InformationWeek
Defining The Business Value Of Technology
Focused On The Customer
Sales force automation and online services keep the leaders on the cutting edge
By Mary Hayes
Issue date: Sept. 18, 1995
he companies that produce washing machines, razors, blue jeans, and other consumer goods have focused in recent years on improving the internal distribut
ion of information. With projects under way to meet that goal, consumer goods makers are now bent on using information technology to get data to--and on--the consumer.
Forward-thinking companies see sales force automation, in-store computer kiosks, online services, and the Internet as tools that offer them a competitive edge by providing more access to the consumer--and, therefore, more access to consumer dollars. While they experiment with these areas, companies are continuing to implement other technologies that focus on improved operations both internally and with business partners, such as electronic data interchange (EDI), client-server systems, efficient consumer response, and point-of-sales data mining.
Industry observers say while large consumer goods companies see enormous potential in the Internet, they're questioning how this service can best be used. "The leading-edge companies are exploring home pages on the World Wide Web, but brand recognition is the extent of that," says Fred Crawford, a partner with Cleveland Consulting Associates, a unit of CSC Partners in Cambridge, Mass. "It's an effort to establish a relationship directly with the consumer."
"The potential for the Internet is absolutely mind-boggling. But we need to be more educated [about its capabilities]," says Leonard Hendrickson, director of information systems at American Brands Inc. in Old Greenwich, Conn. More than 100 companies, ranging from Jim Beam bourbon to Swingline Staplers, contributed to American Brands' 1994 sales of $13 billion. Many are looking at the Internet as a potential sales site.
Chief information officers in consumer goods businesses say their biggest concern is how to secure financial transactions on the Net, and several organizations are at work on that issue.
MasterCard and Visa, for example, are developing technology that will prevent the theft of credit-card numbers online. Other companies are offering an intermediary payment service for consumers, eliminating the process of sending a cred it-card number over a network.
Whirlpool Corp. is one of the more aggressive and innovative consumer goods giants when it comes to the Internet. The Benton Harbor, Mich., company plans to launch a pilot for selling an appliances online next year, says Dan McNicholl, VP of information systems. Whirlpool, with an annual IT budget of $100 million to $150 million, has formed a team to redesign its rudimentary home page and determine how it will handle cash transactions.
But like other companies, Whirlpool says Net surfer demographics need to expand before the industry takes online merchandising seriously. "The average Internet user is a white male under 30, and there aren't many of those buying washing machines," says McNicholl. "Companies like us are approaching these opportunities as an experiment."
In-store kiosks are providing another opportunity to arm the consumer with more information, and Whirlpool is preparing to roll out a kiosk program with a major retailer that it wouldn't identify. Kiosks , which typically run multimedia applications and databases, can help close a deal by giving customers product information when a salesperson isn't around. They can also assist salespeople in getting real-time data such as product availability and shipment sites. These systems are typically linked to a mainframe at the manufacturer.
Multimedia Sales Tool
Salespeople are also benefiting from efforts to automate sales operations. In July, Whirlpool provided 293 laptops to its sales force. "When a salesperson walks into a mom-and-pop appliance store, they can show multimedia versions of new product ads so the retailer can plan ad displays," McNicholl says.
Hendrickson says many American Brands companies are using communications software to let salespeople tap into a host computer for data on product availability, get historical information, and submit orders. "We place a lot of emphasis on sales force automation," says Hendrickson. "We're getting smarter in the use of technology in areas su ch as market recognition and competitive analysis. And we're getting much smarter in how we prepare and train the sales force to use the software."
Technology is playing a big part in yet another consumer goods trend: customization. Sales force automation, for one, is enabling salespeople to order customized products on the spot. Levi Strauss Co. in San Francisco is testing a custom-fit jeans pro-gram that lets retailers file orders electronically with manufacturers after taking a customer's measurements. "People like Levi are using technology to redefine competition," Crawford says. American Greetings Corp. in Cleveland, Crawford notes, is providing retailers with PCs and printers that let consumers create their own greeting card messages.
Consumer goods companies don't lose sight of the first step on the path to a sale: the retailer. That's why most have implemented efficient consumer response (ECR) systems, which typically require an open, horizontal computing system for tracking distribution and allowing retailers to keep manageable inventory levels. "ECR was a discovery phase last year," says Crawford of Cleveland Consulting. "This year, companies are being much more productive with ECR."
To improve distribution of its products, Black & Decker Corp. in Towson, Md., began operating a distribution center this year in Fort Mills, S.C. The facility uses a client-server architecture to improve customer service, minimize inventories, and "make sure trucks leave the distribution center full" says Don Lee, IS vice president.
The distribution center computing environment consists of Turbo Laser 8400 servers from Digital Equipment, IBM-compatible 486-based PCs, and Oracle's database management system. These will manage and support several computer-generated business and mechanical processes within the center.
"B&D is doing some pretty aggressive things in terms of looking at the supply chain overall and deciding how systems fit into the operation," says Lee. "With the new distribution ce nter, we're looking to improve service levels while reducing costs."
Black & Decker is not alone in using client-server solutions. In fact, one of the strongest IT trends in the consumer goods business is the migration from large host systems to a client-server architecture, which can provide enormous benefits to distribution operations. Gaining popularity is R/3, a suite of very high-end business process applications by SAP AG in Walldorf, Germany.
"SAP is trying to provide a complete, robust solution for the [consumer goods] enterprise," says Jeff Smith, a partner at Andersen Consulting in Chicago. "This solution is allowing customers to get much more business-process focused. I've never seen such a high degree of interest over a packaged application in this industry."
What's most appealing about R/3 is it replaces the need for IS shops to develop costly, time-intensive custom applications. But a major drawback, one that's discouraging IS executives at several companies, is the high price t ag, as much as $10 million--and lack of English-language technical support.
Data warehousing is also attracting consumer goods makers. "We're learning to mine our data warehouses for information that helps us run a better business," says Ed Wojciechowski, VP of information systems at Maytag Corp. in Newton, Iowa, which has an IT budget of $60 million to $70 million.
Whirlpool has built 14 data warehouses within the past few years, says McNicholl. "Before, if we wanted to do a sales analysis, the data might have been sitting in 30 different systems," he says. "It would take forever to do the analysis. A data warehouse is pulling information from many systems, and allowing people to see the information when they need to."
Global Integration
McNicholl says many consumer goods companies are also moving toward global integration. It's been the norm for companies to make their products in different countries, but they're finding they can make products cheaper by standardizing specification
s and product parts.
"We believe things like refrigerators and washers made in one country can be more common with those made in another," McNicholl says. IT's part in this effort is to focus on interconnectivity and limiting the number of vendors involved. Whirlpool, for example, hopes to implement one standard CAD (computer-aided design) system worldwide.
Whether it's client-server computing, sales force automation, computer kiosks, efficient consumer response, data mining, or online services, IT has become an essential part of moving products through the distribution chain as efficiently as possible.
(To view the Consumer Goods chart in PDF format click here)
InformationWeek http://techweb.cmp.com/iwk
Featured Microsite
