NEW ORLEANS — Since most plastics e-commerce conversations tend to be abstract — with uncertainty growing as traditional business models are thrown out the window — it was refreshing to hear industry consultant Garrett Gee put some hard numbers on the fast-growing field. Resin producers can save 5-15 percent by using e-commerce- based applications, according to Gee, plastics and packaging business manager for Kline & Co. Inc. of Little Falls, N.J.
In the North American market alone, this would result in annual savings of between $581 million and $3 billion.
Using online purchasing and other e-commerce methods eventually could reduce the cost of a customer transaction from its current level of about $125 to as low as $7, Gee said Feb. 23 at Plastics News' e-briefing in New Orleans.
"With consolidation leading to commoditization, there's an opportunity to use e-commerce as a strategic weapon," he said. "But you can't just take your brochure and transfer it to your Web site."
E-commerce also can reduce the costs of market entry and application development. Gee estimated that an engineering resins maker spends $10,000-$375,000 to add a new customer for the electrical/electronics market, while developing a new application in that market can cost as much as $1 million.
But Gee added that while working on a multiclient e-commerce study recently, he was surprised by the number of plastics executives who didn't know how the cost of e-commerce was captured.
"This is a radical departure for senior management," he said. "If you build a powerful model and only get 15,000 orders a month, you just wasted a lot of money.
"Even if you get a successful program up and running, you may save only 2 percent at first. You're not going to get rich, you're not going to be the hero, but you have to do it."
On the cost side, Gee estimated a major resin supplier would need to spend $5,000 per user to install a seamless e-commerce-based system. Gee based his estimate on interviews with several information technology providers.
However, he pointed out that a smaller resin producer or injection molder could install and operate a basic e-commerce system for as little as $125,000.
"A small system like that would be less complete, but if you're a midsize, midcap company with between $50 million and $150 million in sales, you don't need rocket science, he said.
Attendees from different areas of the resin industry offered a grab bag of responses to Gee's outlook.
Jean-Pierre Demeunynck, a business consultant with the information technologies unit of high density polyethylene/polypropylene maker Solvay Polymers of Houston, agreed with Gee's savings estimate, but pointed out that the $5,000 per-user estimate would include product planning, materials management and sales and distribution.
"Most companies don't need the full suite of services," Demeunynck said.
Gee's $5,000 per-user estimate could even be low if a company needs to invest in new computer systems and programs to make e-commerce work, according to Paul Garstka, vice president of planning and controlling polymers for engineering resins maker BASF Corp. of Mount Olive, N.J.
"To implement a very flexible, agile e-commerce system, it's going to take a big investment," Garstka said. "But we agree that there's a minimum of 5 percent savings out there."
Garstka added that BASF plans to roll out its own e-commerce offering in late April that could include online purchasing of its nylon, polystyrene and polyurethane resins.
Smaller firms, such as Carolina Color Corp., a $25 million-a-year color compounder in Salisbury, N.C., have to decide how to enter the e-market.
Michael Hollingsworth, Carolina Color's business development manager, said it's a big deal for a company like his to lay out $150,000 for an e-commerce system, particularly if doing so leads to their products becoming more like commodities, which command lower prices.
"We want to continue to offer a premium product," Hollingsworth said. "A lot of what's being said [about e-commerce] can apply to what we do, but there's no way to stay in business if we had to offer commodity prices."