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256 Part 3: Business-to-Business E-Commerce

vendor (e.g., Ariba, Microsoft, HP, mySAP SRM, c. The limitations

Oracle, or IBM) or an application type (buy-side, sell- d. The situations for which each method is recom-
side, or auction). Find the major products and services mended
offered. Examine customer success stories. Write a
4. Each team will research vendors that produce software
report based on your findings. Convince the class that
for reverse auctions and vendors that conduct reverse
your vendor is the best.
auctions for businesses. Some companies to consider
3. Each team should explore a different e-procurement are hedgehog.com, purchasing.com, oltiby.com,
method and prepare a paper for a class presentation. sorcity.com, epiqtech.com, and bizauctions.com.
The paper should include the following about the Each team will compile information about the reverse
e-procurement method: auction process, security, and so on. Prepare and make
a. The mechanisms and technologies used a presentation of your findings.
b. The benefits to buyers, suppliers, and others (if
appropriate)

Real-World Case
EASTMAN CHEMICAL MAKES PROCUREMENT
A STRATEGIC ADVANTAGE
Eastman Chemical (ECM) is a multinational corporation primary suppliers, thus reducing the company’s
with 2005 sales of $7 billion with approximately 12,000 negotiating power and increasing costs.
employees. The company operates in an extremely As part of its initiative to improve the MRO procure-
competitive environment (eastman.com). In response to ment process, Eastman Chemical established channel
competitive pressures, management decided to improve on partnership relationships with its largest MRO suppliers.
the procurement of MRO items. In its effort to do so, the This increased the company’s buying leverage and
company embarked on two interrelated activities: inte- reduced costs and delays. Inventories and service levels
grating the supply chain and introducing e-procurement. were improved. In addition, the company introduced two
The objectives of the project, which was implemented in new EC applications from CommerceOne (now Perfect at
2001, were: perfect.com) to its procurement system: Commerce One
Buy e-procurement software (now PerfectProcure) for
◗ To increase compliance with purchasing policies
dealing with the suppliers and Commerce One Conductor
(reduce maverick buying)
(now PerfectManage) for transaction management,
◗ To support frontline employees while maintaining partner relationship management (PRM), and value-
existing rules added services.
◗ To reduce procurement transaction costs via elimination Using the Buy software, Eastman Chemical has cre-
of non–value-added and redundant processes ated an internal catalog of all MRO products located in
◗ To leverage corporate spending to negotiate favorable Eastman’s storerooms. The software checks availability
trading terms with channel supply partners and prevents redundant purchases. The software also
supplies catalog-management features that ensure that
Before the system was installed, the company all vendors’ changes and updates are entered into the
purchased over $900 million in MROs from over 3,500 sup- internal catalog.
pliers. The company used a SAP R/3 ERP system, part of The Conductor application supported the creation of
the legacy system that interfaced with the e-procurement a portal that enables the following:
application. The system provided good control but at a
◗ Use of a common Web browser by all of Eastman
cost of $115 per order when a purchasing card (see
Chemical’s 16,000 employees
Chapter 12) was used. The ERP system helped to reduce
the workload on accounts payable and procurement ◗ Different types of employees can use the system with-
personnel; however, purchasing from noncontracted out the need for additional training
suppliers increased (the card made such purchasing easy). ◗ The ability to integrate the SAP R/3 with EC and the
This maverick buying reduced purchase volumes with procurement card
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Chapter Five: B2B E-Commerce: Selling and Buying in Private E-Markets 257

◗ An effective and efficient catalog management strategy Overall, Eastman Chemical’s e-business logged
◗ Maintenance of the existing systems infrastructure 11 percent of the company’s revenue in 2001.
◗ Simplification of business processes Sources: Compiled from eastman.com (accessed November
◗ Flexibility and empowerment of frontline employees 2006), Aberdeen Group (2006), King (2001), Business Wire
(2003), and Microsoft (2000).
The overall effect of the new portal has been
reduced costs and increased profitability and
competitiveness. Questions
By 2004, the system was used by over 6,000 users
in 83 countries in procuring over $2 billion worth of 1. Enter perfect.com and find information about the
goods. The system delivers significant cost savings, capabilities of PerfectProcure. Write a report.
improved productivity, and error reduction. A 2. Why did Eastman Chemical start first with e-procure-
2004–2005 initiative is automating the RFQ process and ment rather than with the sell side? You may want to
special request purchases, using the Commerce One visit eastman.com to learn more about the company.
Conductor platform that was designed to connect and 3. In July 2000, Eastman Chemical introduced an EC
compose business processes between systems and project that enables buyers to participate in its private
partners. online price negotiations using LiveExchange from
Eastman Chemical has a large sell-side marketplace Moai (moai.com). Explain how the software works
as well. Customers order plastics, resins, and fibers and why it is referred to as “dynamic commerce.”
online and track their purchases and transaction history,
even down to the level of a part of a shipment. Eastman 4. Which of the problems cited in this case can be
Chemical also auctions its surplus materials in the solved by other EC applications? Relate your
marketplace. answer to Ariba products (ariba.com).

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