Companies that sell products and services to other businesses rather than to consumers, now known by the ubiquitous moniker B2B, are capitalising on the benefits of e-commerce at a furious rate. B2B commerce in the United States alone will experience a 41 percent compound annual growth rate during the next five years; B2B transaction volume will top US$541 billion by 2003, up from US$138 billion in 1999, according to a report by Yankee Group Inc., a Boston-based consultancy.
CIO-100 honoree Dow Chemical Co. is poised to take advantage of this astounding growth. This year, the Midland, Mich.-based developer and manufacturer of chemical, plastic and agricultural products implemented a Six Sigma program to the tune of US$150 million, thereby bringing about cultural changes that have been instrumental in helping Dow shape its strategic plans. Six Sigma, a business philosophy espousing goals and methodologies for achieving quality throughout an organisation, now permeates all aspects of Dow's business. Black belts, Six Sigma parlance for employees who are specially trained to implement the tools of the methodology, are leading the company's efforts to increase profits by reducing costs, creating customer loyalty and improving productivity. As a result of this corporate makeover, the company's e-business philosophy has become decidedly more customer-centric.
"Dow's overall plan is to combine timely and efficient service with the swift pace of technological advancements to make it easier, faster and more convenient to do business with Dow," says David E. Kepler, CIO and corporate vice president of e-business for the company. "What we are doing is changing our business from selling chemicals to selling our services."
Dow is making these changes at a time when the customer has never been more right. "The question now is, what kind of service level do [companies] have to provide their customers, as opposed to what kind of technology are they using," says Kimberly Knickle, research director at AMR Research, a Boston-based industry analysis company. "[Customers] want more options and an easier way to order.... If [companies] don't provide the highest level of service to their customers, it opens up a window for competition."
As part of its e-business strategy, Dow recently implemented what it calls a customer interface initiative, led by Mack Murrell, global director for the program, which is designed to enable Dow to get information from its customer interactions at all points of contact, with a view toward serving its clients better. "In the old days, departments set up goals and then tried to get customers to meet them," he says, "but we are reversing that by working to understand customer needs first and then planning goals."
Part of the initiative involves building what Murrell calls "customer memory." Dow's customers are in touch with the company through the Web, call center, field sales offices and telesales; Dow makes sure that no matter what channel they use, the representative on the other end will have access to a record of that customer's last 10 transactions with the company. To achieve that, Dow is implementing an integrated desktop based on a suite of Siebel tools, combined with Cisco switches, that also draws information from other Dow systems. This allows Dow employees to see personalised data for a specific customer on their computer screens. "Having done this, we will be able to hand off questions better and give better support because we have context in which to answer questions and deliver beyond our customers' expectations," says Murrell.
Dow analyses its customers' specific purchasing patterns, then tailors offerings to them accordingly. The company assigns the customer to a particular needs-based segment, such as price buyers, convenience buyers and relationship buyers. Dow would offer price buyers products at the lowest available price but wouldn't extend to them special services that other companies may receive, like technical support or specialised delivery. A convenience buyer is looking for a competitive price but, unlike a price buyer, might not be willing to do a lot of self-service. For these buyers, Dow tries to simplify interactions with the company, for example, by handling inventory replacement, thus taking some of the burden off the customer's purchasing agent. A relationship buyer often prefers a lot of personal attention from Dow and, in return, represents a long-term sales opportunity for the company; Dow provides these customers with a high level of interaction from the sales force.
Another aspect of the customer interface initiative is MyAccounts@Dow, an extranet that provides registered Dow customers with online access to order entry, order status, account history and payment information, as well as technical support and product details. Dow, meanwhile, can use information about a customer to decide what messages to send regarding new product development, product stewardship or business news. Dow started the extranet as a pilot program for 200 client companies last year and expects at least half of its customers to be registered users by the end of 2000.
One of the companies participating in the pilot was Chicago-based USG Interiors, a global supplier of Sheetrock and ceiling tiles. Nathan Berg, a clerk and unloader of raw materials at USG, says using MyAccount@Dow has made his job much easier. "It's a wonderful tool," he says. "In today's world, you have a lot of voice mail and phone tag. It's nice to know that if you have to order something, it is right at your fingertips."
Berg says online ordering and order tracking saves him time, and he also appreciates the fact that he still has the option of calling Dow directly. "We like the speed," he says, "but there are still times when we want the human contact."
The underlying premise of all Dow's e-business activity is a simple one: The company wants to sell its products and services to customers no matter how they choose to shop. "E-business is more than just adapting to a technology trend," says Kepler. "It is a key component of our future growth."
Shari Weiss is a freelance writer based in Oakland, Calif. She can be reached at email@example.com. Additional reporting by Sara Shay.
Profile: Dow Chemical Co.
Location: Midland, Mich.
Business: Global manufacturer of chemical, plastic and agricultural productsCEO: William S. Stavropolous CIO: David E. Kepler Revenues:US$19B (sales) Employees: 39,239On the buying side Dow is becoming a more efficient shopper.
Dow's core business puts it in the position of a supplier in the business-to-business world, but the company is also on the receiving end of this kind of relationship. That's why, as part of its total e-business strategy, Dow has taken pains to make sure it operates effectively--not only as purveyor, but as purchaser. The company recently launched an intranet-based electronic catalogue, dubbed Dow e-Mart, from which Dow employees can purchase work-related goods and services, choosing from more than 80,000 items offered by about 50 suppliers. With just a workstation and a procurement card, employees can order items ranging from safety equipment to software peripherals. The e-Mart uses Ariba's B2B Commerce Platform, which automates and integrates the processes of buyers, suppliers and service providers.
Late last year, Dow expanded its online purchasing capabilities further with the advent of Dow e-Vap, (short for electronic value-added procurement), through which the company buys its raw materials and other strategic supplies. Dow e-Vap, which connects to third-party exchanges such as ChemConnect, has sped up procurement transactions and minimised order errors. As with much of its e-business strategy, Dow's procurement decisions have been arrived at via a learn-by-doing philosophy, according to Gary Veurink, vice president of global purchasing. "This [environment] is so dynamic that you have to reposition yourself as business evolves," says Veurink. "We began with nonstrategic areas, where we bought [electronically] so that we could learn. When considering companies to work with, we have looked at the technology offering of each company and [whether it was] scalable."