Neutral Posture Inc. knows that keeping all its customers happy can be a real pain in the neck. That hasn't stopped the company from garnering $18 million in sales annually. Based in Bryan, Tex., Neutral manufactures high-tech, semi-custom office chairs. Customers can order the style, size, options, and finish of the chairs they want; if they think that purple-polka-dot extra-large chairs will enhance their work environment, that's what they can get.
The same capacity for custom ordering that customers love causes problems for Neutral's information systems staff. Large corporate customers want Neutral to list its chairs in the online catalog ordering systems they're installing to the tune of millions of dollars, but the cookie-cutter catalogs can't accommodate so many options. Meanwhile, small mom-and-pop office furniture distributors - the more technologically advanced ones, anyway - are lucky if they're sending along orders via e-mail.
At least most of these customers are communicating on line. CEO and chairperson Rebecca Boenigk just sighs when she contemplates the IT ignorance of her myriad suppliers, who provide the company with fabric, foam, and metal components. "The manufacturers of components are so far behind the eight-ball when it comes to technology that it's ridiculous," she says. "None of our vendors do anything electronically."
If you're selling to major corporations, chances are they're embroiled in a complicated, labyrinthine installation of e-commerce software that is supposed to link seamlessly with your own internal system - some day. Meanwhile, small customers and vendors are scattered all over the electronic frontier.
This isn't just a problem for those trying to master the vagaries of supply-chain management. Few companies still insist on communicating via snail mail and paper, but many cling to faxes. That information, whether it be invoices, reports, contracts, or schedules, then must be re-entered into your systems. Transmitting the information in one smooth electronic transaction could reduce everybody's hassle, but first, you've got to convince your customers and vendors to get on board. Or do you?
Be Your Customer's Boss
Another company of the same size has solved the middle link problem by turning it into a marketing advantage. Robertson Marketing, a 20-year-old firm run by three brothers, manages promotional materials for large corporations. Most companies find themselves constantly spending money on mugs, hats, T-shirts, and other items emblazoned with their logos. Furthermore, most companies find themselves constantly policing the use of that logo and trying to keep track of how much they're spending on promotional merchandise - and where is that latest crate of customized golf balls stored, anyway?
The company created a Web site that enables customers of all sizes to track and manage their own inventories of branded material, and allows vendors of all sizes to smoothly communicate with Robertson's operations managers. Its customers each have a section of its real-world warehouse where the company manages inventories of merchandise, which it produces via subcontractors, for them.
Robertson also manages inventories of electronic material, such as presentations that include use of the logo, and advises customers on how to control who uses their logos for what. Customers can access their materials in a virtual warehouse' so they can see if they've got enough mugs to hand out at next week's meeting and order up more, plus a jazzed-up version of a PowerPoint presentation at the same time, in just a few clicks.
Robertson's ability to offer plug-and-play to big companies has fueled its growth to $17 million (annual revenues). Corporate buyers immediately grasp the concept of synching up only with the company's system instead of trying to connect with hundreds of small suppliers directly.
How does Robertson convince those small suppliers to get up to speed? It doesn't. The company takes what president John Robertson calls a "carrot and hammer" stance towards technology-phobic small suppliers, explaining, "If they don't comply, they're losing out on potential good business."
"Firing" customers is not as crazy as it sounds. Companies must carefully choose which customer and vendor relationships are the most important, advises Fred Sollish, the program director for evolving supply-chain initiatives with CommerceNet, a consortium of executives involved with electronic supply-chain synchronization. "Small companies should go for the largest return on investment first," he says.
Nobody's Business But Your Own
But don't let anyone else make your IT decisions for you. Big companies typically think their business is so valuable to you that you'll gladly swallow the cost of installing the electronic pieces that fit with the puzzle they're putting together. In a business like that of Neutral Posture, most big companies are on a mission to streamline all their purchasing processes, and if you're selling to them, they'll pressure you to get streamlined.
"The temptation is to respond to just a single customer's complaint, and then miss the big picture," comments Philip Walton, executive vice president for business development for V3 Systems Inc. of Charlotte, N.C. V3 is a provider of configure for order supply chain technology. "You need to look at other aspects of what you're doing so that you see all the levels of value you get out of the solution." Sollish agrees.
"Don't be pressured by any one customer or supplier to conform with their system," he says. Concentrate instead on developing a plan for installing the right technology that will better your firm's strategic position with both customers and suppliers.
After all, big customers have needs that are fundamentally different than small ones. Neutral's Fortune 1000 customers very much want to order on line. They want to pay electronically, track the process of the order electronically, and confirm shipment electronically. Marc Krueger, Neutral's information systems manager, engineered its new Web site, where customers can experiment with different chair options to see what their dream chairs would cost with all the bells and whistles or with just the bells. Kreuger also wove in customized functions for major customers, such as UPS and Texas Instruments, that reflect their buying guidelines. For instance, an employee can't order a chair in just any old color if his corporate purchasing department has specified only brick and gray as its official upholstery colors.
Meanwhile, there's no single system that is emerging as the most popular one among the Fortune 1000. "That's our worry now: we want to be able to adapt to any platform," Kreuger says. Currently, Neutral's internal manufacturing system can interface with four popular enterprise platforms, and the pain has not been too great. Sterling Commerce, for instance, offers Commerce Connection with a function called Gentran Director. It is a Web interface designed for small suppliers and offers a charge-per-transaction structure that only costs Neutral about $30 a month. Gentran Director enables Neutral to exchange purchase orders, order acknowledgements, and invoices with its trading partners.
These days, many big companies are dedicated to streamlining their procurement processes, and that often means choosing suppliers that are technologically easy to work with and can provide value-added information over those that simply offer the lowest price. "Their complete expectation is that you'll be up to speed on the other end," adds Brent Habig, president of Tigris Consulting, a Chicago-based consultancy that specializes in supply-chain synchronization. "When and how you'll deliver and information about that [delivery] is integrated into their manufacturing process. You might not get the business if you don't deliver the technological hook on your end."
The Long and Short of the Big and Small
Mom-and-pop dealers can now click into Neutral's Web site to place orders instead of faxing in hand-written forms, though not all of them do. The transition to completely electronic communication is likely to take a while, but for now Neutral has assigned its internal account reps the responsibility of checking on their' section of their customers' e-commerce sites daily to see what orders have been posted. Then the reps download the details of the order from the customer's site to the internal Neutral order-processing and manufacturing system, double-checking along the way to make sure that all the specifics of the order add up.
Robertson's IT staff also works hard to create smoothly functioning electronic touch points with its corporate customers. To mesh with suppliers still using electronic data interchange (EDI) systems, chief technical officer Chad Carter uses Microsoft's BizTalk to translate incoming files into an XML-compatible format. When Robertson's system communicates back with that supplier, BizTalk is set up to send messages in whatever format is friendly to that supplier, even plain-text e-mail.
A gradual approach that allows suppliers to grasp the benefits of being electronically connected will often make believers of them, says Donald Wojtal, senior vice president logistic services for logistics firm CS Integrated LLC, based in Liberty Corner, N.J. The firm has witnessed this process numerous times as it persuades small suppliers to comply with the processes being dictated by the large companies that hire CS.
In one case, CS avoided an all-consuming, real-time inventory synchronization with providers of fresh produce by telling them they would be contacted by big customers only when inventory reached a minimum level. "They could concentrate on getting the order out the door," he says.
Maintaining a personal touch is a good thing, even if it means occasionally processing things by hand. Companies that fear new technologies sometimes have good reasons. For instance, many small firms felt that if they participated in must-have' online, one-size-fits-all catalogs such as those promoted by Ariba and CommerceOne, they probably wouldn't get the chance to explain their pricing, value-added services, and other differentiating qualities that would affect a buyer's decision, according to Mark Picarello, vice president of product management with Kewill Systems plc, a UK-based e-commerce and supply-chain software firm.
Inevitably, you have to choose: accommodate everyone else's IT goals or fulfill your own. And inevitably, customer and vendor relations can get strained. It's up to you to keep them happy while you're doing what's best for your company.
FOR THE BIRDS
Technological tug-of-war isn't just a game played between large companies and their small suppliers. Edith Woodworth, proprietor of Birds and More, a Clarkesville, Tenn.-based exotic bird dealership, is on the leading edge of electronic cash management for small businesses. She uses the electronic funds transfer services of Fidesic Inc., a Bellevue, Wash.-based firm that enables companies and customers to transact payments directly to and from their already-established checking accounts.
The service was designed from the beginning to smoothly convert invoices generated by Intuit's popular QuickBooks accounting software package, send the invoices electronically, and then receive payment electronically. In addition, companies using Fidesic can invite suppliers to create accounts that show them the status of their promised payment.
Of course, that means that small businesses that use the service end up asking their vendors and suppliers to sign up for it, too, essentially becoming part of the Fidesic sales force.
Woodworth says that she and her main supplier, a bird breeder, quickly synched up through Fidesic. Customers have been a different story. She wants all customers to use the service for their deposits on the birds, which can sell for as much as $1,150. She'll accept credit cards, but the processing fee cuts into her profits, and checks sent through the mail must clear before she will send the bird to its new owner.
Out-of-town customers typically complete the transaction through Fidesic, says Woodworth. On the other hand, those who stop by in person to pick up their birds usually just hand her a paper check, an option she considers perfectly acceptable.
Since going into business in 1994 and establishing a Web presence (www.birdsnmore.net) in 1999, she has learned that all of her customers want a personal introduction to their new pets. "Nobody just sends you a credit card number [over the internet] and orders a bird," she explains. "People want to talk to you. They want to find out about the health of the bird, the guarantees, the personality of the bird, and, of course, shipping."
She persuades customers to pay her through Fidesic by pointing out the benefit to them: their bird will be shipped immediately. "I just give them the Fidesic URL over the phone," she explains. "Actually, it has made relationships easier. Some people don't feel comfortable handing out credit card information over the phone."
Joanne Cleaver wrote about online conferencing in the September 2000 issue.