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News
April 07, 2000 02:00 AM

Rival resin firms join to form e-marketplace

Joseph Pryweller
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    MIDLAND, MICH. (April 7, 11:45 a.m. EDT) — Five of the world´s largest resin companies want to craft a central online hub where injection molders can buy and track virtually every material, tool and machinery part at the click of a mouse.

    That high-arching vision was formalized April 5 when five suppliers — BASF Corp., Bayer AG, Dow Chemical Co., DuPont and Ticona/Celanese AG — signed a letter of intent to create the yet-unnamed Web site targeted to injection molders.

    Eventually, they plan to cede control of the neutral site to an independent company. And while the five "founding fathers," as they call themselves, are investing $50 million in the venture, they plan to own less than half of the new company.

    "It´s first and foremost an alignment around our view of the future in (electronic) commerce," said Craig G. Naylor, DuPont group vice president and head of DuPont engineering polymers worldwide, in an April 5 telephone interview. "It indicates the kind of one-stop shopping we see for a customer site.

    "It wasn´t a question of if it was going to happen, but to what degree we would be able to play in a value-added environment."

    In the past two months, the companies decided to play together in the e-business pond before others jumped in, said Naylor, based in Geneva, Switzerland.

    The consortium will start with a catalog-based site listing resin prices for each company. Eventually, it plans to broaden the electronic marketplace to embrace compounders, distributors, equipment suppliers, toolmakers, packaging material companies and anyone else with ties to products that injection molders need to buy.

    The new company also plans to add other aspects of supply-chain management. That could include electronic order tracking and shipping, credit checks, quote requests and billing.

    The companies still must find a technology partner to create the site, pick a chief executive officer, determine a headquarters location, hire staff and develop a business and technology strategy to deliver the services.

    The resin makers expect to sign a definitive agreement within 60 days and launch the site in October in the United States. Europe will follow three months later, and Asia three months after that.

    "Competitors now became partners," said Bill Gaughan, director of information technology for polymers and chemicals with Pittsburgh-based Bayer Corp. "In the chemicals industry, proper pricing, moving material on time and the logistics piece make our work much more daunting. It cried out for a better way to get this handled."

    The electronic marketplace will increase the buying and selling power for molders as well as resin companies, said Steve Kafkaphoto, business e-commerce analyst with Cambridge, Mass.-based Forrester Research Inc. It should open doors to companies seeking wider purchasing access, he said.

    Yet, challenges remain for the resin companies to perfect the technology, convince molders to buy online and even to work jointly, Kafka said.

    "I think the individual players didn´t want to be left out of the game," Kafka said. "It was a concession of the inevitability that marketplaces are a viable way of trading."

    Several molders predicted that even an all-encompassing Web site will not replace behind-the-scenes price negotiations.

    Some competing Web-based trading exchanges seemed ready to stage a welcoming committee for the new dot-com counterpart.

    "The year 2000 will be a turning point for (chemical) business transactions online," said Linda Stegman, senior marketing vice president with San Francisco-based chemical trader ChemConnect Inc., which filed its registration for an initial public offering the day before the resin companies´ announcement. "Every new introduction helps the current players to some degree."

    Supplier-based trading sites are fast becoming a preferred mode of e-commerce travel. A day after the resin-company announcement, blow molder and metal-can producer Silgan Holdings Inc. and two partners announced their own plans for an independent Web portal (see related story).

    Initially, the resin makers´ new Web portal for injection molders will link to separate sites for individual resin suppliers. Eventually outside auction or exchange companies could be linked to the site, Naylor said.

    "It offers the ability to see multiple suppliers at a single site," said Dick Sosville,, Midland, Mich.-based Dow global vice president for engineering plastics. "That´s a huge amount of convergence for a buyer."

    One major resin company not included in the project is Pittsfield, Mass.-based GE Plastics. Several resin-company executives in the project said GE was not invited to join.

    GE Plastics launched its own online buying and distribution site in 1997 through GE Polymerland. GE officials say the company is happy working alone right now.

    "We think the move (by other resin companies) validates our leadership position," said GE spokesman Jay Pomeroy. "We didn´t think we were going to be the only player in e-commerce in the plastics industry."

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