September 18, 2000

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Wake-Up Call

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More on E-business transformation:

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Polymerland's around-the-clock online ordering capabilities may have saved one manufacturer from losing a customer last year, says Tom Falcone, president of Syracuse Plastics Inc., a $30 million-plus maker of plastics products in Fayetteville, N.Y. "Our plant in Cary, N.C. miscalculated an order for raw material. Instead of needing the material in four weeks, we needed it within 24 hours," says Falcone. However, the mistake wasn't discovered until about 6 p.m. Syracuse Plastics' staff sent the recalculated order online to GE, and within an hour, GE confirmed that the order was on its way to the company's plant. Without this capability, Syracuse Plastics would have had to wait until the next morning to call Polymerland. "We would have lost at least 48 hours, and wouldn't have been able to meet our (24-hour) manufacturing commitment to our customer," Falcone says. Syracuse Plastics deals with about 50 suppliers online, for everything from office supplies to raw materials. "By far, the GE Polymerland site is tops," he says.

On the buy side, GE has purchased as much as 12% of its supplies on E-auctions. As a result, transaction costs were slashed from $50 to $5 per transaction, resulting in millions of dollars in savings for GE, Reiner says.

On the production side, GE has squeezed out $30 million in savings over the last two years by reducing "touch points" or process steps and replacing them with E-business processes. That's certainly the case at GE Capital's Fleet services business, which provides commercial fleet leasing and management services for hundreds of companies' cars and trucks. In May, GE Fleet Services made data analysis about fleets available via the Web. Prior to that, the data was provided to customers "through boxes and boxes of materials and reports we shipped," says Ken Schneider, product manager for Fleet Services' electronic commerce.

Reiner sees himself as a coordinator for all of these E-business efforts. He hosts monthly teleconferences and frequent gatherings with GE's 35 leaders charged with bringing the Internet to their units. About 80% of Reiner's time is spent on IT and E-commerce; the rest is spent working with GE's global exchange services--the 1,500-person group that provides infrastructure support for extranets.

To further slash costs and improve productivity, GE is analyzing jobs throughout the company--including those in its purchasing, human resources, and travel departments--to identify where automation will work best.

The company is aggressively identifying "analog touchpoints," in tasks that require human intervention, such as the need to make a phone call or fax a document, Reiner says. "We're making decisions on how to Web-enable as many as possible." Donna Olsen, customer-service leader at GE Polymerland, says Web-enabling processes such as order tracking and fulfillment, lets the 85 people in her customer-service department provide faster service. Automation frees customer-service staffers to address other issues. Before, it took up to an hour to determine whether warehouses had enough plastic to fulfill an order; it now takes "only seconds," says Olsen.

That's exactly the aim of GE's companywide campaign. We want "to take out mundane work and replace it with value-added processes," says Joseph Parsons who was recently promoted from president and CEO of E-business at GE Capital to CEO of GE Equity.

But the result will also alter many jobs. At GE Capital's mortgage business, up to 60% of more than 200 steps for processing mortgage applications are being Web-enabled. Most of the affected employees are being redeployed, not laid off, Parsons says. He predicts that GE Capital's productivity as a whole will "see double-digit gains," and that 50% to 60% of that will result from automating analog processes. The Internet's potential may be greatest at paper-intensive GE Capital which, through its 28 businesses, generates 45% of GE's $55 billion in revenue, Parsons says.

GE's quality-assurance program--Six Sigma--is behind much of GE's E-business success so far. Six Sigma is more than a slogan. It mandates GE to provide flawless products and customer services, and allows no more than six defects for every 1 million products and services delivered by GE. "The work done with Six Sigma has allowed us to deploy E-business more quickly," Parsons says.

Despite its aggressive strides, "General Electric will not become Amazon.com. It's a brick-and-mortar adapting the power of the Internet to slim down costs, move and act on new ideas more quickly," says Michael Regan, a financial analyst who follows GE for Credit Suisse First Boston. "But in doing that, Welch is also remaking GE's culture" and streamlining business processes--and that's a positive move, he says. Regan also says the Internet "is shifting GE from a manufacturing company into a services company. It's bringing GE closer to the customer."

Although the GE and GM have different approaches and cultures for making changes, both are driven by necessity. The "Internet is going to change General Motors," Szygenda says, just as it is other old-line businesses.

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Photograph of Schneider by Steve Woit

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