Chemicals Industry & B2B

Chemicals Industry & B2B, what is it and how can it be used to create advantage? In a series of articles we examine how B2B can be applied to the chemicals Industry as an e-chemicals tool, helping to deliver longer term benefits. We start with a short article produced by Netmarkets Europe which provides a fast guide to Business to Business e-commerce.

Inside Business to Business - The Basics of B2B

This section is specifically designed to give you an overview of the subject, and to explain terms that are commonly used but not always clearly understood. For easy reference a glossary is provided as well. Pre-Internet 'B2B' is about increasing the efficiency of trade between organisations. Electronic Document Interchange systems (EDI), developed by the largest organisations, have been around for over 25 years and still involve many companies. However they were and are expensive, inflexible and proprietary. Major initiatives to increase internal efficiency and hence readiness to trade externally occurred first with Business Process Re-engineering (BPR) in the late 1980s and then with Enterprise Resource Planning (ERP) - essentially "software-wrapped BPR" - in the 1990s. The Millennium Bug (Y2K) created an opportunity - albeit an expensive one - to spring-clean the internal systems of mid and large size corporates.

Business to Business

Internet

Internet-based e-commerce began in the mid-90s with companies like FedEx, Cisco, Dell and GE. They focused on sales, customer service and procurement. Dell now generates more revenues online than McDonalds as a whole. Cisco generates $13.4bn of its sales online (84% of its total). Many-to-many public e-markets emerged at the end of the 1990s with software companies like Ariba, CommerceOne, Oracle, and independent companies such as Chemdex and PlasticsNet. Other products such as auctions (FreeMarkets) and deep industry communities (VerticalNet) were also appeared. As a cheap, flexible and universal network, the Internet offered the opportunity for smaller companies to get involved in e-commerce. Web technology promised real-time transaction processing and richer data exchange.

E-marketplaces offered dramatic efficiency benefits to both buyers and suppliers alike - a seemingly perfect win-win situation. Entrepreneurs, fuelled by huge sums of venture capital money, founded most of the e-marketplaces. Large corporates watched with increasing alarm as independent e-marketplaces proliferated. They saw a threat to their trading relationships. In 2000 they began to set up their own 'consortia' e-markets. The biggest example of this was Covisint, formed by Ford, GM and Daimler Chrysler.

Within 2 years 1500 independent e-markets emerged in nearly every conceivable industry sector across the world. In parallel 'consortia' started to mushroom. The number of independents is now dwindling rapidly as investors and managers lose patience. It appears the world is not yet ready to move online fast enough to provide the levels of on-line trading (known as liquidity) required. Some consortia are also struggling to develop viable business models. A number of powerful e-marketplaces are, however, likely to emerge in certain industry sectors.

Next phase

The one sure result of all this activity is that the large corporates are awake to the wider opportunities of B2B. For many, ERP systems have not delivered the ROI and flexibility they imagined. And now they are moving fast to e-enable existing systems and processes to increase operating efficiency. The largest companies piloted B2B projects heavily in 2000. Analysts predict major investment over the next few years in internet-based solutions to deepen relationships with trading partners. As the large corporates move from defence to offence in exploiting new eChannels, their supply chains will be forced to participate, creating new opportunities and threats for mid and small sized companies.

Article reproduced courtesy of NetMarkets Europe

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