Consumer Products: Using The Net To Deliver The Goods

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Consumer Goods: Using The Net To Deliver The Goods

By Mary Hayes
Issue date: Sept. 9, 1996

hether they sell blue jeans or power tools, consumer goods companies share the same objective: to respond to consumer needs and increase market share. Technology plays an important role in achieving that goal, and the consumer goods industry continues to develop and invest in better systems to manufacture and ship its products and serve its customers.

The technology with the most impact on the consumer goods industry over the past year has been--and promises to continue to be--the Internet and intranets. There's been a flurry of activity in the realms of electronic commerce and Net-based computing as these companies explore how best to use the emerging platform.

Although hardly 18 months have passed since most Americans became aware of the Internet, a large number of consumer goods companies have posted informational Web sites. The Internet, after all, provides a direct avenue into a consumer's home. Now many forward-thinking companies are pushing Internet technology further by making it a critical part of their internal business operations. Consumer goods companies are building internal intranets for employee communications, creating important links between the Internet and vital business applications, and exploring ways to conduct business-to-business transactions over the Int ernet.

"Everyone is fixated on the Internet," says Jeff Smith, a partner at Andersen Consulting in Chicago who specializes in consumer goods. "Whether it's internal use or electronic commerce, they are all doing something."

Consumer goods companies, many of which operate globally, are finding that both the Internet and intranets can help improve communications among divisions scattered throughout the world. San Francisco apparel manufacturer Levi Strauss & Co., for instance, is in the early stages of building an intranet it calls Eureka. The company hopes to make Eureka available to nearly 38,000 employees around the world, according to Levi Strauss officials. By centralizing information on Eureka, Levi Strauss hopes to eliminate problems associated with exchanging information across disparate computing platforms, time zones, and cultures.

Levi Strauss designed Eureka so that employees can get crucial information about products, services, or the Levi Strauss supply chain through HTML links. Th e idea: to provide employees with access to different databases and business systems. For example, a product information sheet may link to a photograph of the product. It also might link to availability or shipping information. In addition, Levi Strauss hopes to add multimedia and other types of interactive capabilities to employee PCs to bolster the usability--and utility--of its intranet.

Of course, other consumer goods companies are building corporate intranets. Procter & Gamble Co., one of the category's largest with more than $33 billion in annual revenue last year, has just begun development of an intranet, company officials say.

Under Consideration
Many consumer products companies are examining Internet technologies and working to improve enterprise systems. "We're now examining the prospect of buying and selling over the Internet," says James Sabino, director of the business information services department at Armstrong World Industries Inc. in Lancaster, Pa. "But the current fo cus is on providing better information."

Armstrong, which makes floor coverings and home furnishings that are sold through retailers such as Home Depot and Builder's Square, is creating its own applications that will link German software maker SAP AG's enterprise application modules that track orders to the Internet. "This would allow retailers to get order status over the Internet by tapping [directly] into SAP [modules]," Sabino says.

Indeed, companies in the consumer goods sector are quite creative in the ways they use data that resides on the Net. "I know of a coffee company that is helping buyers navigate Department of State and CIA Web sites to determine the [political] risk of buying beans from [certain] countries," says Andersen Consulting's Smith.

Caution Prevails
But while most consumer goods companies have established informational, marketing-driven Web sites and are beginning to build intranets behind their firewalls, many companies are far more cautious when it comes to us ing the Internet for full-blown electronic commerce.

Black & Decker Corp. launched an informational Web site in June, but VP of corporate IS Don Lee says the Towson, Md., hardware manufacturer doesn't view the Net as a viable channel through which to sell products directly to consumers. Lee says he needs more certainty that technology questions about transaction security have been answered, and that everyday consumers, not just upscale home PC owners, express more interest in using the Net to shop.

"We don't know if we could get the demographics we want," he says. "Even with the number of people on the Internet, many may not be interested in shopping. There are a lot of people betting on the Internet, but it's not clear that it's sturdy enough or the right venue for direct-to-consumer electronic commerce. We see more potential for the Internet in implementing an 'extended enterprise,' linking the next generation of our systems to those of customers and suppliers."

Clorox Co., the Oakland, Cali f., manufacturer of bleach, Kingsford charcoal, Black Flag insecticides, and Hidden Valley Ranch foods, is so anxious to meld electronic commerce and the Internet that it helped form the Internet Mail Consortium in February to find and agree on a standard Internet messaging protocol for business.

Interested In Security
The consortium is "extremely interested in security," says Paul Rarey, a Clorox systems architect who helped launch the group. "It's a slow-going process because it's difficult to achieve consensus for a consistent path forward." To prepare for the age of electronic commerce, Clorox is working to provide Internet access and E-mail addresses for every employee.

While consumer goods companies explore the potential of the Internet, they continue to work on fundamental business systems that get their products onto retail shelves in the quickest and most efficient way possible. In consumer products circles, one of the hottest initiatives is known as efficient consumer response (E CR), which relies heavily on electronic data interchange (EDI). With ECR, these companies rely on retail bar-code scanning systems and EDI to get product information instantly back to manufacturers.

Vanity Fair Corp., a Reading, Pa., maker of sleepwear, relies on ECR and EDI to obtain more timely information from one of its most important retail channels, Wal-Mart Stores Inc. "When all of Wal-Mart's stores close tonight, we'll get reports on what Vanity Fair products sold," says Ray Harris, president of Vanity Fair's data center. "We find out what needs to be resupplied, and can get those products back to Wal-Mart within five to seven days. Just six years ago, the replenishment cycle was 70 to 80 days."

Improving Their Own
Many companies are taking information from retailers and installing systems that improve their own warehousing and shipping operations. In line with its concept of the extended enterprise, Black & Decker opened a new distribution center in 1995 that can provide infor mation to customers about when a product shipped, the expected delivery time, and how it was packaged.

According to Black & Decker's Lee, the center, which runs primarily on Digital Equipment Turbo Laser 8400 Alpha servers and Oracle7.1 relational database management systems, includes an automated inventory and product-flow system. Forklifts have their own scanning and input stations. Black & Decker also is addressing two other areas that many view as critical in the consumer goods industry: internal communications in product development and external communications to heighten customer satisfaction.

Over the past several months, Black & Decker has rolled out a new version of IBM's Product Manager workflow software. The application helps manage and distribute memos and complex documents, and it links to computer-aided design files created in Catia, the CAD package from Dassault Systemes.

In addition, Lotus Notes groupware will play an important role in companywide communications and doc ument sharing, Lee says. "The introduction of new products is key," he says. "Part of this is based on having the right tools for modeling, sharing information, and improving concurrence and flow within the design and manufacturing processes. It's a virtual team concept."

To better serve customers, Black & Decker also has installed Power Line User System (Plus), a home-grown application that provides call-center customer service agents a question-and-answer database, document imaging, and customer location systems.

The Plus initiative includes automatic number identification technology, so calls can be routed based on a customer profile. For example, a caller from Quebec may need to be routed to a French-speaking agent, or a repeat caller may be transferred to an agent who has worked with the customer before.

Building Intelligence
Black & Decker eventually wants Plus to incorporate other sophisticated call-center technologies, which have a customer's current account status pop up on a service representative's screen just as the call comes in. "We continue to build intelligence on what responses to give to customers' questions, so that the agent can do a search on a question and come up with the appropriate response," Lee says.

Indeed, it's that search for the appropriate--and timely--response that motivates many consumer products companies to employ leading-edge technologies.

To view the IW 500 Consumer Products chart in PDF format click here

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