The European e-Business Report 2004 - Berlecon Research GmbH

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The European E-Business Report 2004Activity 1: The portals – communities of users of chemical products:SpecialChem is a gateway to several portals on the Internet which offer (for free) avariety of information and support functions for users of chemical products. The usercommunity currently comprises 80,000 registered firms and individuals ("members"),with about 3,000 new registrations per month.Activity 2: Carrying out e-marketing and sales promotion for clients: From thisactivity, SpecialChem earns its income by organising targeted e-marketing andpromotion activities for clients. This activity exploits the database of product usersand the profound knowledge about these users collected via the various portals.Results• The use of ICT for marketing and sales purposes is still remarkably underdevelopedin the chemical industries, according to SpecialChem's experience.The company says that there are still many companies which do not even knowthe e-mail addresses of their customers, or at least have not organised them ina way that they could be used even for simple direct mailings.• SpecialChem expects that the e-business focus in the chemical industries willshift from cost cutting and optimising supply processes to marketing. A lot ofplayers, the large ones in particular, have already optimised their supply sideprocesses in highly sophisticated ways or are in the process of doing so. Oncethis has been accomplished, they may search for better ways to market newproducts and to extend their markets.BASF (GERMANY)BackgroundActivitiesBASF is one of the world's leading chemical companies, headquartered in Ludwigshafen,Germany, with production sites in 41 countries and customers in more than170 countries worldwide. In response to growing pressures on its commoditiesbusiness, BASF turned to modern e-business solutions to contain costs. It hassuccessfully implemented a customer focused supply chain integration initiativeusing Internet and extranet hub portals conforming to the leading industry eChemStandards TM .BASF has actively engaged in standards development and implementation forchemical e-business since the mid 1980s. Initially the focus was mainly on EDI andtailored one-to-one solutions. During 2000-2001, together with a small number ofleading chemical companies and partners, BASF were instrumental in developingthe first version of Chem eStandards TM . Since then BASF and its partners continueto encourage the adoption and use of Chem XML through a partnership process forstandardization and simplification.BASF conduct their e-business activities mainly via its own portal WorldAccount, anintegrated global extranet platform for customers, and through the Elemica network.By the end of 2001 WorldAccount had seamlessly integrated the existing regionalBASF industry portals for different product categories. BASF's ERP is linked toElemica, a neutral e-marketplace acting as a transaction hub for the purchase andsale of basic, intermediate, specialty and fine chemicals. BASF uses the ElemicaBuyer Direct and the Elemica Seller Direct solution as a “lite” working channel tosmall and medium sized companies.Vendor managed inventory is the main instrument for building up an integratedsupply chain network. BASF has just launched its VMI (Vendor ManagementInventory) solution which makes full use of the Chem eStandardsTM data structureand processes.95
The European E-Business Report 2004Results• Online ordering is increasingly becoming a daily routine for BASF's customers.The average number of monthly system-to-system messages carried overvarious channels (EDI, VPN, ISDN, Internet, extranet) has doubled from 2000 to2003 and is expected to increase by 35% in 2004 (as compared to 2003).• BASF's sales through WorldAccount, its global e-business portal, exceeded2bn Euro in 2003. In total during 2003, 11.25% percent of BASF's global salesvolume amounting to 3.7bn Euro was conducted electronically.• The channel strategy and expectations vary across segments. For instance,while BASF offers and sells fine chemical products through its global e-commerce platform, the majority of these products is traded through its owncustomer sales force.2.2.4 Conclusions: e-business opportunities and challengesExhibit 2.2-7: Overview of e-business related opportunities and challengesfor firms from the chemical industriesOpportunities• Save costs by improving the efficiency of supplychain processes, in many cases with a rapidreturn on investment• Reduce the error rates in B2B transactions byeliminating paper-based processes• Faster accomplishment of tasks by usingelectronic planning and controlling tools• For buyers: reduced procurement costs• Possibly, not yet exploited: innovative, betterfocused marketing approaches to reach newcustomersChallenges• For suppliers: further pressure on profit marginsdue to sophisticated e-procurementmechanisms (such as e-auctioning)• Investment risks due to uncertainty about thetechnology and market development: potentiallock-in to specific applications and B2Bconnectivity modesSource: e-Business W@tch (2004)OpportunitiesSave costs by improving supply chain processes: In the chemical industries, the main opportunityof e-business for companies is to save processing costs. This is achieved by improving the efficiencyof business processes in transactions between trading partners and related processes within thecompany. Cost saving potential of systems and standards for electronic supply chain processes canbe regarded as proven, as the Case Studies on BASF and Slovnaft demonstrate, at least for largefirms. The question is whether this will lead to a win-win-situation or whether large companies are themain beneficiaries.Reducing error rates by eliminating paper based processes: As per definition, doing businesselectronically aims to eliminate paper based processes. In some cases, this can even be an explicitobjective for implementing e-business systems. The main advantage for the company is that the errorrate in transactions with other firms tends to decrease in parallel with reducing the handling of printeddocuments. This increases the quality of business processes and can ultimately help to save costs.Faster accomplishment of tasks: In manufacturing sectors, integrated electronic supply chainsystems help companies to perform various planning and controlling tasks much more quickly. TheSlovnaft case study shows that, after implementing an e-procurement suite, the company was able toreduce the time for materials' daily balancing from two hours per day to 15 minutes, and for calculatingthe 10-days' production costs from 15 to 2.5 hours.96
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