suppliers are starting to add e-commerce features to their websites. Injection machinery maker Van Dorn Demag Co. lets you get cost quotes or place orders for spare parts (www.vandorn.com). So does extrusion systems builder Black Clawson Converting Machinery (www.blackclawson-cm.com) which also provides instant quotes on-line for processors who need a rough estimate for budgeting purposes.

Auxiliary equipment and components are also on the Web. Maguire Products Inc. says it now sells less than 5% of its blenders and granulators via its website (www. maguire.com), but expects its level of on-line business to grow to 1520%. Major catalog vendors like IMS Co. and Molders Choice have on-line sales (www.imscompany.com and www.molderschoice.com). Various component vendors allow you to order on-line--examples include Edward D. Segen & Co. (thermoforming tool components at www.segen-online.com); Raytek Corp. (noncontact temperature sensors at www.raytek.com); and ePressure, Inc. in Wilmington, Del., a new firm created specifically to sell melt-pressure transducers over the Web (www.ePressure.com).

There are even some vendors of chemicals and additives on-line, like Slide Products, Inc., which lets you purchase or order free samples of mold releases, cleaners, rust preventatives, and lubricants (www.slideproducts.com).

Going once, going twice

A number of new firms have sprung up with plastics-related web-sites that serve as a virtual auction house, marketplace, trading exchange, or flea market (see box). One of many new capabilities is the reverse auction," in which one buyer solicits bids from many sellers. Auctions and exchanges create opportunities for companies to reach many firms they didn't know existed. In particular, some of them offer processors a chance to bid on molding, extrusion, and assembly jobs.

For example, The Simmons Co., major U.S. mattress maker, used an auction-type feature at the web-site of SupplierMarket.com to save more than $400,000 in its procurement of 8.5 million lb of polyethylene film to cover mattresses. "Usually it takes months to research and qualify suppliers, says Leo T. Brennan, Simmons' v.p. of material management. Simmons made a request for the material and then watched as potential suppliers bid for the business. The firm saved $424,798, or 73%, compared with prices paid in previous years when it negotiated among a small group of businesses.

A Site to Behold 

Here is a sampling of third-party e-commerce sites that cater to plastics. No list can be complete, as new sites pop up every week.

American Plastics Council, Arlington, Va.

(www.caplasticsmarlects.com)

A free web platform concerned with recycled plastics in California is sponsored by the APC but is operated by Moore Recycling Associates, a Sacramento, Calif., consulting and management firm. The Recycled Plastics Markets Referral Service provides only information and referrals, not on-line sales.

American Plastics Exchange, Minneapolis

(www.aapexq.com)

ApexQ started as a dial-up service in 1994. Initially developed for recycled materials and used machinery, the site now offers on-line transactions in less- than-truckload quantities of virgin materials (ApexQ-Pirme). The site currently lists 34,000 lots of available materials. Sellers receive e-mail offers from potential buyers, but actual negotiations are carried out off-line. The site includes a freight calculator to estimate transportation costs. Sellers are charged a monthly fee for listing secondary materials or a commission on sales of prime materials.

ChemConnect Inc., San Francisco 

(www.chemconnect.com)

Said to be the biggest global chemicals exchange, it is a spot market with around 3300 members, including 20 of the world's 25 largest chemical makers. The firm recently hosted an on-line sale of 10 million lb of ethylene monomer worth almost $2 million. The site is supported by Dow, Eastman, and Robin and Haas.

CheMatch.Com, Houston

(www.chematch.com)

This two-year-old site for bulk commodity chemicals intends to add plastics. Trade volume reached a record $11.5 million in November. It has gained financial support from DuPont and Millenium Chemicals. Companies participating on the site include Eastman, ExxonMobil, and Equistar. Transaction values average around $530,000. Features include anonymous trading and live posting of pricing activity. Overseas shipping and tracking is scheduled to debut this year, as are analytical tools to help users determine the spot market for a particular material.

E-Composites.com, Grandville, Mich.

(www.e-composssites.com)

Started up last March, it serves as an auction site for composites, secondary materials, and equipment Users get a free weekly newsletter highlighting jobs, project opportunities, materials-selection guidelines, composite pricing, and a supplier directory.

Equipp.com, San Diego 

(www.equipp.com)

This January 2000 start-up focuses on machine tools and plastics equipment "We expect to have 10,000 registered users by the end of February," says Oren Klaff, founder and v.p. of marketing. "Our analysis shows we can reduce the costs of acquiring manufacturing equipment by up to 60%:" he adds. The firm already has 16,552 listings of plastics and metalworking equipment in 100-120 major categories, valued at $400 million. Both auctions and fixed-price listings are offered. Live customer service is available. Freight, financing, and inspection are also negotiated on-line. There is no cost to list, but the site gets a commission on transactions.

Atlan Plastics, Inc., Dallas

(www.eAtlan.com)

Surplus virgin plastics are offered on this auction platform. Users of the free site can earn points redeemable for miles with airlines or hotels.

IMark.com, Austin, Texas

(www.imark.com)

This marketplace for used equipment, including plastics machinery, started last September. It has 11,000 firms registered and over 5000 pieces of equipment listed. No actual selling is conducted on-line. If you want an item not listed, the website promises to find it in a week. Services are free, but iMark gets a 5% commission on each successful transaction.

Industry to Industry, Boston

(www.i2i.com)

Launched in September, i2i offers minute-by-minute pricing on available amounts of chemicals, plastics, energy, and more. Minimum value of an offering is $25,000. There are no membership fees, but i2i gets a commission from the seller. The firm offers auctions, reverse auctions, and classified ads. Approximately 700 members are registered. Users can choose to identify themselves or not, and also can leave comments about their trading partner based on a rating system.

The PlasticsNet.Com, Chicago

(www.plasticsnet.com)

A platform for primary materials, spare parts, and used equipment since 1995, PlasticsNet.Com has established a number of relationships with suppliers, including the General Polymers div. of Ashland Distribution Co., which brings about 2500 products to the platform. PlasticsNet.Com reportedly has 30,000 users. Investors include Eastman Chemical and H. Muehlstein & Co. The firm has agreements with machinery vendors such as Milacron Inc., Van Dorn Demag, and Maguire products. Users can make multiple material requests on a single purchase order. The site takes a commission on completed transactions.

SupplierMarket.Com, Burlington, Mass.

(www.suppliermarket.com)

This a "virtual marketplace" for sourcing and selling built-to-order, semi-custom, or stock manufactured products, ranging from components such as fasteners to molded parts and assemblies. It has about 6000 registered users. Users submit a Request for Quote (RFQ), which is automatically matched to firms capable of filling the order, then the buyer sets up online bidding.

SupplierOne.com, Houston

(www.SupplierOne.com)

Launched last year, this web marketplace is tailored exclusively for procurement of plastic and metal fabricated parts. Buyers, usually OEMs, describe their part specifications in a request for quotes that can include CAD drawings.

Supplybase Inc., San Francisco

(www.Supplybase.com)

Founded in 1996 by former managers from GE Plastics, this site is intended to help OEMs in computers, electronics, telecommunications, and medical devices to procure materials, tooling, fabricated parts, and assemblies worldwide. Participating molders, toolmakers, and materials and component suppliers are listed in a classified database. It lists between 25,000 and 50,000 suppliers and processors. A new addition is Supply manager, a platform for an OEM to manage communications with vendors during the life of a project.

TradeOut.com, Ardsley, N.Y.

(www.tradeout.com)

Anything can be sold at this auction-based internet bazaar. The platform helps to facilitate transactions between buyers and sellers of extra inventory, idle assets, and last year's products.