Chemunity - Pragmatic Procurement of Chemicals

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	Filling the gap Arnhem, The Netherlands - July, 2000 -ChemUnity has developed a unique e-commerce business model catering to the needs of companies that buy chemicals by the truckload, as CEO Herman Rijks explains to Alan Tyler. Is the chemical e-commerce arena too crowded? While just about every dotcom executive can talk for hours about his or her own 'unique model', and well thought-out business strategy, most admit privately that not all can survive. While they remain confident that their own businesses will not only survive - but prosper - in the chemicals e-commerce arena, they are sure than many others will go to the wall, or be gobbled up by bigger fish in a much-needed phase of consolidation. They cannot all be right, so not all will survive. The next phase in the development of chemicals e-commerce is therefore likely to be dominated by consolidation - and it could be bloody. Only those companies with well thought-out business models will survive. One dotcom player that remains highly confident about the success of his business model is Herman Rijks, who, along with partner Mark-Jan Terwindt, launched ChemUnity.com late last year. ChemUnity has financial backing from a Dutch venture capital source. Partnerships or cooperation agreements have been established with CSC for software development, Compaq (hardware, systems integration and security), Nokia (wireless application protocol [WAP] and Systems Management Server) and NCM/Swiss Re (credit insurance). Initial funding of E1.5m ($1.4m) was raised by Gilde IT fund and Optimix. Market niche identified Rijks and Terwindt worked for many years with Dutch chemical distribution company HCI, and it was there that they identified an important market niche that, they believe, is not catered to by trading sites such as ChemConnect and CheMatch. Rijks and Terwindt came to the conclusion that there was a gap in the market for an e-chemicals trading site catering for the buyer of chemicals by the truckload. 'Over the past year or two, the number of chemicals trading sites on the Internet has mushroomed - each one claiming its own specific set of advantages,' says Rijks, who is ChemUnity's CEO. He continues: 'Most of them are targeting people in the chemical industry, responsible for buying or selling fairly high volumes of product. 'But there are thousands of small and medium-sized companies in Europe that consume commodity chemicals, such as food processors, paint manufacturers, textile industries, detergent producers and so on. Even the large industrial chemical producers buy all sorts of non-strategic products in smaller volumes. This sector has been neglected by large producers, while it still doesn't require the high added value of distributors. We felt a sourcing platform specifically for full-truckload chemical commodities would make sense.' ChemUnity has decided to focus on a three-step strategy to reach this market: first, to concentrate on buyers in Europe; second, to look for full truckloads of chemicals which are, third, chemical commodities. 'This will allow users to compare apples with apples,' says Rijks. 'It is essentially for buyers who explore market options at each purchase. ChemUnity will focus on business carried out at the single to five truckload level. These are medium-sized buyers, lying between the large strategic purchasers and less than a truckload, small-lot purchasers,' says Rijks. He estimates that there could be up to 150 000 prospective users in Europe. Selection process ChemUnity's model may be unique, but, indicates Rijks, it is 'not everything for everybody. If a buyer has decided to source from a single supplier, we don't add much value. If, however, he or she wants to check out the market options, we're a very efficient way to do so.' Under the ChemUnity.com model, buyers can define what they want, when and where they want it, and ChemUnity.com will forward that enquiry to all suppliers of that specific product. Within a day, a selection is made and, if the best offer is within the range indicated in the buyer's enquiry, the transaction is confirmed and the winning supplier is introduced to the buyer. The supplier invoices the buyer directly, but ChemUnity.com monitors the whole transaction up to delivery and payment, since all transactions over the system are credit insured. Products covered by ChemUnity include acetates, acetone, chloralkali, chlorinated solvents, phosphates, soda ash, surfactants, toluene and xylene. Rijks emphasises that ChemUnity does not expect huge volumes of business yet, since it will be introducing just a few products at a time. Suppliers are being signed up first, then buyers. From a supplier's perspective, the truckload business occupies an important middle ground. For large bulk orders, of 1000 tonnes or more, suppliers tend to deal direct with customers. For smaller volumes, in bags and drums, suppliers use distributors which can take large commissions. A diversity of supply and demand An order for truckloads of goods falls in to the middle ground. The margins are small enough to make agents unattractive, yet dealing direct is inefficient because of the cost of processing each order. Using ChemUnity will allow suppliers to handle more buyers directly without increasing their costs. ChemUnity's model is accessible only to approved users. To be approved, buyers must complete a registration process, which will include guarantees of HS&E compliance. Buyers must provide credit insurance and ensure that they will adhere to ChemUnity's business profile. Rijks estimates the addressable market for truck-load chemicals in Europe to be worth around E15bn ($14.29bn). By the end of 2000, ChemUnity expects a few enquiries per product, per week. But, in five years, the plan is to reach a transaction turnover of E1bn from selling 150 000 full truckloads. Source: European Chemical News, 'IT In Chemicals' - July 2000