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January 31, 2000

Putting The "E" Back In Business
continued...page 3 of 3

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"It's an important evolution in people's thinking to realize that E-business isn't just one thing--because business isn't just one thing," says Fulton Wilcox, BOC Gases' director of technology business development. "We have initiatives with vendors, customers, and employees in many different areas. In the days when each of these projects would cost a million dollars, like an enterprise resource planning system, you could only do one of them."

Among the E-businesses becoming ingrained in BOC's everyday processes is an electronic vendor-managed inventory effort. Companies whose gases and other products are distributed by BOC receive FTP file updates of BOC's inventory levels and customer-buying patterns. The vendors respond with messages that indicate which BOC regional distribution centers need to restock. "We load that data back into our system and the vendors have, in effect, created our orders for us," Wilcox says. "We delegate a lot of decision-making to them, which is really just common sense. We have the same goals of serving the end customers." BOC transacts E-business with its three largest suppliers, accounting for nearly 70% of its revenue. "It's not very glamorous, but it's thousands and thousands of transactions," Wilcox says.

E-business can also put a new spin on a marginalized business process. For instance, online auctioning represents a new process for most companies as well as for individuals. "In the past, most people wouldn't auction something in order to sell it unless they were desperate," says Yankee Group's Williams. "Now online auctioning is becoming another sales channel to sell more, and more cheaply," items such as airline seats and hotel reservations, she says.

Williams also points out that some companies, such as those in the automotive and aerospace industries, have been conducting E-commerce "forever" through the use of electronic data interchange. Today, companies are forging profound changes in their supply-chain partner relationships with collaborative Web applications that go far beyond the simple data-sharing of EDI.

For example, BOC Gases has launched a project called VE-Com (Vendor Communications), a Lotus Domino-based business application with online discussion capabilities. About a dozen vendors and 25 BOC buyers use VE-Com to help sort out complex logistics issues in the transportation of gases. Another Domino application, for BOC's chip-industry raw-materials processing business, lets BOC buyers from Japan to New Jersey minimize the problem of competing with one another to buy the same materials in spot markets. "Our suppliers and customers are all getting on board," Wilcox says. "And the notion that it's mainly a U.S. phenomenon is also going away."

The acceleration of Web business processes may be moving faster than some companies can accommodate, particularly in terms of reconciling entrenched sales channels. "Web-enabling your business processes can improve the processes but opens up other issues, like marketing and distribution," says the former CIO of an East Coast cosmetics company. Almost totally dependent on its millions of independent sales representatives, the company has to avoid channel conflict at all costs, he says. Sales reps can use the Web to place orders, and consumers can make purchases on the Web site, but only of select products. While 10% to 15% of the company's business processes are Web-enabled, almost all will be eventually. "But this will take time," he says. "It will be an eventual transition, not a big bang."

Some companies have found a new dynamic for dealing with channel conflict and customer control. "The traditional vendor-dealer relationship can be an us-vs.-them situation regarding who 'owns' the customer," says Whirlpool's Rodgers. "Doing business on the Web is changing that--we're sharing the customer. That's because the customer is controlling the value chain now. Customers can determine where they get information, who they buy from, and how they want to interact."

One of the most daunting challenges of an ambitious E-business strategy is integration--harnessing the Web's distribution power by unlocking the data in legacy applications and databases. The Web world is one of instant gratification, the former cosmetics company CIO says, and you have to be able to deliver on your promises. "It's one thing to allow sales reps to place orders over the Web, but you have to be able to let them know when that product is available to the customer," he says. "That means front-end apps need to be tightly integrated to back-end apps like logistics."

E-business challenges such as channel conflict and integration are significant, but no one is turning back. "Two years ago, the burden of proof was really on the E-commerce team to persuade everyone that E-business made sense," says BOC Gases' Wilcox. "Now anyone who says we shouldn't be on the Net has a very tough argument to make."

That's because the rapid pace of E-business implementation has made it standard operating procedure. Goodyear's Hargreaves says almost all of the company's independent dealers also sell competitors' products--and those competitors have online ordering capabilities, too. "Doesn't everybody?" Hargreaves says. "It's a competitive necessity for doing business now."

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