Ashland buying group offers e-procurement to customers
Susan Avery -- Purchasing, 3/6/2003 2:00:00 AM
As a value-added service, Ashland now offers its customers and others use of an e-procurement system for indirect materials purchasing.
Through sourceXplorer, (sourcexplorer.com) a wholly owned business of Ashland Inc., the company's customers can place orders electronically for office supplies and other MRO items directly with more than 50 suppliers.
As part of a strategic sourcing initiative started at Ashland about six years ago, the company consolidated its indirect materials purchasing, says Terry Tyler, director, strategic sourcing, Ashland. "Very quickly we recognized a need for use of an e-procurement system," says Tyler, who has an engineering background and experience working in the sourcing operation at DuPont. That need includes use of data generated by an e-procurement system on the company's spending on indirect materials. Such data is useful in product standardization efforts.
After developing and implementing an e-procurement system (based upon SAP's R/3 enterprise resource planning system and i2's catalog and search engine) for internal users, "we decided that we wanted to offer it to our external customers as a value-added service," he says. "So we started looking at the possibilities of doing that and we found very quickly that the system we had created for internal use would not work externally." That's because internal users accessed the system through the company intranet, and providing a link to SAP for external customers would mean additional software licensing fees for Ashland.
Leveraging the earlier experience, the sourceXplorer team started from scratch using internal resources to build the new system for Ashland customers. The state-of-the-art system "had to be extremely user friendly, requiring little or no training," he says. Within one year, they were in beta tests of sourceXplorer with about 50 customers and five suppliers.
That was two years ago. Now more than 3,000 customers use sourceXplorer to purchase indirect materials. Initially, Ashland offered sourceXplorer to customers of Ashland Distribution, many of whom are small to mid-size companies, through Distribution's 500-person sales force. "We targeted companies that are too small to have their own e-procurement system or even their own purchasing organization," says Tyler. Eventually, larger companies became interested as well.
Users include customers of Ashland business partners, customers' customers and suppliers of goods and services to the company. Buying activity conducted through the site is growing 15-20% each month, says Tyler, who declines to reveal purchasing volumes. Use of the system has generated cost savings for customers: One, who rolled out the system to its dealers, reports cost savings resulting from using sourceXplorer of 28%.
To include services
The sourceXplorer catalog contains more than 500,000 items from 50 suppliers of office supplies; safety supplies; lab supplies; material handling equipment; welding supplies; pipe, valves and fittings; PCs; flowers; lighting; packaging materials and promotional items. The marketplace has one primary supplier selected for each commodity grouping. The sourcing operation is working to add such services as temporary help and uniforms to the catalog.
Based on past experience, customer input and internal projections, the sourceXplorer team selects commodities included in the sourceXplorer catalog. The team determines Ashland's spend on the commodity, identifies current relationships with suppliers and analyzes the marketplace. Once this research is completed, "we start discussions with the supplier, make our selection and put the supplier on the site," says Tyler. Since quality is very critical, sourceXplorer has capability to develop electronic content for suppliers.
To use sourceXplorer, a user simply needs access to an Internet browser. Registration is online. "We complete the registration on our end and notify suppliers that there's a new account," says Tyler, who says the "closed" marketplace fosters a partnership among users, Ashland and its suppliers.
Users may search the sourceXplorer catalog by key noun, part number or manufacturer. Pricing is negotiated by Ashland. "We leverage our spending to provide our customers with the best pricing," says Tyler. For its efforts, Ashland receives a minimal commission or rebate from sourceXplorer suppliers, as well as strengthens its business relationships with customers and suppliers.
Orders are sent directly to the supplier who then invoices the requisitioner. Requisitioners have the option of paying by purchasing card. The supplier ships the items direct to the requisitioner. Ashland does not take delivery of the items for customers.
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