Chemical companies outsource e-procurement systems

By Staff -- Purchasing, 9/7/2000

By now, the benefits of e-commerce in transaction cost reduction should be "old hat." As one e-procurement user puts it, "Online procurement allows you to focus less on the transactional issues, such as chasing down an order, and focus more on the strategic side of procurement, such as talking with your suppliers about a particular commodity or negotiating contracts months in advance."

This primary benefit has caused the e-commerce marketplace to grow. And as it continues to grow, more and more technology companies are springing up in response to the demand for the tools and expertise required to bring about e-procurement.

One new company, B2e Markets based in Rockville, Md., is billing itself as a total e-procurement solutions provider.

"We're buyer-oriented and we're focused on the actual e-procurement enterprise," says Orville Bailey, president and CEO of B2e Markets. "This is not a site on the World Wide Web, though we do provide the option to link to third-party auction sites. We're designed to be private and secure," Bailey says.

Users of the system, called SeSM (Strategic eSourcing Management), can link to vertical exchanges from the application in order to research commodity prices and availability, as well as identify suppliers and strategically source chemical products.

According to the company, the SeSM application is designed to provide complete, end-to-end sourcing tools and support to enable buyers to:

• Identify, qualify and select the best suppliers for their chemical procurement needs.

• Define and put into practice purchasing strategies.

• Negotiate and award the best total-cost contracts for products and services.

The company has been around for a little more than a year. "We were incorporated at the end of the first quarter 1999," says Bailey, adding that the company has had its e-procurement platform available to customers for the last 90 days.

In fact, the company has recently installed e-procurement systems for two of the top companies in the CPI: Millennium Inorganic Chemical, based in Red Bank, N.J., and Praxair Corp., based in Danbury, Conn.

"Essentially, B2e Markets helped us to digitize our contract management process," says Randy Hempel, director of new business development at Millennium Inorganic Chemical. "This has eliminated a lot of the paperwork associated with purchasing and has allowed our procurement personnel to be more strategic in their sourcing," he says.

Hempel also says that the system has facilitated better contract management through closer performance tracking. "We have every step of the process documented and monitored, much like an ERP system," he says. "This has allowed us to improve existing contracts with suppliers as well as negotiate better potential contracts through more favorable terms and conditions for Millennium," he says.

Speed and security

According to Praxair's Lou Romano, two issues were primary in implementing the system: speed and security. "We challenged B2e Markets to deliver the full system to us in less than five weeks. They worked overtime to deliver it ahead of schedule," he says. Romano adds that implementing the system included training more than 100 people in its use so that those 100 could champion the system and train others throughout the company. "Eventually," Romano says, "Everyone who buys materials throughout the company will use this system."

Security was another concern. "Initially, we had some concerns about these platforms regarding confidentiality and the security of our information," says Romano. "This was especially the case when considering to use open on-line auctions."

"We researched a lot of providers of e-procurement systems and we found that B2E Markets' offering was similar to our goals and what we wanted to accomplish for strategic sourcing and reverse auction capabilities," Romano says. "We consider theirs to be the premier e-procurement offering in the marketplace."