E-Catalogs: Long Journey To Rewards

As a leading distributor of nuts, bolts, screws, and other industrial products used by manufacturing and construction companies, Fastenal Co. is on the front lines of a major effort among businesses to automate routine purchasing activity by routing orders through the Web. As the number of E-marketplaces and E-procurement projects ballooned in the last two years, the $746 million Winona, Minn., distributor has become expert at building electronic catalogs in all the popular E-commerce formats. In just three or four days, it can crank out a catalog on demand with custom pricing for a selection of 100,000 products that's compatible with E-procurement systems from vendors such as Ariba Inc. and Commerce One Inc.

But few suppliers are as far out in front of E-commerce trends. Converting reams of paper catalogs, data from back-office and legacy computers, and numerous other computing systems that store information about products and suppliers into searchable, easy-to-navigate electronic catalogs accessible from within leading E-commerce engines is no trivial task. And underestimating the magnitude of the content-management task has caused business-to-business E-commerce projects to take off much more slowly than many expected. Yet both buyers and suppliers are plugging along one stockkeeping unit at a time, propelled by the great promise of efficiency purportedly attained through the adoption of B-to-B E-commerce.

Companies have vastly different approaches to online catalogs. Fastenal has a group of 25 to 30 product-marketing and technical staffers, versed in XML, who help the company assemble and update its catalogs. The first step is to send a database query to its PeopleSoft Inc. order-management system, which functions as the master database of product information. The company then converts the data into a variety of formats using the Notepad application in Microsoft Office and Microsoft Access.

Fastenal provides the catalogs directly to customers, as well as to a number of product-data aggregators such as i2 Technologies, Requisite Technologies, and TPN Register (recently acquired by GE Global Exchange Services, a division of General Electric Co.). These aggregators repackage its product data with catalogs from other suppliers and resell the content to companies undertaking E-procurement initiatives.

Fastenal's task is nowhere near complete. The company's goal is to expand its electronic catalog selection from the 100,000 products it contains today to the full line of more than 1 million products it distributes. The expansion makes sense: Fastenal's ability to provide electronic product content has helped the company win new business and expand sales with existing accounts.

"We're picking up national accounts every week, because we're already set up" for E-commerce, says Mark Kaske, E-content editor and member of the E-business development group at Fastenal. "A lot of times, customers are mandating suppliers integrate with a certain system. We're not competing so much on price as technology."

That's ironic. One of the goals of E-procurement and using the Web as a purchasing tool is to reduce buyers' costs by enabling them to find and buy from suppliers with the most competitive prices. Now the means have become the end, and E-commerce capability, rather than price, is the competitive factor.

In contrast to Fastenal, Applied Industrial Technologies didn't want the headache of creating and updating catalogs in so many formats for customers. The $1.6 billion distributor of bearings, power transmission components, rubber products, and other specialty maintenance items in Cleveland is sticking to just one format for its online catalog. It's using a catalog-management application from A2i Inc. to create a catalog of nearly 2 million parts, available directly to customers only through its own Web sites. Applied Industrial is focused on driving business through its Web sites, allowing customers who use Ariba, Commerce One, or other E-procurement systems to "punch out" to its site to browse and place orders.

Applied Industrial likes that the A2i application provides a taxonomy for organizing products and information into neat, easy-to-browse categories. The ability to let customers search for goods without knowing product codes has become the company's Web slogan: "No part number, no problem."

The A2i application also supports a rich set of data that Applied Industrial can use to describe its products, including product images, drawings, dimensional information, and relationships to other products offered by the distributor. Applied Industrial has integrated the catalog with its online ordering system and its back-office inventory systems, which it developed in-house, so customers can check if a part is in stock and see order status and history, shipping status, and customer-specific pricing.

All these features come at a price. Kaske says Fastenal has spent a total of nearly $50,000 creating electronic catalogs, including charges to put the data into Requisite's format and transaction fees paid to Ariba and Commerce One; the A2i product starts at $200,000. For both companies, the amount they've invested in these projects is just the beginning. Jupiter Media Metrix analyst Darren Bien says maintenance-updating prices, adding and deleting products, etc.-makes up 70% of the long-term total cost of creating online catalogs.

For complex, highly engineered products, building an online catalog usually involves much more than product codes, specs, and images. Pratt & Whitney, the $7.4 billion division of United Technologies Corp. that makes and services engines for commercial and military aircraft, is doing away with the printed parts catalogs that drive its after-market parts business, which represents about a third of the company's revenue. It's implementing a Web application that links electronic-parts catalogs to related engine manuals and service bulletins, providing instructions on modifying and improving engine performance with different parts. "The key to using an online catalog in making a decision to replace or purchase a jet engine part is understanding the rules of configuration-in other words, which parts can replace others," says Michael Hawman, a Pratt & Whitney IS manager.

The Web application, named E-spares and built on applications from software providers Enigma Inc. and SpaceWorks (the latter now out of business), lets customers order new and refurbished airplane engine parts from Pratt & Whitney's Web site when servicing existing aircraft. With information about replacement parts more accessible to its customers, the company hopes to reduce aircraft downtime, thus increasing customer satisfaction.

The application also helps Pratt & Whitney field-service engineers, customer-technical support, and shop-floor mechanics find information more quickly and work more efficiently. Before E-spares, they may have had to flip through several 6-inch manuals to find the information they needed. "You'd have all these things spread out on a table to understand which part to use," Hawman says. "With Enigma, you have a Web browser, type in a product number, and it's a series of clicks."

Companies trying to streamline their buying processes by putting in place E-procurement applications face a whole different set of challenges in creating electronic catalogs of the supplies they purchase. The task, after coaxing vendors to provide their catalogs in electronic format, is to mesh catalog formats from various suppliers, with different naming schemes, units of measure, and terminology, in a way that lets users run a search across all vendors and get reliable results.

Cargill Inc., a $47.6 billion agricultural producer, has a pretty good start. Since launching its Ariba E-procurement implementation last fall, the company has gathered electronic catalogs from 30 of its 55 suppliers of operational and commodity products. But before loading the catalogs into Ariba, it runs the data through a software program developed by Cardonet Inc.

The Cardonet Content Factory edits each catalog so it's consistent with standard formats and terminology as defined by Cargill, ensuring the right products will come up in text searches. For instance, what one vendor calls a yellow notepad, another may call a canary legal pad. The Cardonet tools classify them in the same category and ensure they come up in a search for notepads or legal pads. The tool speeds up the processing of new catalogs and ultimately increases the return on investment in the Ariba application by improving the user experience. "The ability of the end users to find the right item in the catalog is imperative to their satisfaction," says Gayle Bunes, an IT manager at Cargill.

While scores of catalog-management tools are available today, they're not perfect. Among the challenges that suppliers and buyers face when bringing content online, despite investments in such applications, is ensuring that multivendor catalogs are kept up-to-date and changes from suppliers are incorporated in a timely way.

Applied Industrial Technologies says just keeping up with changes in its manufacturers' part numbers, often more than 1,000 in a given day, is a hassle. Additionally, Applied has to manually enter data from print catalogs of many of its suppliers, but hopes to reduce manual labor with an additional component from A2i called Import Manager, says Vickie Molenda, E-commerce manager of content at the company. When implemented, that tool will let the company import data directly from its suppliers' product databases.

For manufacturers such as Pratt & Whitney, the "mundane back-office preparation"-that is, cleaning up data from different sources and in different formats-is the worst part of creating online catalogs, Hawman says. The volume of data spans several decades of products. It's pulled from a variety of sources, from mainframes that run its back office to document-authoring systems, all of which have to be cleaned up and reviewed before going into Enigma.

Another gripe, after all the time and effort companies spend producing electronic catalogs compatible with E-commerce tools du jour: Many of their customers resort to old habits. Says Kaske, "It's still standard [for customers] to pick up the phone and talk to a Fastenal rep or fax over an order."