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Success Factors in e-Procurement and e-Trading in the Petroleum Industry

Success Factors in e-Procurement and e-Trading in the Petroleum Industry. October 3, 2002. Principal Investigator: Ricki G. Ingalls, Ph.D. Co-Director, Center for Engineering Logistics and Distribution Research Assistants: Hitesh Govind, Loay Sehwail Oklahoma State University

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Success Factors in e-Procurement and e-Trading in the Petroleum Industry

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  1. Success Factors in e-Procurement and e-Trading in the Petroleum Industry October 3, 2002 Principal Investigator: Ricki G. Ingalls, Ph.D. Co-Director, Center for Engineering Logistics and Distribution Research Assistants: Hitesh Govind, Loay Sehwail Oklahoma State University School of Industrial Engineering and Management

  2. Project Phases • The time-span for this project is 8 months • There are four phases of this project, of which we have finished 3 • We are currently in Phase 4 and expect to finish it by the first week of November 2002

  3. Phase 1 • Phase 1 was a broad survey of e-Trading and e-Procurement companies • Phase 1 Tasks • Identification of 100 online marketplaces • A brief overview of all the 100 marketplaces • Of the 100 companies identified, 18 were identified as candidates for detailed review. In Phase 2, 13 of these companies were selected for the research focus

  4. Phase 1 Study Methodology • The marketplaces were identified by extensive browsing of the internet, reviewing e-commerce literature, white papers, and online resources • The identified marketplaces were a combination of e-Trading and e-Procurement companies • These identified marketplaces were characterized by the type of industry it serves, the type of exchange, and their commerce model • Failure stories were also included in our study

  5. Aerospace Agriculture & Food Others 4% 3% 6% Automotive 22% Chemicals & Plastics Transportation 16% 2% Real Estate 3% Computers & Electronics Construction Energy, Oil & Gas 10% 4% 30% Summary of Survey of the 100 Companies Status of Marketplace (Live) Industrial Sector Type of Marketplace Type of Commerce Model

  6. Phase 2 • Out of Phase 1, we offered 18 possible companies for in-depth study. • The 13 companies that were selected from the 18 companies identified earlier are: ChemConnect IndigoPool Covisint OFS Portal Elemica Pantellos FreeMarkets PartMiner FuelSpot PetroCosm HoustonStreet Trade-Ranger Intercontinental Exchange

  7. Phase 2 (Cont.) • Our aim was to study the business model, and answer the following questions for each of the 13 companies: • Company ownership, revenue streams, profitability, trading volume, security offered, systems used to transact business, and product offerings • What is their value proposition for buyers and sellers? • In what ways was the company successful? • If there is resistance from either buyers or sellers, why is that resistance there? • What is the impact of this marketplace being public or private? • Does the site offer back office integration? If so, how are they accomplishing back office integration? • How does the site guarantee that a trade done with an approved trading partner? • Does the site keep the traders anonymous? • Does the site offer real-time execution? • How does the site handle loss of communication? • Is the site staffed by industry professionals?

  8. Phase 2 Study Methodology • Information on each online marketplace was compiled by extensive browsing of the Internet, visiting company website, talking to contacts within the company, reviewing e-commerce literature, white papers, D&B reports, and other e-commerce resources

  9. Commerce Model

  10. Revenue Stream

  11. Summary

  12. Phase 3 • In this phase, we complied a list of success factors and also determined the value proposition for participants. • What constitutes success? • Profitability • Cash-flow positive • Volume of transactions

  13. Lessons Learned • The lessons learned from the success and failures of the 13 companies that we surveyed highlight the following important facts: • Liquidity is the most critical for the e-marketplace survival: • The failing of the dotcom’s in the late couple of years has made it even more important to have funding in place until critical mass is achieved. (e.g. PetroCosm failure) • Management know-how of the industry and the e-commerce can't be replaced by other factors such as the use of new technologies.(e.g. Chemconnect)

  14. Lessons Learned (Cont.) • The adoption of wide variety of business models (RA, FA, Catalog, Exchange, RFX) that suits the business and targets the marketplace is a critical factor. (e.g. Covisint) • Commitment from the senior management of the participants in the marketplace for the success of the marketplace is an important element in the success formula. (e.g. Covisint, Chemconnect, Houston Street) • Providing value for both the buyer and the supplier in terms of revenue and competitive advantage. (e.g. Chemconnect and Covisint)

  15. Lessons Learned (Cont.) • A marketplace should support operations in a wide variety of products and exchanges. • (e.g. Intercontinental exchange acquired International Petroleum Exchange in London)

  16. Economic Value for e-Procurement (Buyers)

  17. Economic Value for e-Procurement (Suppliers)

  18. Economic Value for e-Trading

  19. Phase 4 • Time span is one months • Adapt the cost/benefit equation for our sponsor

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