Web trading hubs: how far can the 'e' world go?

Are manufacturing companies really benefiting from implementing web-based trading exchanges or enterprise-wide portal software? The answer is very definitely ‘Yes’. However, a word of caution. Although there are some very good individual success stories out there, the actual number of implementations in the UK isn’t that impressive. And the type of product or material you’re hoping to trade online will also have a bearing here. At an exhibition in November 2001 of the trading exchange/ e-procurement software community, Nigel Montgomery, European analyst for AMR Research, commented: "A year ago, the major vendors in this area were all shouting about the savings firms could make with this technology. Ariba, Commerce One and Oracle certainly all profited from the large, corporate clients that had enough spending power to aggregate over their global sites to make impressive savings." And last year, AMR tracked the progress of 300 separate European trading exchanges. The conclusion from the survey was that, although firms have seen short term savings (typically 20%) as a result of trading online (particularly for indirect goods such as stationery and office supplies), if you’re looking to source more complex products, manufacturers need to look at their supply chain relationships much more closely. "The biggest barriers to trading online were partner readiness, cost and legacy business models," says Montgomery. "Even though we currently lag the US on adoption rates, the functionality we have on offer over here is more than equal to the US." So why the low number of UK adopters then? Montgomery answers: "The big difference over here [Europe] is our attitude and culture. European firms are now demanding faster paybacks - they’re getting smarter and they want to see real business value from the technology they implement." He also refers to content management and supplier enablement as the next biggest barriers to successful adoption of trading exchanges. This means providing suppliers within the trading exchange community with software that can help them create, manage and update their product catalogues for posting online. And there are plenty of UK vendors who can help here. The likes of CatalogA, SAQQARA and Reqio can all provide tried and tested e-catalogue/ content management systems. CatalogA’s project manager, Hew Bruce-Gardyne: "Supplier enablement is crucial. Besides organisational change, it’s the next most problematic issue for trading exchanges. One of our clients had 80 different catalogue formats to manage ... And one exchange may require an Ariba-friendly format, another Commerce One or Oracle. So without access to the right technology, creating and maintaining catalogues is difficult and very expensive." And he points to a recent report from IT analyst firm Aberdeen Group: "Delivering a 10k item catalogue incurs 20 man-days effort, and an annual cost of $200k. “On top of this, firms will come up against other issues relating to data cleansing and coding of data to multiple classification schemes. This can mean delayed ROI, extra implementation and operational costs." But what do manufacturers think about it all? Norgren makes a range of pneumatic control and automation devices for use in packaging, automotive, printing and electronics applications. These are aimed primarily at design engineers, 60% are made-to-order, the rest to-stock. The group’s £50m turnover UK site is based in Lichfield, with 450 employees and a large manufacturing operation consisting of CNC machines, stamping presses and moulding machines. Customer success Mark Stevens, Norgren’s marketing director, explains the decision to implement a web trading hub: "At the end of 1999, we were looking for ways of reducing our transaction costs whilst still improving customer service levels. We decided on a three-way integration project between a new web storefront and e-catalogue software, and our own [in-house developed] ERP system. I headed the team that drove it all." The company needed to source a suitable system and so Stevens approached Essex-based web consultancy firm Igentics to help specify the software and source an appropriate vendor. "We considered SAQQARA, Reqio, IBM and Ironside Technologies. We chose Reqio because the others couldn’t offer the depth of product that Reqio could." And by ‘depth’, Stevens means the way Reqio’s software handles complex engineering products, using detailed classification and attributes. "You can use Reqio to define your products by assigning attributes to them. We’ve set up about 20 different attributes against our pneumatic cylinder range. The client can now specify the diameter of cylinder, whether it needs to be magnetic or not, the stroke, mounting options, if they want a switch or not, and the cylinder’s material." And there are 10,000 Norgren items in its electronic catalogue, 2,000 of these being fully configurable with specific attributes assigned. Stevens: "Customers can even download drawings from the web site. We use a separate CAD engine that allows design engineers to view 2D or 3D images of the catalogue products. They can download in 13 different CAD formats like Pro/Engineer and Catia. When they’ve completed specifying a product, Reqio automatically sends a BoM [bill of material] straight to the CAD system." But surely there’s been some internal pains? Says Stevens, "Yes, in two areas really. The integration work was difficult because Norgren has different ERP systems installed throughout its world-wide sites. So we couldn’t simply employ a ‘one size fits all’ strategy … At our German site for example, we’re having to make the web storefront software ‘fit’ two different ERP systems at the one site." He also points out the effort required to populate an e-catalogue. "We had to get all our product data into one format. Our own people had to do a lot of keying-in. It wasn’t that difficult, just time-consuming." As a group, Norgren has spent around £0.5m with Reqio (for software and associated integration work). "We’re the first site to implement it, but we’re planning roll-outs to 11 other sites within 18 months, starting with our German and US ones: We’re first in the queue because the US market [Norgren’s largest by far] is full of distributors, whereas in the UK we tend to deal direct with design engineers, so it made sense.” The firm’s already starting to see reward for its efforts. As well as cutting the level of sales order processing staff, Stevens says that, "Originally, we took orders over the phone or by fax. Now, 10% of our clients are ordering online. And that’s pretty successful if you gauge us against RS Components [who he considers the UK leader and a good gauge of success]. That’s about 1,000 client web sessions a week. "Engineers sign-in to the website, which is personalised, and they can browse the product catalogue, specify product combinations, download drawings and technical datasheets, then order goods. One customer has even expanded the concept to include a direct link within his own sales ordering system. Their sales engineers can now answer their own clients’ lead time queries by looking directly at Norgren’s data here. “The whole business sees the [Reqio] catalogue as the standard. Internally, we use it to view datasheets, update and manage our products. And we didn’t even need to upgrade our networks - the existing wide area network was adequate.”