Chemical Compound

With the proliferation of trading exchanges, the challenge for many companies may well be which to join. For Dow Chemical Co., Midland, Mich., that means a combination of buy- and sell-side initiatives including its own e-commerce systems, third-party exchanges, and marketplaces it is creating with industry partners to meet its specific needs. "About 90% of our activity on the sell side is one-to-one transactions," says David Kepler, vice president of e-business and Dow's CIO. "The challenge we have is positioning ourselves the way the buyer wants to buy. People look at these exchanges and marketplaces as one kind of activity, but you have to look deeper into the products, the market, the customer, and the functions you need to provide for the transaction." To manage the company's participation in its variety of trading exchanges and marketplaces, the company established the function of director of electronic market channels. "Increasingly we are going to have to embrace these channels and come up with full-fledged business strategies around them," says Andy DuPont, who holds the position. "My job was established to coordinate and leverage best practices across businesses as each of them puts together electronic-channel strategies." To service Dow's ongoing, contractual customer base in an open forum, the company joined with others in its industry to form two exchange consortiums -- one for chemicals, the other for thermoplastics -- that will create an online, standard platform for supplier/customer interactions. Dow applies the word "marketplace" rather than "exchange" for these groups to emphasize that their scope is greater than just buying and selling. In fact, the consortium marketplaces will function as a supply-chain hub for members, focus on transaction efficiency and cost reduction, and support a multitude of services and applications pertinent to their industries. These could include logistics, credit, product development, packaging, and equipment acquisition. "A whole host of services to do what we call community and convenience can be leveraged in this kind of marketplace," says DuPont. "But clearly none of the marketplaces will start up with the functionality they will host in a year or two." Eighteen members already are on board for ELEMICA, the chemicals marketplace, including Du Pont & Co., BASF AG, Bayer AG, Rohm & Haas Co., and BP. (An information-only Web site has been created until the exchange is operational: www.elemica.com.) The chemicals marketplace is managed by a board of executives from each company. Day-to-day activities are carried out by a steering committee of company representatives working in task forces who draw from their individual companies' expertise in areas such as legal, tax, finance, and technology. Initial capitalization is $150 million, divided among founding members, most of which goes towards connectivity. "The engines, databases, and infrastructure to do all the information interchange between suppliers and customers is much more expensive than most people realize," says Dow's DuPont. The chemicals marketplace is scheduled to be up and running by yearend. For customers that wish to buy directly from Dow, the company launched its own e-commerce initiative in November called MyAccount@Dow. For this program a customer is provided a secure link directly into Dow's database. Through the link a customer can access current order status, historical purchase information, technical/safety data, and certificates of analysis. Larger companies can get a look at their worldwide interaction with Dow in one place. To serve specific needs of its construction-products businesses, namely Styrofoam and polyurethane products, Dow has joined BuildscapePro.com, a trading exchange for builders and contractors. In addition to buy/sell transactions, the site hosts tools and applications that support the scheduling, work-flow management, and distribution of goods through the industry's complex supply chain. On the buy side of the equation Dow has another deck of exchange cards to play. Office supplies and more are purchased through Ariba.com Network, a popular MRO (maintenance, repair, and operation) materials-acquisition site. Laboratory supplies are acquired through SciQuest.com. For more heavy-duty indirect materials purchases Dow has joined with 13 other energy and petrochemical companies to launch a procurement exchange to gain volume and transaction efficiencies. And to facilitate its purchase of raw materials for chemical production Dow has joined ChemConnect, which has hosted auctions of some of the company's excess capacity/aged inventory.