Plastics giants meld, mold new e-marketplace

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A handful of the world's largest plastics manufacturers are forging full speed ahead with an e-marketplace that will let them market and sell their products more efficiently.

Atlanta-based Omnexus, led by BASF AG, Bayer AG, The Dow Chemical Co., DuPont and Ticona/Celanese, is live in the U.S. and prepared to roll out across Europe, Asia and elsewhere next year. The company's next big step-naming a full-time CEO-is in the offing as well. An offer has been made and Omnexus expects an answer shortly.

The venture detailed additional milestones earlier this month, including:

• Its first online transaction, the sale of 80,000 pounds of polystyrene by Dow to Technimark Inc.

• Deals with two independent Net markets. Omnexus said it will work with to build its business in Asia, while a separate agreement with Conferos Inc. (formerly will add collaborative design tools to the Omnexus marketplace.

• Finally, it added six new equity partners in the venture, smaller plastics suppliers from around the globe. Twenty suppliers are now selling via the Omnexus site.

While many e-marketplaces are led by buyers to aid their own procurement efforts-for instance,Covisint L.L.C. helps the leading automakers cut their buying costs-Omnexus is a sell-side effort, with suppliers joining together to more efficiently sell and market to their customers.

"In general, seller-sponsored Net markets are viable but probably harder to pull off than buyer-driven marketplaces," said Tim Clark, an analyst with Jupiter Research's Net Market Makers group. "Two problems are more acute for seller-driven markets: Data security-so competitors don't see my prices-and the general mistrust among competitors who have been bashing each other in the marketplace for decades."

Initially, the suppliers will look to move their existing customers onto Omnexus to automate the selling process. For instance, inaugural buyer Technimark is a long-standing Dow customer.

Later, as more buyers are integrated into the hub, the plastics suppliers will have effectively created a marketplace where their customers might be tempted to move to competing suppliers. But that's a risk worth taking, executives involved with the site contend.

"Very few purchases are single-sourced in this industry," Omnexus interim CEO Yaarit Silverstone said.

"Integration is a very expensive and laborious process," Silverstone said. "Very few organizations are willing to put in the time and energy to integrate with multiple marketplaces."

By moving a key buyer relationship like that with Technimark onto the Omnexus e-marketplace, "it's a possibility we could eventually lose that business," said Paul Janicki, Dow executive finance director for e-business. "But they have relationships with 10 other suppliers already. For Dow, we need to make it as easy as possible for our customers to reach us. It's not about tricking the buyer. We feel confident we have the products they'll want."

Indeed, even as these large plastics sellers commit business and capital-some $50 million to start-to Omnexus, they plan to continue to maintain their own sell-side Web sites, such as My Account at Dow and Bayer One.

But as Omnexus grows, it has the potential to not only serve as an e-commerce hub, but as a b-to-b marketing channel as well.

"Omnexus is not about taking over relationships, it's about facilitating existing relationships," said Duane Priddy, the hub's VP-global marketing. "We do not ask customers to choose between a relationship with their [supplier] sales rep and us."

That, of course, is the difference between independent e-marketplaces and industry-led, equity-owned e-markets. In the latter, the big boys have a stake in the market's success, as well as the incentive to shift customers from existing channels onto more efficient Internet-based e-markets, Omnexus interim CEO Silverstone said.

A next natural step for Omnexus would be to link with other e-marketplaces whose participants are heavy users of plastics. While such arrangements are still in the discussion stage, it might make sense for Covisint's automakers to buy their plastic for bumpers and dashboards directly from Omnexus.

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