Finding the Right Mix

The Holy Grail for the energy and chemical industries can be summarized in one word: integration. For the past 12 months, virtually every major company in these sectors has been working toward increasing the use of the Web for purchasing and selling, while at the same time integrating their Web and e-commerce portals into their back-office functions.

Dave Ashworth, Air Products and Chemicals director of e-business, says his company is pushing its e-commerce initiatives in multiple layers, all of which will integrate with the companys back-office system. For example, Air Products is streamlining its XML protocols — which provide a common framework for exchanging information over the Net — so that there is greater integration potential between the companys Enterprise Resource Planning systems and those of its partners. Add in Web-based collaboration tools and mobile and wireless applications, and, Ashworth says, the companys goal of “creating value for our customers and suppliers” through the Web is slowly becoming a reality. During the past 12 months, Air Products has done about $100 million in e-commerce. By 2003, the company wants to be doing $3 billion per year.

The adoption of Web-based commerce was inevitable in the energy and chemical industries, which have long been technocentric. Companies are pushing for tighter integration with their peers and customers, so they can “tie their customers into even tighter relationships,” says Richard Baxter, an analyst at energy consulting firm Pearl Street. By offering customers Web-based decision-support services and analytical tools, the companies not only provide good service, they get better visibility of their customers needs and can then better segment them into more distinctive groups, Baxter says.

Segmenting customers and allowing them to order products more easily is one of the main goals for Tom Fannon, director of e-commerce of Ashland Distribution, a subsidiary of chemical giant Ashland. Each online customer gets a customized template with information on products the customer has ordered in the past. The goal, Fannon says, is to allow customers to just “enter the quantities they need and hit submit. It reduces the need to search through the catalog, because the template is automatically created for you.” The Web-based ordering lowers costs for Ashland because it reduces the amount of clerical staff needed to process each transaction.

Blake Young, president of Dynegy Global Technology, a subsidiary of energy services and trading firm Dynegy, says the companys customers are “clamoring for as much information as we can give them.” But all of the data generated by Dynegys online trading operation, Dynegydirect, has required the company to push for faster integration of its trading business with its back-office operations.

Dynegys goal is to have what Young call “zero touch processing” for each transaction. That integration, Young says, will allow Dynegy to cap the costs associated with doing more trading. With the integration in place, “we can pick up business from smaller customers without adding cost. Its technology that is driving those efficiencies,” Young says.