Chemical companies' b-to-b exchange slow to emerge

An online exchange founded last year by several major chemical companies o find its place in the industry, and officials at the companies that created Elemica remain uncertain about what role the business-to-business marketplace should play.

At the International Quality & Productivity Center's Chemicals Online conference, e-business executives from both Du Pont and Mitsubishi Chemical Co. said their companies are still investigating how to participate in Elemica.

With founders that include Du Pont, The Dow Chemical Co., Mitsubishi, Bayer AG and BASF AG, Elemica technically has the support of the major players in the chemical industry. But Lisa Boothe, global e-business leader at Du Pont, said her company has yet to commit to procuring through Elemica's network.

"We don't have a set amount of business we intend to channel through them. That's very much an open question," she said.

Mary Hopkins, e-business director at Mitsubishi, offered similar comments, saying Mitsubishi has no timetable as to when it would connect to Elemica. "We want to do business with them, but we haven't worked out all the details as to how it will work," she said.

Both made it clear that the initial investment their companies made in Elemica doesn't guarantee their loyalty as customers. Elemica, they said, will be treated like any other business partner by their organisations.

Elemica Vice President Charles Gruber said that when the exchange was founded, it traded away the promise of a dedicated portion of its founding members' procurement spending for full autonomy. He acknowledged that it's a Darwinian compact.

"No one's going to hand us money to keep us around," Gruber said. "We have to earn the business, even with our founding members. ... At the end of the day, if we don't add value, we aren't going to make it."

Elemica also has to contend with technology vendors such as i2 Technologies, Comergent and Manugistics, which are building one-to-one trading networks for corporate clients.

In order to survive, Gruber said, Elemica hopes to build a set of business process schematics for its network that will allow customers to map once to the schema and then be able to connect with multiple partners. That would prevent them from having to undertake numerous IT projects in order to form close-knit relationships with individual trading partners.

Elemica is just one of several emerging exchanges founded in recent months by corporate titans. Covisint in the automotive sector, Cordiem in aerospace and Transora in consumer packaged goods all have financial backing from most of the largest companies in their respective industries. Most are late comers to the exchange party and face major hurdles in satisfying all of their corporate founders, many of which have spent decades in fierce competition with one another.

James Kendrick, chemicals and plastics industry analyst at consulting firm Lante Corp. in Chicago, said that with its backing, Elemica should have a leg up on direct competitors such as eChem and Envera (which announced last week it is being bought out by independent online exchange ChemConnect Inc.).

But there are no guarantees if Elemica's founders don't build on their seed money with a steady stream of business, Kendrick said. "The challenge right now is to survive during the adoption phase," he said.

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More about BASF AGBASF AustraliaBayer AustraliaChemConnectCordiemCovisintDow Chemical AustraliaElemicaEnverai2i2 TechnologiesInternational Quality & Productivity CenterLanteManugisticsMitsubishi AustraliaTransora

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