by Ken Gunn
There are 60 million internet users in the US and another 60 million in the rest of the world today for a total of 120 million. By 2004, that number is expected to exceed 500 million. Business transactions over the internet by 2004 are expected to exceed 7 trillion dollars, 10% of which will be consumer purchases with the remaining 90% being one business selling to another business ( B2B). To put that 7 trillion in perspective, it is approximately 4 times the US government’s annual budget and just 2 trillion short of the USA’s 9 trillion dollar economy.
All industries will be impacted, some more than others. The petroleum industry is fast moving toward the internet as means to improve supply chain efficiencies and drive costs out of systems. The impact is not limited to supplier organizations. It involves the entire supply chain from wellhead to convenience store and end-use commercial customers. Marketers need to get on board with e-commerce or they could be disintermediated from the marketplace. In other words, cut out of the supply chain as a wholesaler and relegated to being only a delivery mechanism.

Emerging internet e-commerce applications are in development and will be coming online as early as this summer. These internet applications generally show up in three solution categories and are outlined below.

1.   A basic online marketplace that matches buyers and sellers. Your company becomes registered as a seller and has access to customers who come to the site to request quotes for products. If the price requested by the customer is accepted by your company and you meets other customer needs (delivery time etc) you may have a customer for that single transaction depending who else was competing for the business.

2.   Your company customized, by the (dot)com, transactional internet site that allows for current and new customers to come to your website and conduct business with your company via the internet. You can have your product and services offerings available online for your customers to review and place their orders.

3.   A fully integrated business enterprise solution that includes full back office functionality and supports business process needs. Your customer comes to your site to place the order and the execution of the order has a direct interface with a back office system, dispatching, customer order confirmation, and invoicing, to name only a few.

Depending on the particular solution you will have revenue opportunities and also the ability reduce the cost of how you do business today. Common to all of the solutions is how they generate revenues for their dot-com. Each is paid a transaction fee, typically cents-per-gallon basis for fuels and percent-of-sales basis for lubricants.

Option #1 provides a venue to get new customers without the additional cost of adding folks to your sales staff. However, to meet internet customer expectations, you must monitor the site activity for customers submitting requests for quotes and be mindful of the transaction fee.

Option #2 provides more business functionality because your customers go online to place their orders versus the current process of calling on the phone. If you can migrate existing customers over to using the internet, you can achieve savings by reducing your order-taking staff. I do not advocate letting qualified people go. Instead, re-deploy them in sales positions or other customer value added support functions.

Option #3 provides the greatest opportunity to reduce your cost of doing business with current and new customers. It also provides the same ability to gain new customers via the internet. An example of how option three can provide the optimum efficiency is shown in the flow charts below as an inefficient process becomes more streamlined and very efficient. (source of charts www.FuelQUEST.com)

The typical fuel transaction today is a 23-step process often requiring 6 to 8 days, 4 separate data entry points, 9 touch points and 6 people. Imagine using e-commerce and the process being simplified to four steps as illustrated below. The process becomes one day, no data entry by marketer, and two people!

The dollars you save will depend on your own business processes, but as you can imagine, the opportunity is enormous. For example, suddenly you have freed up people who are trained in your business and are customer oriented. You can expand your sales force bringing in new revenue or enhance your customer services offering. What would an increase in sales of 5 or 10 percent mean to your bottom line? What if enhanced customer service reduced customer churn significantly, what would that do?

Start Today! You need to have someone in your company responsible for researching, understanding and assessing the internet e-commerce applications for your business. Supplier companies are all moving to an “E” environment. Don’t get left behind and ultimately cut out of the marketplace from either a supplier going direct to your customers or your competitor embracing internet applications before your company does.

You may start with option one and migrate toward option three, but the key is to get started and soon! From here on out, the internet will change how we do business and conduct our daily lives, so let’s embrace it and enjoy the fun and success for doing so.

PetroAnswers Internet E-Commerce – A Business Requirement