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October 29, 2001 01:00 AM

E-businesses need to team up

Joseph Pryweller
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    PHILADELPHIA (Oct. 29, 11 a.m. EDT) — It is no longer about transactions. It is no longer just about online sales.

    According to a new study by consulting firm Forrester Research Inc., what will drive the future of e-business in plastics and chemicals is a virtually unexplored area: collaborative product development.

    Forrester in Cambridge, Mass., was one of the early predictors of Web sales taking off. The firm came up with a widely circulated quote in 1999: Internet sales worldwide would top $2.7 trillion by 2004.

    Now, that consultancy has discovered that the emphasis has changed, said Forrester senior analyst Steven Kafka, speaking Oct. 3 at the EyeForChem USA 2001 conference in Philadelphia. Sales growth has slowed, and processors are talking more about online help in new product development, Kafka said.

    “What has changed quite a bit since then is that the economy has gone into the tank,” Kafka said. “But e-business budgets are holding fairly firm. The points of pain are coming from end customers who want to allow e-business to ripple through the supply chain.”

    Using the Web as a wedge to help resin-company customers could give those material suppliers the next big edge, Kafka said. The gains from online sales, and the distinctions between resin companies, are starting to fade, he said.

    Consider these facts from Forrester's study, based on a survey of 50 leading resin and chemical companies: On average, those companies expect to see only 5 percent incremental growth in online sales during 2002; e-business budgets for those companies will grow only about 0.3 percent next year, to 3.4 percent — not a staggering figure.

    So what is a supplier to do on the Web? Collaborate, said Kafka.

    “There are real inefficiencies in the new-product process,” he said. “It's a disjointed process today, with most having poor communication with design partners.”

    The material supplier does not always know what the processor is doing. The Web will help those companies manage orders, provide better shipping logistics and plan inventory levels, Kafka said.

    But that will take a different mind-set among suppliers. Today, many of them discard product-development ideas that are not invented in-house; tomorrow, they will have to adopt ideas that are the “best from anywhere,” Kafka said. They will need to adopt more interactive tools to work with customers, developing a network of specialists through the supply chain, he said.

    Some companies are attempting that leap today. Ticona, like others, has developed secure e-rooms for companies to collaborate on new products, said Kevin Cronin, global e-business director for the Summit, N.J.-based company. Instead of designing for one specific part, suppliers look to the overall design process.

    “The Internet does not collaborate — people collaborate,” Cronin said. “The tools we have cannot replace relationships or skills. They must enhance those relationships.”

    Pittsburgh-based Nova Chemicals Corp. phrases that same idea as increasing the level of customer trust, said John Wheeler, Nova senior vice president and chief information officer.

    Nova customers only buy products online a few times a month, so the whole product-development process must be reworked using the Internet, he said.

    “What we've done has been necessary but not sufficient,” Wheeler said. “We have to learn to trust each other in ways we've never done before. We can't be expected to have more power than customers do. Collaboration cannot occur any other way.”

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