InformationWeek

t's a summer morning in Atlanta, the kind where the warm dawn invariably gives way to a hot, still afternoon. A pickup pulls into the lot of a local Home Depot store and out climbs a worker, lunchbox in hand. He enters the store and uses a keypad to log into a mobile cart that will track his hours as he helps shoppers in the store's lumberyard. It's a perfectly ordinary beginning to a perfectly ordinary day--except that this man doesn't work for Home Depot. Rather, he's an employee of Georgia-Pacific Corp.

So why is he punching the clock at Home Depot? In the coming months, the lumber maker and the home-improvement retailer will test whether working together can improve customer service and sales. Under the pilot plan, Home Depot will collect data from the time cards of product representatives, marry it with sales and inventory information, and forward it electronically to Georgia-Pacific. The idea: By providing its top suppliers with more detailed information about how its people perform on the store floor, Home Depot hopes to increase its sales as well as those of its suppliers. "Hopefully we'll both end up managing a better business together," Home Depot CIO Ron Griffin says.

Griffin is in good company. More than ever, according to opinions voiced by IT and business managers in InformationWeek Research's new Information Sharing & Collaboration study, companies need to partner with suppliers and customers to develop the right products, find the right markets, and deliver the goods on time without stockpiling huge inventories. ERP and CRM tools have helped many businesses lay a foundation to make all this happen; now, these companies are looking for the next edge by building close partnerships with suppliers and customers.

There's some urgency. IT managers face intense pressure in a slowing economy to justify new technology with financial returns, and business managers are searching for ways to regain sales momentum and cut costs. The good news: According to the InformationWeek Research survey, more than nine of 10 business and IT executives believe that collaboration--the sharing of business information within and across corporate organizations--will increase sales opportunities, and about half say it will cut costs. Yet this drive for revenue is far different from fanciful dot-com dreams in which Web storefronts capture mountains of cash. Collaboration is about creating a broadly connected world, from suppliers to producers to customers to the customers' customers, that can react more quickly to changes in supply and demand.

Many businesses are already using collaborative tools to better understand their markets and thereby boost sales. Executives at Franciscan Estates in St. Helena, Calif., the winemaking division of Constellation Brands Inc., say they can more effectively tune sales and marketing efforts, since they get access to detailed sales data from distributors. Using a software front end from E.piphany Inc., data mining specialists at the winemaker now can dig more deeply into the raw information that's supplied from distributors via a central information clearing house. Franciscan knows not only which products are selling well through the distributors, it's able to track down sales to the retail level. If a premium product such as Franciscan's Cuvýe Sauvage chardonnay isn't selling well in a well-to-do area of Silicon Valley where it should be a natural, Franciscan's sales staff can target individual stores in those ZIP codes with a sales campaign for that product, without relying on distributors.

"It used to be that we knew what we sold and what the distributor sold, but [none of us knew] where it was being sold," says Elliot Stern, director of sales and marketing operations at Franciscan. "All of a sudden, our universe expands to 600,000 retailers that we can target by ZIP code, address and telephone, name, etc. The distributor network has become so big that it's almost mandatory that we have access around them."

Stern says it's difficult to directly link company sales results with the new data, but he's sure of one thing. "Our goal is to double sales volume in five years," he says. "We couldn't possibly do that without having access to the data and the ability to fine tune it."

Few companies are being as aggressive as Home Depot in sharing information with suppliers to drive sales and cut costs. Beyond the pilot program with Georgia-Pacific, it's sharing real-time point-of-sale information that helps suppliers lower inventory costs. Only 13% of surveyed companies share real-time sales data with suppliers. Home Depot shares that information only when company officials are sure it will pay off. To get the data, suppliers have to show that they can translate a smaller inventory into lower prices and fewer out-of-stock shelves for Home Depot. "Then we'll allow them whatever information they want--sales by store, geography, day of the week, whatever," Griffin says.

Home Depot first began implementing an electronic data interchange network in 1992; today, 85% of all the company's dealings with suppliers--from ordering to invoicing--are conducted electronically. Home Depot is working with suppliers to bring consumers into an electronic network, thereby completing the loop among supplier, retailer, and customer. For instance, the company is linking its E-commerce engine to marketing sites operated by manufacturers. Shoppers browsing small-engine manufacturer Briggs & Stratton Corp.'s Web site, for example, are dropped directly into Home Depot's checkout page if they click the "Find a merchant" button; they can buy from the site if there's a store in their area.

Collaboration may sound like one of those mom-and-apple-pie business ideas that everyone supports, but the reality is that companies such as Home Depot and Franciscan Estates are at the forefront of this wave. Many companies remain wary of opening up too much. Only half of the companies surveyed by InformationWeek Research will share monthly or quarterly sales data with suppliers, and just 39% make collaborating with customers part of early product development.

Yet companies that embrace collaboration find that the more they do it, the better it gets. Eighty percent of companies that share data with more than one partner give the strategy a thumbs up, but only about half of the companies that share data with just one partner feel that way.

Most businesses just aren't built to take full advantage of collaborative networks, says Cap Gemini Ernst & Young consultant Dale Perrott. Collaboration calls for decentralized decision-making structures that let knowledge workers act on the information that IT tools place before them. "This requires a revolution in the thought processes and operating structures of a business," he says.

Businesses haven't yet approached the Zen-like state in which suppliers and customers interact unconsciously in an infinite, virtuous cycle, where customer feedback ripples back organically through the supply chain. But a rare few companies have set their sites on something approaching that. One is Quaker Chemical Co. Last year, the $267 million chemical supplier to the steel and auto industries implemented a flexible information-sharing network that CIO Irving Tyler envisions as the basis for a loop connecting employees, customers, and suppliers. It's the kind of broad effort at collaborative business that draws from and blurs traditional technology disciplines from knowledge management to ERP to CRM.

The Conshohocken, Pa., company's business-intelligence network, which operates over a frame relay WAN powered in part by software from Intraspect Software Inc., lets employees and business partners throughout the world share product data, research, and other information in almost any format. The first push for Quaker is collaborating internally. The multinational company is using its network to more efficiently solve problems and take advantage of its global research network. "Our associates in China can tackle a problem so that it's solved by the time our people in Europe get to work in the morning," Tyler says. With that backbone in place, Quaker is trying to develop fully collaborative networks internally and across its supply chain and customer base--and ultimately link them all together. If Quaker can connect the loop from suppliers to customers, Tyler sees ways to make the entire process more efficient.

For instance, some of the chemicals that Quaker sells contain an anticorrosion agent because that's how the base ingredient comes from the supplier. That's fine for the steel mills, but the automakers who buy that steel have to remove the agent and apply their own, more specialized formula. If Quaker knew its chemicals would be used on steel bound for the auto industry, it could use different ingredients. "If we can push that information through the development chain, we could speed up our development cycles and create some new opportunities," Tyler says.

Though increasing sales is the most common goal for collaboration, companies are also collaborating to cut costs. More than half of respondents to the InformationWeek Research survey view collaboration as a means to squeeze expense out of their supply chain and target other pockets of inefficiency. Briggs & Stratton last year built a collaborative extranet--BriggsNetwork.com--for partners and suppliers. Among other things, the Wauwatosa, Wis., company's eight-language site lets suppliers and manufacturing customers log in and check manufacturing specifications, view upcoming sales promotions, and receive parts and warranty information. Distributors can set up their own Web site to highlight information of particular interest to their customers using the Briggs & Stratton extranet. "The cost of getting information out is greatly reduced," says Erik Aspelin, Briggs & Stratton's VP of E-commerce, noting that the company uses more than 35,000 distributors worldwide.

People see different data on the site depending on whether they're a manufacturing customer, a dealer, or a distributor. The offerings include a searchable library that contains all product brochures and marketing material; an interactive engine-replacement application that helps dealers select the correct replacement engine for a customer; a library of two- and three-dimensional engine drawings; and an online calendar that lets dealers schedule training classes with their distributors. Briggs & Stratton regional managers can also publish information unique to their regions, so a dealer in the South can still get lawn-mower information, while a counterpart in the North has moved on to emergency generators.

The company says more than one-fifth of its 35,000 dealers have used the site since it launched last June; it expects many more to log on this year. Aspelin says the extranet delivers an indirect benefit to consumers. "It translates into more accurate service for the end consumer, because the [equipment makers] and distributors have information that's more up to date," he says.

Briggs & Stratton is looking to bring consumers directly into the loop. The company is extending much of the information posted by suppliers out to customers via its consumer Web site, BriggsandStratton.com. From that URL, consumers can access sales catalogs of equipment powered by Briggs & Stratton, use an "Ask The Expert" feature to match products with their needs, find a merchant that carries the product, and even access personalized content once they register. In addition to Home Depot, shoppers on the site might also be directed to Lowe's, Sears, or a smaller retailer. Extending the concept of collaboration to services, Briggs & Stratton even hosts E-commerce sites--via Digex--for small retailers that lack their own Web presence.

In addition to saving money, companies are creating collaborative environments to help build customer loyalty. During the past two years, diesel-engine manufacturer Cummins Inc. has been constructing an extranet that customers such as Peterbilt Motors Co. and Kenworth Truck Co. can access for updates on their engine orders.

"To the extent that we're easier to deal with, they'll design their products to use our engines," says Brad Lontz, director of the E-business office at the $7 billion Columbus, Ind., company. Cummins competes primarily with Caterpillar Inc. and Detroit Diesel Corp. in the market for large diesel engines. At present, truckmakers can log into the site and view early prototypes for Cummins' 2003 line of engines--and ask for modifications if they see a problem.

Next up for Cummins is adding real-time design-collaboration tools so its engineers can work with their counterparts at a customer site anytime they want without having to board a plane. "That could save us a lot of money," Lontz says.

To ensure that their extranets are user-friendly and meet customers' needs, both Cummins and Briggs & Stratton are getting customers involved as they build collaborative networks--something 54% of survey respondents say they do routinely or occasionally. Cummins has formed a customer council that weighs in on all significant upgrades to the site. Briggs & Stratton uses a small team of distributors to evaluate planned upgrades to its extranet, then tests the ideas with a larger group once a working prototype is in place. "In many ways, you're building these tools for your partners, so why not involve them?" says Briggs & Stratton's Aspelin.

To ensure that their extranets are user-friendly and meet customers' needs, both Cummins and Briggs & Stratton are getting customers involved as they build collaborative networks--something 54% of survey respondents say they do routinely or occasionally. Cummins has formed a customer council that weighs in on all significant upgrades to the site. Briggs & Stratton uses a small team of distributors to evaluate planned upgrades to its extranet, then tests the ideas with a larger group once a working prototype is in place. "In many ways, you're building these tools for your partners, so why not involve them?" says Briggs & Stratton's Aspelin.

Collaboration requires trust and a leap of faith that once customers get a good look inside your business, they'll like what they see. Thomas Nather made that leap when, as senior systems analyst, he helped Penske Logistics develop an extranet through which customers such as home cabinet manufacturer American Woodmark Corp. in Winchester, Va., could access Penske's data to do their own monitoring of the exact comings and goings of the Penske delivery trucks. "You're basically taking your business and wearing it on your sleeve," Nather says. "The customers may see something a little different than you do."

Penske uses an online business-intelligence system from Business Objects SA that lets customers look into Penske's database to see when a truck left a factory, arrived at and left a distribution center, and pulled into a retail store. Nather's team creates the report templates; this keeps customers from having free rein through the database but lets them change fields such as date ranges and vary the depth of analysis from overview reports of a geographic region to the performance of a single distribution center.

Amy Livesay's world revolves around those reports. As American Woodmark's logistic financial analyst, she used to rely on paper and faxes to track how well the company's delivery system was working. As a supplier to home-improvement stores such as Lowe's and Home Depot, American Woodmark is expected to deliver to stores within scheduled two-hour windows. The reports let American Woodmark hold Penske accountable for mistakes that cause it to miss deadlines, but it also illuminates problems in the cabinet-maker's own distribution system. "It may not be Penske's fault; it might be ours," Livesay says. "It made us focus our energy on those areas where we had a problem."

Penske's biggest concern before launching the project was to make sure the data was accurate. That's why the company spent almost two years using the system internally before opening it up to customers. The next step was making sure that the customer contacts--the area managers and regional VPs--knew what data was going out to customers, and were prepared to deal with new, sometimes tougher questions fueled by better data.

Penske has four customers accessing its extranet system, and Nather says it has changed how they view their logistics efforts, since they can get reports at each stop along its route. "It used to be close the door and worry as it goes down the road," he says.

While Penske is giving that information away to help sell shipping, another trucking company has turned information sharing into a revenue source. Schneider National Inc. in Green Bay, Wis., created Schneider Logistics to market logistical data to Schneider's customers over the Internet as part of a larger logistics services offering.

Customers access reports and analyze personalized account information over an extranet that Schneider built using Cognos software. Schneider officials say the insights customers glean from the extranet enable them to identify potential savings. Therefore, they're willing to pay for the information. "This is true executive-level decision-making information," says Bill Braddy, VP/engineering and knowledge services at Schneider Logistics. Users can access reports on transactions and freight and transportation management. They can break down the summaries and analyze more detailed information using a built-in online analytical processing system. For instance, a customer can access an aggregated report on a series of shipments and then drill down to a particular shipment for details on time, cost, distance, and other information that can help identify costly delays or other possible savings. In addition to generating revenue, Schneider Logistics officials say their extranet improves customer acquisition and retention.

Despite its potential, true business collaboration is being adopted only gradually by corporate America. Notwithstanding the onslaught of new tools and services and some notable success stories, most businesses still don't routinely collaborate with customers and suppliers, according to the InformationWeek Research survey. Only half of respondents say they regularly share information with customers, and only 37% routinely share information with suppliers. Participation in more specific collaborative activities such as the development of customized solutions for each partner was even lower.

Part of the problem is often the technology itself. Whirlpool Corp. in Benton Harbor, Mich., has been actively pushing electronic business with its retail-channel customers since 1995, when it formed an internal unit now called eWhirlpool. But company executives say the extent to which they can exchange critical business information with large retailers is limited by the fact that many have built proprietary EDI systems with limited functionality. And those companies--mostly large department stores--make up the top 20% in terms of volume of Whirlpool's customer base, so Whirlpool is trying to sell them on deeper collaboration. "We push them more than they push us to add functionality to the EDI equation," says Dave Cosgrove, Whirlpool's VP for business-to-business operations.

Cosgrove says many of Whirlpool's smaller, less-technologically sophisticated customers are more easily able to take advantage of Whirlpool's XML-based Intranet. "They were never locked into an EDI environment," says Cosgrove, who notes that many midsize companies use relatively open ERP software applications from vendors such as J.D. Edwards and Oracle. "It's easier to dump that information into our own system." Retailers using Whirlpool's XML system can use a Web browser to share order-management information, as well as gather product information. Cosgrove says Whirlpool is savings big bucks by enticing customers to use its intranet to obtain product information and other data instead of dialing in to its call centers. He points to industry research indicating that it's dramatically more expensive to handle transactions through a call center than online.

Companies appear most reluctant to share information with their suppliers. The Franciscan Estates winery, for example, receives information from distributors but doesn't pass production information on to carton manufacturers or its bottling plant. Stern says there's no technological platform to do so, and it would be too difficult and costly for a small player like Franciscan to build one. He's waiting for a broader industry solution. "Part of the problem is that our industry doesn't have a portal where we could share all that stuff," Stern says.