On a sunny July morning in eastern Wyoming, David Crum expounds on how a cloud can enhance clarity for his company's management. The cloud in question is a new network connecting the branches of Crum Electric Supply Co., Inc., which is based in Casper. The company is putting the final touches on a private frame-relay network commonly called a T1 "cloud." The network connects all of Crum's nine locations via the same high-capacity T1 trunk lines that form the backbone of the Internet throughout the U.S. The cloud is the platform for Crum's next push into the future of communications and information handling in the electrical industry.
Crum is one of the industry's strongest advocates for expanding the use of electronic-commerce technologies. During his term as chairman of the National Association of Electrical Distributors (NAED) in 1996-1997, Crum helped make electronic commerce a rallying point for the entire industry. He worked to shift distributors' attention away from the threat of mass merchandisers and toward technologies that can make them more competitive against any alternate channel. He promoted a dialogue among distributors, manufacturers and their reps and software companies-a dialogue that has led to new standards, new organizations and closer working relationships among the groups involved-a dialogue that continues to this day.
Now Crum is the first chairman of the newly formed Industry Data Exchange Association (IDEA), Inc., that for openers is handling the creation of an industrywide data warehouse and has the potential to do much more. The association, which includes distributors and manufacturers equally, is charged with the formidible task of developing and managing a nationwide electrical industry information system.
Although much of his time these days is spent promoting what to some are nebulous, futuristic concepts, back home his interest in electronic commerce and the technological advancement of electrical distribution is yielding tangible benefits.
Crum Electric Supply, where Crum applies his ideas to real-world situations, covers markets throughout the state of Wyoming, plus two locations in Idaho and one in South Dakota. Crum refers to his company as small, even though by geography it covers all of a very large state and parts of neighboring states, and by revenues it's in the top 10% of electrical distributors in the U.S. Crum Electric Supply's $24.9 million in 1997 sales placed it 235th on EW's annual list of the "250 Biggest" distributors.
But there is an unmistakably rural feel about parts of Crum's operations. Even the largest cities in which Crum Electric Supply operates would be considered small by most standards. Cheyenne, Wyo., with about 54,000 people, is the most populous. There's no concentration of large factories or major commercial customers. To make it here, a distributor has to wear many hats; Crum's business is about 40% industrial, 40% construction, 10% government and 10% utility.
His urban peers might expect a distributor in the wide-open spaces to hold out against the march of technology, but in Crum's case the broad expanse his company covers just adds to the need for the speed and efficiency of electronic communications. The company's farthest branches are about 1,000 miles apart, and airline service is scant. The drive from the headquarters in Casper to the branch in Cheyenne is 2 1/2 hours of phone poles and grass, rocky bluffs, cattle, deer, and little else. Except for occasional mines and oil pumps, there's not much that would require lots of electrical equipment. The distances drive up Crum's cost of sales and deliveries. The benefits of making communications easier and more efficient pay off quickly here.
Technology is also intrinsic to the company's identity. Crum Electric Supply has the automation distribu-tor's natural affinity for technologically optimized operations. Industrial automation was the company's principal focus when Crum set up shop in 1976. He had spent several years in Denver, Colo., first as a sales engineer for Cutler-Hammer, then as part-owner of an industrial-control and panel-building shop. He was drawn back to Casper by a boom in the oil business and the chance to return home. The subsequent oil-market collapse brought the decline of the Wyoming oil patch and the departure of most of the major oil companies from the domestic oilfields.
Crum Electric Supply still does some oil business and is heavily involved with Wyoming's other natural-resource industries, including miners of the world's largest deposits of trona, a white, powdery substance used in glass and cosmetics. But the dissipation of the oil boom forced Crum to diversify.
Through all the changes, Crum Electric Supply has focused on technology and the efficiencies it brings, though it's not always easy to get advanced systems set up out here. When Crum Electric Supply opened its newest branch last November in Cody, a town of about 8,000 people at the east gate of Yellowstone Park, Crum wanted to start the branch out on the new frame-relay network to avoid the cost of installing modems and leased data lines. The phone company was installing a new fiber-optic system in the area and was eager to comply, but the weather intervened. One of the relay stations supporting the network was on top of a mountain, and due to heavy snows, they weren't able to get up there until the spring thaw. Cody only recently joined the cloud.
The company's fascination with technology took another form last October with the creation of a new datacom division, Crum.com, that supplies products for data and communications networks. The new business takes Crum another step along the diversification path while providing a convenience for his contractor customers, many of whom are getting job bids with the electrical and datacom systems quoted together. Datacom demand is soaring as the technology spreads into every kind of operation.
"The schools are buying it like gang-busters; the universities and colleges are buying it. What we're finding, when you quote a hospital and you quote a cement plant now, dad-gum, they're starting to look just alike," Crum says with a laugh. "The controls are all electronic; they're all local-area-network-based, computer-based. Fiber-optic loops are all through the hospital; they're all through the cement plant. There seems to be a convergence here of some kind." If his expectations prove true, the datacom division should keep him laughing for a long time to come.
One person who's already smiling is Sear Thapa, Crum Electric Supply's information specialist. He's the one who gets to rebuild the company's entire network nerve-center with the very latest technology, so the datacom guys can show it off to customers. Thapa and Miquelle Bernard, information technology specialist, get the task of executing the electronic commerce experiments that Crum concocts. They are responsible for all the MIS needs of a 70-person, nine-branch operation, and both say they enjoy the challenge of bringing information technology to bear on the day-to-day problems of operating an electrical distributorship.
Not that Crum Electric Supply has all the most technologically advanced systems on the planet. Crum is obviously eager to try new things, but the company doesn't pursue technology for technology's sake. One example is bar coding. Crum believes it may not be economically sensible for small distributors to invest in bar coding, especially as long as so many manufacturers in the industry can't seem to put a decent bar code on their boxes.
"It's the economies of scale," he says. "There's a huge number of small companies like Crum where you have branches that only need one or two warehousemen, regardless of the volume. To give them bar-code capabilities to do that job, you need to really evaluate what kind of productivity it's going to bring you." Nonetheless, Crum says he would jump into bar coding in an instant if more manufacturers were properly labeling their boxes. "It would improve accuracy and instill a culture of using the systems, which helps with growth," he says. "If we can get the systems installed and grow with those in place, we're ready when we get to the size where we need it."
Crum's vision is not filled with futuristic gizmos, but with proven technology used to solve real-world problems. The company's systems consist of client-server networks in each branch-personal computers on local-area networks (LANs)-that are connected to the company's Central Services offices in Casper via the frame-relay T1 cloud. On that cloud Crum has a public Web site accessible from the Internet and a company intranet that sits behind a firewall and is only available to Crum employees.
A drawback of client-server networks is that most of the programming resides on the individual PCs, so most problems have to be solved there. Over the frame-relay system, Thapa and Bernard are able to take over any employee's PC in any Crum Electric Supply location and solve problems remotely, using a piece of software called "Timbuktu." The program also works over modems and conventional data lines, but the speed over the T1 makes it far more efficient. The costs saved in eliminated travel time and hotel nights-sometimes for a problem that took five minutes to fix-are just part of the savings Crum believes are available to any distributor who embraces new technologies.
Crum's contention is that the productivity gained more than compensates for the cost of the technologies, if distributors are willing to invest the effort to understand and fully use what they have. Benefits of the T1 cloud, for example, are numerous. The immediate cost savings in telephone bills have been perhaps the strongest tangible encouragement for Crum in the early phases of the project. The frame-relay network has the capacity to combine voice and data transmissions, so rather than paying long-distance bills on a per-call basis, voice traffic is included in the flat monthly rate for the T1. "We feel that the payout for changing from modems to frame-relay will come in about 18 months," Crum says. "We're very excited about the savings we're going to see there."
Then there's the speed of Internet access. Over a T1 connection, the Internet begins to approach the speeds of a LAN, making searches for information much more productive.
"We're getting virtually every single Crum Electric employee involved with the Internet and getting them familiar with it so they can take it from there and continue to learn about it," Crum says. "That's one of the big things we're doing culturally within our company."
All the industry involvement with NAED and IDEA, as well as state development councils he sits on, means Crum is out of the office much of the time. Is it wise in these circumstances to give everybody in the place high-speed Internet access? Won't they just waste time surfing? "No," says Jeff Hockin, vice president and general manager. He's the one who makes sure the trucks and forklifts run on time. "You find that they do very little of that, and the productivity, the speed with which they can get information, far outweighs that stuff."
Of all the communications technology available, lowly e-mail is the most valuable so far, and getting employees comfortable with e-mail is an important step, Crum says. "I'm really trying to promote the use of e-mail in communicating with our manufacturers, our reps and our customers, and it's beginning to happen," he says. "Our quotations coming from manufacturers' reps are beginning to come as an attached Excel file, which means we don't have to manually retype the quote." It also saves on rewrites when more than one customer is bidding on the same job.
E-mail has also increased the productivity of Crum's publishing operations several-fold. Every month, Crum produces an internal newsletter filled with news and announcements about the company. He says he does it because everybody else is too busy. The newsletter includes pieces written by each branch manager, and Crum used to spend about eight hours a month typing in the articles and laying out the newsletter. Now that branch managers submit their articles via e-mail, Crum is able to do the whole thing in a couple of hours. "Right there I save six or seven hours a month," he says.
Beyond the immediate cost savings and productivity improvements, the T1 cloud and all the other technology prepares Crum Electric Supply for the future. In Crum's vision of the future, one day most distributors will have T1 clouds, and those clouds could connect through an industry cloud-an industrywide extranet-with each other, with manufacturers and reps, associations and buying groups, maybe even with customers. Such an extranet may be in the IDEA's future, he suggested, but declined to elaborate further, saying that the work of getting the data warehouse up and operating is the first, and, at this point, only project on IDEA's plate.
The investment in technology also prepares Crum Electric Supply to use the tools it will need to support future growth. "We don't invest in technology to reduce the number of people. We invest in technology so that we can grow without having to add as many people," he says. The challenge of adding people of the highest caliber is another area where Crum believes his investments in technology show definite benefits. "People want an environment they find challenging and where they can be effective," Crum says. "If you want to attract and retain the best and the brightest, you have to support them. Otherwise, they won't have the tools to do the job the way they know it should be done."
Crum Electric Supply is using its intranet to help people do their jobs more effectively and work with the equipment more confidently. The first step is to get people used to using it. Thapa and Bernard did this by having employees make reservations for the company Christmas party via an online form. Once people get comfortable, they can begin using it for more advanced information-gathering tasks, such as getting answers to computer-related questions. Thapa puts service-call notes into a searchable database on the intranet. Employees can search by hardware or software problems and find a list of fixes that can help them solve some of the more common problems on their own and call Thapa and Bernard only when something new or more severe comes up.
>From the standpoint of management efficiency, the ease of exchanging reports, either through e-mail or by posting them on the intranet, will allow Crum Electric Supply to eliminate the 2-in. stack of monthly paper reports branch managers all get-a major benefit, says Hockin. More than that, though, the reports generated by a good business system add clarity to decision-making, Crum says.
"Now you're not managing as much by gut feel and experience as you are managing by data," he says. "Now you know who's buying what and when they're buying it and how much, and how much you're making on it, how long it's taking you to get it and so forth, so I think it clarifies management. It really brings it into focus, and I think that's what's needed."
Systems such as the A-DNet created by Crum's buying/marketing group, Affiliated Distributors, Wayne, Pa., have further simplified managers' work. There was a time when the volume of paperwork sales managers had to do to qualify for A-D's Sales Stimulator Plan (SSP) credits was a formidable time commitment, but last fall A-D introduced the A-DNet system and demanded that all participants file reports electronically.
One part of the puzzle that promises to pay hefty dividends is electronic commerce with customers, but most of Crum Electric Supply's customers have been slow to grab the opportunity. There have been some large customers in the area who five years ago told Crum and all other suppliers that they had to be ready to do business via EDI by a certain deadline to continue doing business. "We're ready, but they still aren't able to do it," says Jim Roden, operations manager.
Other customers are using the Internet to educate themselves, and come in the door knowing almost as much about the products as Crum's salespeople. This could lead to a teiring of the customer base, where you deal with a knowledgeable customer differently from one who needs more support, says Roden.
Crum believes that the cost of technology will have to be a larger portion of distributors' capital outlay from now on. "That's where I have to embrace change," he says. "The understanding and commitment that it takes to make this technology a real productivity enhancer, rather than just an added cost, is a real effort. When you only have the system 50% paid off, and it already needs to be replaced, it's a hard thing to get used to. But we are seeing an increase in productivity that allows for the increased investment."
Fortunately for the industry, Crum says, outside factors such as the Year-2000 issue are forcing distributors to undertake upgrades that wouldn't otherwise happen. This lowers costs for software vendors, who don't have to keep people at the ready to program fixes for and answer archaic questions about a system that was outdated seven years ago. At the same time it raises the level of proficiency throughout the industry and makes the move to electronic commerce much smoother as system vendors begin to build the bones of electronic commerce functions into their programs, says Crum.
The results of his experiments with electronic commerce thus far seem to have added to Crum's enthusiasm for the technology and bolstered his belief that electronic communications will be a critical element in electrical distributors' future success. "If we don't embrace this stuff, competitors will eat our lunch," he says. "Customers are driving suppliers toward more efficiency. If we do business as we always have, customers are going to decide we're too expensive to do business with."