CHICAGO (June 15, 10:45 a.m. EDT) — Commerx PlasticsNet (Booth E10103) is shifting its e-commerce engine into a different gear, moving from a pioneering marketplace model into Web-hosted systems for individual processors.
The Chicago-based company — which changed its name in May from PlasticsNet.Com — is undergoing a fundamental change in focus, said Tim Stojka, chairman and chief executive officer of parent company Commerx Inc.
PlasticsNet now is providing Web-based purchasing software to processors, who then integrate it into their computer systems. The first customer for PlasticsNet's new eBuy software is custom injection molder Nypro Inc.
Clinton, Mass.-based Nypro plans to use PlasticsNet's technology to buy goods and services online with its trading partners, said Nypro global purchasing director Bob Smetana.
"The payback really lies in our ability to take this across all of Nypro," Smetana said.
The sprawling company has 25 injection molding plants in 11 countries.
"If we can consolidate (purchasing) volumes, we can get better leverage. There are a lot of opportunities to uncover savings," he said.
PlasticsNet also is counting on a big payback with its new collaborative model. Founded in 1995, the company developed one of the plastics industry's first commercial Web sites.
Then, a year ago, PlasticsNet.Com announced it would open an electronic marketplace so buyers and sellers could trade products over its site, with suppliers paying the dot-com company a transaction fee.
Several resin companies, including Huntsman Corp., Eastman Chemical Co. and Ashland Chemical Co.'s General Polymers unit invested in the company.
Yet, that model was always a stopgap for the company on the road to its true mission, Stojka explained recently. Its vision always has been to improve the way companies do business in the plastics industry, he said.
"Being a virtual distributor was not where we wanted to be," Stojka said. "But companies were at the very early stages of technology. They wanted Web sites and brochure ware. And then they wanted sites matching buyers and sellers."
The company plans to maintain its marketplace site for now, Stojka said. But PlasticsNet wants again to be a pioneer in what Stojka calls the next wave, which e-business researchers have referred to as the collaborative marketplace.
Companies use Internet software from an outside application service provider that connects them to suppliers and end users. The software can combine purchasing, transportation and administrative functions with a mouse click.
A March e-commerce report from Boston-based consultancy AMR Research Inc. said the next evolution of plastics and chemical trading sites will be as application service providers.
"It makes perfect sense in fragmented markets with small to midsize buyers and suppliers," the report stated. "These companies cannot afford a dedicated implementation of an (in-house computer system)."
Instead, online companies such as PlasticsNet maintain the Web site and charge a fee for use on a pay-as-you-go basis. PlasticsNet developed its eBuy software package in an alliance with leading software development Commerce One Inc. of Pleasanton, Calif.
A feature of the site, developed by Tampa, Fla.-based CommerceQuest, uses messaging technology to translate data from different computer systems.
PlasticsNet is seeking other processors to use the technology, Stojka said. Other online marketplaces also are looking closely at their customers. San Francisco-based ChemConnect Inc. plans to offer back-end integration of spot purchases onto customer's computer systems, said Linda Stegman, senior marketing vice president with ChemConnect.
After a customer makes a spot purchase of plastics or chemicals on its site, the order will be automatically processed on that customer's computer system, Stegman said.
The system currently is in pilot mode, and ChemConnect is working with several processors in its development, she said.
"It's paperless from beginning to end," Stegman said. "It's a way to do seamless transactions for a customer."
While industry evolution is spurring some of the change at PlasticsNet, the company is making the shift for more basic reasons. Making money from a resin catalog site has been difficult, Stojka said.
"You need billions of dollars of product sales over time to make any money," Stojka said. "There is some value in matching buyers and sellers, but it's difficult to build a business around the model."
According to a January prospectus when it registered for an initial public offering, PlasticsNet lost $12.4 million in the first nine months of 1999. Its sales for that period were $833,000.
Margins are too thin in commodity plastics to allow many companies to be successful trading resins online, said Donald Goodwin, president of Northbrook, Ill.-based consulting firm Technomic Inc.
"Margins become like that for a grocery store," Goodwin said. "You might make 1 percent on some products. One mistake, and you're dead. An online company needs more content to distinguish itself. Desperation can be the mother of invention."
Commerx eBuy's business suite includes the creation of purchase orders, order status and history, central data reporting and requisition requests from anywhere within a company. Approval signatures are received electronically.
Nypro plans to integrate the purchasing software into its computer systems immediately and roll it out to plants as early as July, said Mike MacKenty, Nypro vice president for information technology.
"It acts as a kind of pass-through to our vendors and suppliers," MacKenty said. "The system provides us with the means to incorporate our (computer) systems into the supply chain. The idea is to shrink (purchasing) cycle times."
Commerx plans the same initiative in the metals industry. In May, the company launched Commerx Metals to provide U.S.-based companies with a portfolio of Web-hosted purchasing and supply-chain solutions.
With technology stocks still trending downward, the company has not yet made its initial public offering. No time line is imminent, but Commerx still is planning an IPO.
"It's definitely still on," Stojka said. "We're in conversation constantly with our banking team. We'll wait to see what happens."