Shopping malls on the web

Siemens Automation and Drives’ (SAD’s) supply chain IT strategy couldn’t be simpler. “It’s to make trading with us as easy as possible,” says SAD’s UK group marketing manager, Ian Bowman. “We want to cut out – for us as much as the customer – the problems that arise from paper ordering systems.” SAD makes hundreds of thousands of items of control equipment for its distributors to sell and OEMs to use: fuses, switchgear, low-end programmable controllers, drive systems, pumps and process test and measurement systems. The whole Siemens group has been moving towards electronic trading for a year or more. In October last year it signed a partnership agreement with e-supply chain software supplier i2 to roll out its TradeMatrix e-commerce platforms throughout Siemens over the next three years. i2 described the deal, its largest single licence agreement, as “one of the largest e-business transformation programmes in the world”. SAD has also set up ‘Siemens Mall’, an on-line shop for Siemens’ automation and other products. Buyers can go to the Mall, browse the products and enter orders for what they want. But, as many companies are beginning to realise, setting up such websites isn’t the whole e-trading story. For SAD’s larger ‘regulars’, its distributors and OEMs, going to a website every time they want something is not an attractive substitute for entering orders the way they have done for years – over EDI. However, SAD also has many more smaller customers for whom EDI trading is an expensive option, one that has to be tailored to every customer with which they exchange EDI messages. Until now they’ve been sending in orders by paper systems – faxes or phone messages. Some have even been using card indexes. But all paper systems are slow and error prone: part numbers are entered wrongly, customers order out of date products at old prices and order takers sometimes enter the wrong delivery dates. Every such mistake causes a query, and every query is a delay in payment which sucks up working capital. Every mistake is also a delivery delay, which means a disgruntled customer. Paper isn’t self-checking, Bowman notes, but electronic systems can be: “If you can eliminate [paper], or minimise it,” says Bowman, “it’s a business benefit for everybody.” So for former fax users, swapping the fax for phone, modem and browser is ideal. But what about the 20% of EDI customers who provide 80% of SAD’s business? Or those who want to order using flat files, or XML (Internet extensible markup language)? And what about SAD’s own ordering systems, based on SAP’s R/3 and built on the assumption of EDI messages? SAD needed a one-size-fits-all solution. It found it in Kewill.Trade, part of UK software supplier Kewill’s Kewill.Net portal offering. Together SAD and Kewill – now, as K3 Business Technology, a division of K3 of Sweden – developed Kewill.Trade into SAD’s SmartTrade system. Mimick EDI instead? Kewill.Net tools use XML to map any structured business document in an XML or flat file format to common versions of both the ANSI X12 and UN/EDIFACT EDI document libraries. So SmartTrade adapted Kewill.Net to map all SAD’s incoming orders to its own preferred EDI format. Says Bowman: “It is easier to mimick the EDI than put something new and separate in place. The advantage is the customer does not need to know that the result is EDI.” The portal was up and running in August last year – just one month after implementation began. SAD’s customers now use EDI, flat files or XML to enter orders, or do it by accessing the SmartTrade portal with a web browser through HTML. Now, says Bowman, even the smallest buyer just has to pull up a page, enter a user ID “and they’re off”. As for the card index users, SAD showed them how to use Excel spreadsheets to enter and alter orders off line then upload the Excel file to SmartTrade. “XML will communicate with anything,” says Bowman. Importantly, there’s hardly any investment for the buyer to make. All buyers can check that their orders have been received and where they sit in the pipeline. And the system won’t let wrong orders, part numbers or prices past the front door. So SAD is now encouraging the distributors’ customers to use similar systems to order from the distributors – “and the whole supply chain starts to become a bit more electronic,” as Bowman puts it. The first big lesson from all this is SAD’s determination to develop supply chain strategies that make things easier, not harder, for their customers. To go with what customers are doing, and not to assume that electronic trading has to sweep away everything that went before, is clearly the way to go. Second, SAD’s system values all its customers. It is inclusive: “It meets the needs of that 80% of companies that previously couldn’t afford to trade electronically, by EDI or any other form. [But] we have to be very careful about how this fits in with the whole sales channel,” Bowman adds. SAD doesn’t believe in ‘disintermediation’ – the idea that customers will increasingly use websites to buy direct from the manufacturer: “We don’t think distributors and OEMs are going to go away,” says Bowman. “We see a big role for those.” Universal SAD system Third, it was important for SAD that SmartTrade integrated into a single system: “It’s no use having smart traders sitting on one side and something else sitting on the other. It’s all got to be part of a strategy,” a strategy which allows customers to evolve at their own pace. The fourth and final lesson, Bowman advises, is for manufacturers to “just get involved and do it, [then] at least you’re on the road to understanding it.” You can go down the e-trade route, he says, if you develop the right partnerships: “Even companies the size of Siemens need partnerships… Nobody develops their own operating system these days just because they can. But if you don’t start you’re never going to get anywhere, and if you wait till you’ve got everything in line, you might as well forget it – it’s too far ahead of you.”