E-commerce @

Air Products (A.P)Company overview

• Specialised in Industrial gases and Chemicals products

– Presence in steel, metal, glass, food processing….

• 18,000 Employees worldwide (15,000 in 97)

• $ 5.7 Billions sales in 2000 ($ 4.6 billions in 97)

• $ 2.7 Billions sales in industrial gases sales in 97 (4th world producer)

• Presence in 30 countries

North America32%

Western Europe30%

Eastern Europe4%

South America7%

Southern Asia8%

Northern Asia15%

Africa, Middle East4%

The Industrial Gases (I.G.) Market

Consumption by region

I.G. Market (2)Production by company

Air Liquid18%

Praxair16%

BOC15%Air Products

9%

Aga7%

Messer6%

Lindo6%

Other23%

IT & the I.G. industry

• Most innovative in the Chemical sector– Standardized Services– Cost reduction

• Conviction of CEO: IT should be an integral part of the business

AP Points of View

• John Pfeiffer, MIS VP ?-1996– Father of Internet at AP– Early 90’s: employees access to information on

the Internet– Predicted the demand growth for email and

internet access via graphical interface– Predicted the role of Internet in business

challenges

AP Points of View

• Joe McMakin, MIS VP 1996 - ?– Internet will change the way we do business

• Steve Cameron, Communication Manager and Bill Townsend, IT Manager– Internet Economy will drive technological change

at AP– Web site is to be a transactionnal medium (1996)

Problem Identification

• How to reoganize a company around Internet

• Traditional Brick and Mortar company

• Strong potential of Internet :– Growth in Productivity– Customized services– New sales channels– Marketing– Lower Cost

Problem Identification

• Potential Problems– Initial Investment– Strategy to follow– Speed of Change– Resistance to change– Harmonisation of sites

2 Different approaches

• Air Products– Internal approach– No or Few outside expertise

• Structural change• Testing approach

• BOC – External approach– Intervention of outside expertise (IBM&American Express)

• More Conjonctural approach• Fast Implementation

AP: Internet will definitely change the business

• New competitors (intermediaries, Auctions, trading…)

• Intervention of IT in every part of the business

• Not only concern a presence on the web– Huge infrastructure to be built– Concerns in Internet, Intranet, Extranet– E-commerce needs convergence of those three elements

• 1st: Internet is a sales enabler

• 2nd: Internet will draw new business models– New sales channels– Value added marketing– Existing customers’ portal

E-Business Evolution

• Evolution from marketing to transactional medium

• Marketing (On-line presence)– Institutional information– Brochures– Catalog– Possible contact (4% logged as potential sales)

• Interaction– Call me now Button– E-commerce solution– VAM to potential client

• Free MSDS• Product locators and specifiers

E-business Evolution (2)

• Transaction– Real E-commerce

• Existing customers ordering on-line• Auctions• Participations to industry platforms• EDI• Real time access to information

– Order tracking– Invoicing– Order status– …etc.

E-business Evolution (3)

• Transformation– Application of knowledge to others activities– New business models

• All web-based Business– Customers AND Suppliers

– Supply chain optimization– Advanced personalization

Concerns

• Big investments to be made in the infrastructure

• Harmosation of Intranet sites

• Access to information

• Quality of info collected

• Multilingual Access

• Resistance to change– IT culture of the company plays a role in the education of

employees

• Communication cost

• Peoples and resources

• Convergence of Data (intranet, extranet, internet)

Concerns for the Intranet

• Allows to centralize data

• Reduces cycle time

• Extend the sources of information– Pb: How to structure and organize them

• Gain in productivity• Do not inhibit creativity and initiative

• Link it to Internet– Separation of info– Created more added value

Architecture WCA framework

• Customers– Searches info on products through the web– Searches Contacts for info or transaction– May try to buy on line– Ease the buying process of existing client– Info on delivery date, tracking of the order

• Products– Availability, location of products– Customization of orders– Price

Architecture WCA framework

• Business Process– Process operation

• Get the relevant information throughout the organization• Assemble into a database within the intranet• Serve the required information to the customer on

internet– Architecture

• Software (ex: MFG PRO, SAP) capable of collecting the info.

• Presence in every involved department• 100% reliability

Architecture WCA framework

• Participant– Every department that can deliver info (production,

invoicing, transport…)

• Information– Define what the customer’s want– Many steps of selection of information

• Technology– Necessity of building huge infrastructure

Customer

ProductsStatus

Invoicing

Web site Ordering process

Customerstatus

Data Flow DiagramOrdering for existing customers

Alternatives

• Do nothing

• Improve while keeping the same way of working

• Improve by injecting external expertise

Do Nothing

• Stop the improvement process, Keep the existing

• Benefits:– No short term cost– Savings on R&D– Relocation of resources– No management of change

Do Nothing (2)

• Disadvantages– Long term cost

• Increasing communication cost• Intranet inefficiency

– Too much unorganized information available (Quantity, not quality)

– Loss of competitive advantages• Loss of leadership (Image, sales)• Decreasing Productivity

Keep the same way of working

• Continue the internal improvement process

• Benefits– Rely on internal expertise– Mastering of costs– Parallel evolution of process and employees

training• Less resistance to change

Keep the same way of working (2)

• Disadvantages– Slow implementation

• Loss of ground face to competition– No optimal feedback– Human resources problems

• Recruitment• Competence

Inject External Expertise

• Development through Consulting and Benchmarking

• Benefits– Keep Internal expertise– Avoid others’ mistakes and benefit from their

experience– Optimal feedback– Cost efficiency (no cost due to testing)

Inject External Expertise (2)

• Disadvantages– Internal resistance of change– Consultants have no real experience of the

business and the firm– Gap between external methods and company’s

culture– Short term costs

Decision grid

Decision Criteria

Risk Time CostResistance to Change

Quality (security and

service)Confidentiality Total

Coefficient 0,15 0,2 0,3 0,1 0,15 0,1 1Alternative 1 2 4 2 2 1 4 2,45Alternative 2 3 1 3 3 3 4 2,7Alternative 3 4 2 4 1 4 2 3,1

Recommendations

• Take alternative 3: Inject external expertise

• Will allow to keep competive advantage

• Improve the intranet

• Do not be too much ahead of customers

• Do not give up traditional sales methods !

Business Results-to-DateResult

Commitment Current

Status (run rates)

Projected Status (run rates)

Target

Internet Corporate Sales

$40 Million $100 Million $1 billion by 2003

New sales via the Internet

$125,000 $250,000 $100 million by 2003

eProcurement cost reduction

$3.0 Million $5.0 Million $10 million/yr by 2003

On-line Procurement

$50 Million $100 Million $100 million in FY01

Internet facilitated

transactions3.2% 6.5% 80% in 2003

SBU’s with an e-business

strategy

17 completed 17 completed 17 by FY01