ERP + ERP = B2B

When it comes to opening new pipelines, Occidental Chemical Corp. (OxyChem) knows how. And, it should. After all, the $3 billion Dallas-based company is a wholly owned subsidiary of $14 billion Occidental Petroleum Corp. (Los Angeles). From drilling fields and platforms throughout the world, Occidental pushes oil and natural gas through a growing network of pipelines.

When it comes to opening new customer pipelines, OxyChem knows how, as well. Since 1999, when the company rolled out SAP to its 36 domestic plants, OxyChem has focused on giving customers access to its back end ERP (enterprise resource planning) processes. The pipelines it built for that purpose now include multiple e-business channels. All of them integrate with SAP to optimize inventory management and order fulfillment for buyers of the basic chemicals, performance-based chemicals, and chlorovinyl products OxyChem supplies.

In jump-starting its e-business initiatives, OxyChem did what chemists and innovative companies do well. It set up an experiment and carefully observed the reaction. Not long after the SAP rollout, a customer approached OxyChem about directly linking the two companies' SAP systems. A few months into the online integration, millions of dollars in business transactions were seamlessly flowing - ERP-to-ERP style - between the customer and OxyChem. Realizing that this Internet-based pilot project had struck a gusher of enhanced customer service, OxyChem looked to drill more deeply into e-business.

Customer Choice Drives Online Options
Determined to connect more customers via online channels, OxyChem knew it had to develop a coherent e-business road map. And, it had to get started immediately. In 1999, dot-com boosterism threatened to dismantle any organized strategy before it could be formulated. "There was tremendous e-commerce fervor at that time," says Stacy Palmatary, VP of e-business for OxyChem. "The company didn't want individual business units going off and executing their own e-business initiatives. Since the entire company was set up on SAP, we needed to take an enterprise-wide approach."

The first step involved identifying the online capabilities of OxyChem's more than 5,000 customers. Those customers vary in industry segment and in size, from large pharmaceutical companies and aluminum producers to smaller manufacturers that extrude polyvinyl chloride (PVC) resins. (OxyChem also knows pipelines at a fundamental level. It holds a 76% interest in OxyVinyls, North America's second largest producer of the PVC resins used in residential and municipal pipe.) To develop the plan, OxyChem assembled an e-business leadership team comprising internal corporate representatives and, most importantly, customers. The team concluded that OxyChem would have to offer multiple access modes and different levels of functionality. "Our customers have varying degrees of complexity in their businesses," says Palmatary. "Very early on, we realized there wasn't going to be a single solution that could line up with all of their needs."

The result was four B2B channels: 1) direct ERP-to-ERP integration, 2) VMI (vendor managed inventory) for monitoring tanks that hold raw materials, 3) an Internet-based chemical industry hub, and 4) a Web portal for online order management. Despite its sense of urgency in heading off rogue e-business initiatives, OxyChem engaged in a full year of project development before going live with all four e-business options in 2001. "We spent three months developing a comprehensive strategy and another nine months building the infrastructure to support it," Palmatary explains.

XML Fuels ERP Exchanges
After establishing its initial e-business relationship, OxyChem discovered other customers seeking a direct ERP-to-ERP integration. To support this channel, OxyChem brought in the webMethods (www.webmethods.com) integration platform, an XML (extensible markup language)-based translation engine. Designed for B2B exchanges, webMethods takes XML messages generated by a customer's ERP system and translates them into a format OxyChem's SAP system can understand. After SAP acts on a message, webMethods translates the response back into XML and forwards it to the customer's Web server.

In the direct ERP-to-ERP model, production processes at customer sites trigger replenishment actions within OxyChem's order fulfillment operations. "We can see right into the planning cycles of our customers," says Edward Barrows, OxyChem's VP of IT. "We monitor demand signals and determine at what rate customers are running our products through production. Based on forecasts, thresholds, and predefined time sequences, we know when a demand signal needs to be acted upon." When the time comes to act, the integrated system automatically generates a purchase order at the customer site and converts that purchase order to a sales order at OxyChem. Throughout the process, customers are constantly updated with information about OxyChem's production and shipping dates.

VMI Pumps Orders From Production
The next two e-business channels rely on outsourced hosting support. One takes VMI services right to the plant floor. Global VMI from GE Operations Services (www.geops.com) is an online system for remotely monitoring inventory and consumption. At OxyChem customer sites, GE Operations installs sensors that monitor levels in tanks used to store raw materials. A Web interface allows customers to enter demand forecasts. When tank levels and demand forecasts combine to meet predefined criteria for reordering, the system automatically generates a purchase order, wraps it as an XML message, and forwards it to OxyChem via webMethods.

Customers can also order by visiting an Internet-based chemical industry hub, OxyChem's third e-business channel. Hosted by ChemConnect (www.chemconnect.com), the hub gives customers access to order management functions, including invoicing and shipment tracking. "Rather than paying for separate connections to each vendor, customers can use the hub to buy from several suppliers, including us," Palmatary explains. Once again, the webMethods platform wraps information into XML documents for transmission to and from SAP at OxyChem.

Web Portal Provides Real-Time Tracking
For its fourth e-business channel, OxyChem built Connect2.OxyChem.com, a Web portal running on a browser-based order management suite from HAHT Commerce (Raleigh, NC). The HAHT Commerce suite enables real-time interaction with SAP via Java and XML, enabling customers to place orders and check order status online. Because OxyChem's logistics system is also connected to the portal, customers can track shipments, even to the extent of monitoring specific railcars.

Connect2.OxyChem.com was originally intended to accommodate smaller customers that don't have an integrated ERP system in place. OxyChem soon discovered, however, that major customers are accessing the portal as well, making it the most heavily used of the four e-business channels. "Even a large company may not be able to do direct B2B integration. Or, it may not have its ERP system running from a central location," Barrows explains. The portal is particularly useful for companies that authorize more than one facility to place orders. "Even when orders don't come through a central purchasing office, corporate headquarters can use the portal to monitor purchasing activity at all locations," Barrows says.

Call Center Taps Online Services
Along with its new channels, OxyChem maintains a traditional call center to accommodate customers that can't or prefer not to place orders online. To enhance call center efficiency, OxyChem linked the HAHT Commerce suite to the CTI (computer telephony integration) system that pushes caller information to agents' screens. The integration enables agents to use the HAHT interface to process customer orders. And, it allows customers to use the portal to track orders placed by phone.

In judging how well its new channels have affected customer service and supply chain efficiency, OxyChem can point to alterations already occurring in its order processing. "Previously, 98% to 99% of our orders came in via phone or fax, with a small amount coming in via EDI (electronic data interchange)," says Palmatary. "Today, over 20% of our orders are being processed via e-business channels. So, we're already seeing staff productivity benefits from offering online order management and automated inventory replenishment. Of course, the key was having a unified back end system for our customers to connect to. If we hadn't first put that house in order, we couldn't have moved forward as quickly and smoothly as we did."