This past week I sat down with Rick Bushnell, VP
of North American Sales of Elemica, at their headquarters in Exton, Pa. We had met once before at the Lehigh
University Supply Chain Symposium, and after a brief introduction, I was
intrigued by Mr. Bushnell's claims of profitable record growth in a tough
economy.
I didn't know much about Elemica except that it is a B2B
integration service provider that was founded by the leaders of the industry
which it mainly operates; Chemicals.
Elemica was the brainchild of Andrew Liveris, the current
CEO and Chairman of Dow Chemical (NYSE: DOW).
In the late 1990's, Mr. Liveris rounded up 21 other investors,
Air Products, ATOFINA, BASF, Bayer, BP, Brenntag, Celanese,
ChemCentral, Ciba Specialty Chemicals, Degussa, DSM, DuPont, Millennium
Chemicals, Mitsubishi Chemical Corporation, Mitsui Chemicals, Rhodia, Rohm and
Haas, Shell, Solvay, Sumitomo Chemical and Vopak,
and convinced them to collaborate on a "one to many" and
"ERP to ERP" industry supply chain service company. Mr. Liveris and the other Elemica investors
had a clear vision of the operational efficiencies to gain over "one to one"
EDI (electronic data interchange) connections, but they were also concerned
with other new exchanges coming to market.
"We could see a scenario where they
would wedge themselves between us and our customers, and then proceed to
streamline an inefficient supply chain ... and capture all the value themselves.
This would have further commoditized our industry and driven our margins even lower."
stated Andrew Liveris at a conference back in 2002, when he was Business Group
President of Performance Chemicals (source).
Most industry collaborative efforts fail from paralysis due
to competing agendas of the group. But
this was not the case from Elemica.
Since 1999, the company has grown to be one of the largest and most
financially stable multi-national business integration service providers. They have over 20% top line organic revenue
growth and 160 full-time employees.
Elemica is a private US headquartered company. Off the record they did mention their revenue
(no, I did not get to check any bank statements), let's just say, I cannot
believe they only have 160 employees.
Early this year, they merged with the RubberNetwork, another industry
consortium of:
Continental AG, Cooper Tires, Goodyear, Hankook Tire, Kumho
Tire, Michelin, Pirelli, Sumitomo, Toyo Tire, and Yokohama,
which strengthened their sourcing capabilities in Asia. The combined
company now has a wider service portfolio to offer its 100 integrated customers
and 2,500 network connections. Earlier
this month Gartner placed Elemica just shy of the Leaders Quadrant, and included a note stating the reason for not
making it into the leaders quadrant was due to their industry focus. After talking with Mr. Bushnell, I'll bet you
Gartner places them as a leader in 2010.
{GTBP} Rick, what differentiates Elemica from GXS, Sterling
Commerce, and the other EDI VAN networks, and business integration outsourcers?
Elemica has a unique set of solutions that are difficult to
compare to classic EDI heritage businesses.
Elemica's worldwide business process network is focused on heavy
manufacturing industries. We put a lot
of emphasis on the context of the message [transaction] to the business. That is how we add value; by putting the
data in perspective to what it means to that business.
{GTBP} What's the
elevator pitch for general management folks?
We help in the collaboration space. The space that is not inside a companies
firewall but to make the process work, somebody needs to help the other
partner. We are a multinational company
that is best positioned for multinational clients due to our local
international presence and 24/7 around the globe, multi-language support. Our familiarity of the business coupled with world class technology equips our clients
to be more valuable to their customers by allowing them to scale with
visibility into the supply chain.
{GTBP} Would you give
me an example of Elemica's unique solution offering?
Sure. In the
replenishment process the chemical industry likes discrete purchase orders
while the CPG and automotive industry likes demand forecasts. That is their business model. Elemica's applications convert the demand
forecasting to discrete purchase orders.
We would take the demand forecast and plot it out by dates and volumes
and items and it populates that into individual purchase orders. This preserves each industry's style of doing
business.
This was one big pain for the chemical suppliers in dealing
with CPG and Automotive. We enhance the
business process by allowing our clients to stay in their traditional order
management system. Some companies where
printing up these demand forecasts, which are quasi machine code, laying them
out on long tables and having a team of 4 to 5 customer service reps trying to
decipher what has changed to update their spreadsheets which they will later use
to create purchase orders. This
approach was massively time consuming and error prone. We see the same thing in the automotive
industry. In one example, one of the
major automotive companies built a second plant and doubled the volume for our
client. The Elemica solution handled the
increase without requiring additional human resources. This also increased their vendor rating in
the industry.
In the logistics process, we can deliver the same visibility
and automated tendering with carriers as 3PL's, and allow our clients to take logistics
back in-house. We can accurately share,
with both parties at customer quarterly meetings, the information that we have
across the network, including track shipment statuses and on-time deliveries.
The key success metric here is that you can ship-doc 100% of
the time but if the carrier is late to the customer, the customer still rates
this as a late shipment. The industry
was very interested in on-time shipment, now they want to know on-time delivery
from the customer's perspective. This is
one critical link in the supply chain.
We offer a dashboard and reports on origin, destination, carrier, that
allow a user to identify a problem ship doc, problem plant, and problem
rack. Clients can identify if all the
carriers are stuck from a specific destination or if the carriers have dwell
time just sitting there.
We have another business process application for appointment
scheduling and slot booking. This allows
clients to spread out the tenders to the trucking company for the pickup. These
tools help them to de-bottleneck the site.
Through a web interface, the shipper can schedule by open slots and get
feedback from the carrier, or flip it around and have the carrier select a day
and time range when and where they want to load. If they have certain assets that can only be
loaded from a specific bay, we can model the system to block out certain
appointments. It's a dynamic
system.
{GTBP} What are some
of the trends that you see in the business process space?
The trend we see evolving is getting B2B transactions closer
to the application by taking out other middleware applications that need to be
supported.
{GTBP} Where is the future growth for Elemica?
There is still a lot left in the Chemical industry. There are thousands of mid-size companies
that could benefit from our network.
With the merger of RubberNetworks, we have added sourcing services to
our portfolio which would be of value to current customers. But the next big step is duplicating our
business process network for other heavy manufacturing industries. This is where our expertise lies and where we
intend to focus. The next logical step
will be into the oil and gas industry.
{GTBP} Sounds promising Rick. Where can I submit my resume? ; )
Thank you for your time.
My thoughts in summary:
There are a few ways to go to market for a technology, or
business process company. Most companies
take the route of venture capital. Some
companies come about as a spin-off of a larger corporation. But Elemica is a great example of getting
your customers to buy into the company, which gives you a vested interest in its
success.
The industry leaders designed and implemented a supply
chain/business process network that has already paid for itself from
operational efficiencies. Now they are
offering the same system to the industry for a flat monthly cost based on
subscribed services. Basically the
industry proved its best practices for business process management and made it
available to similar process, heavy manufacturing companies.
Mr. Bushnell and his sales team have all the credibility
they need; success stories, a repeatable model, proven technology and high
growth with healthy margins in a down economy.
It sounds like the best sales job a person could find. Rick did mention that the competition is not
Sterling Commerce or GXS, but indecision.
They don't get a lot of RFPs. The
Elemica sales team needs to do a lot of evangelizing. It's a longer sales cycle when you need to
begin with education of the need and value.
Keep an eye and an ear out for these guys. You'll be seeing more of them.
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