Several Organizations are stepping forward and staking their claim to a role in the evolving electronic future of commerce in the electrical industry.
We are happy to report that the future of the industry is beginning to come together. After several years filled more with what-ifs and fantasy than serious action, a number of heavy hitting organizations have emerged from the shadows, or popped out from beneath well-known rocks, with hopes of helping the electrical distribution channel and its customers exploit the possibilities of electronic commerce.
Given the traditional, steady-as-she-goes mindset that still prevails as one of this industry's most admirable and frustrating traits, any observer would have to be impressed with how far electrical distributors and their partners have plunged their heads and hopes into a still murky and uncertain future. And it's a future many gurus continue to believe will see the end of the traditional distribution model. It shows a lot of confidence in the strength of this industry's future that so many are putting so much on the line.
For years we've been watching the horizon and pondering the images popping up on our computer screens, waiting for a sign of what this industry will look like when electronic transactions over the Internet become a sizable part of the way this business is done. At last, the initial contours are beginning to gel. We're seeing some of the more conservative, nuts-and-bolts kinds of individuals get deeply involved in making this industry work over wires.
Major organizations and technological platforms that will characterize the electrical industry in the electronic realm are taking strategic positions. We're seeing internet portals emerge and alliances form among distributors, manufacturers and service organizations, each placing bets on which combination of partners and capabilities will give it optimum efficiency and exposure to the right customers.
Yet this is a process that will likely never end. We can tell you what the landscape looks like at this particular point in time, but by the time we've told you, it will already have changed. We'll explore who is aligning with whom, and what issues these alliances raise for the distributors involved and for those competing against them. But the internet universe changes so rapidly and so constantly, it's like staring into a river. At best this article will be a snapshot of the players who've already emerged to stake their claim.
Without doubt there are numerous other proposals being developed under wraps, any one of which could change the picture in an instant. All the same, the organizations that are now involved have large, serious backers, which suggests they'll be in this for the long haul.
The enabling IDEA: The Industry Data Exchange Association (IDEA), Rosslyn, Va., is putting new emphasis on the "e" in electrical. The association was created to streamline and strengthen the industry's information infrastructure in preparation for industrywide adoption of e-commerce. In pursuit of that goal, the organization has detailed a standard database for all the relevant information exchanged between manufacturers and distributors in relation to electrical products; it has built the Industry Data Warehouse (IDW) through which manufacturers and distributors can synchronize that data; and it has built an industrywide private, high-speed network, IDXchange, to allow the secure exchange of that information without the volume-rated fees charged by value-added network services (VANs) for EDI.
Perhaps more significant than the achievements above is the fact that IDEA has succeeded in changing the industry's prevailing attitude toward information technologies in distribution operations. IDEA has managed to unite fractious elements and to turn an entire, extremely tradition-bound industry in a new direction by subjecting it to a demanding self-analysis and soliciting a serious financial investment in the future.
By and large the industry has stepped up to the IDEA's challenge. Some in the industry are therefore perplexed that the IDW and IDXchange services are not yet available to the majority of the industry, although they went "live" early last fall. The technical specialists at Triad Systems, Livermore, Calif., which manages the IDW, and MCI WorldCom, Jackson, Miss., which manages the IDXchange, are still working with IDEA's technical committee and distribution software developers to eliminate the last bugs from the final part of the system, a "plug-and-play" solution that will make the technologies available to the electrical mass market, says Dave Crum, chairman of IDEA and president and CEO of Crum Electric Supply, Casper, Wyo.
"At this point, even if we had more members, we can't put the members we have on the system fast enough," Crum says. "It just takes time to work it through. Once we get this last plug-and-play piece finished, we'll be able to move very quickly."
For its part, IDEA is laying the infrastructure to make other e-commerce services possible. Among the systems enabled by the IDW's data model are the two newest major players in the electrical e-commerce arena: SourceAlliance.com and SupplyFORCE.com, both of which have been allowed to join IDEA as distributor members.
Collossal collision concerns: Rockwell Automation launched its e-commerce vehicle for integrated supply and national accounts last fall and, to no one's surprise, quickly signed up all its Allen-Bradley distributors as participants. Given the strength of this network, both in the talent of the individual companies and the unusual loyalty they show Milwaukee, SourceAlliance.com enters the e-commerce fray with a strong offering for the large industrial companies that make up its target audience. With the addition of a recent alliance with MRO.com, SourceAlliance adds full-spectrum product breadth as well.
Rockwell's leap into the e-commerce-enabled supply chain of the near future has also taken some leaps forward in credibility with the recent announcement of its executive officers. The additions of John Burke, formerly an executive with GE Supply, WESCO/EESCO and Rexel/CES, as chief operating officer, and John Peterson, formerly with Crouse-Hinds and Warren Electric Group, as director of business development and manufacturer relations, as well as Jim Besikof, formerly with OneSource Distributors, as a director of operations, give SourceAlliance major leadership clout in the industry from the distributor side.
There is only a handful of organizations in the electrical industry that could call on a distribution network to rival Rockwell Automation's, and Affiliated Distributors, Inc., King of Prussia, Pa., may be the first among them. A-D's network includes a host of strong electrical distributors throughout North America, supplemented by independent distributors in the industrial mill supply and industrial pipe, valve and fittings channels. A-D's new spin-off company, SupplyFORCE.com, begins life with 243 of these companies signed on, $35 million in capital and the entire national-accounts and integrated-supply service infrastructure of A-D in hand. With that arsenal they will approach the same industrial maintenance, repair and operations (MRO) accounts SourceAlliance.com targets, plus constructionand commercial accounts, offering products from all threeA-D divisions.
One huge potential problem for distributors aligned with both A-D and Allen-Bradley is the considerable overlap between SupplyFORCE.com and SourceAlliance.com memberships. Both intend to streamline purchasing through the Internet and coordinate accounts nationally, while offering the intimacy of local distributor support. The A-D/A-B distributors we've spoken with hesitate to speak for the record, but tell us they have absolutely no idea how they are going to decide which of the two services to offer industrial MRO customers. They see SourceAlliance.com and SupplyFORCE.com on a collision course, with the distributors "dancing on the tracks" in between. With no clear indication of a treaty between the two giants, the distributors say they plan to take it on a customer-by-customer basis. Both services are scheduled to become available to customers early this year, so much will be revealed when e-commerce strategy meets purchasing-agent reality.
More e-MRO: W.W. Grainger, the undisputed front-runner in the race to leverage the Internet for distribution of MRO products, has had its own multi-distributor solution in the market for more than a year now. OrderZone.com is a one-stop site for purchasing the full range of Grainger's legendary big red catalog, plus other maintenance items such as Cintas uniforms. Coverage is provided by a limited list of distributor participants, but the companies involved all have international reach, which is expanded by the global presence of the Web.
MRO.com, a new business-to-business e-commerce system just emerging, is a more open setting in which a number of distributors' offerings are made available to purchasers, who can choose the supplier of their choice. Backed by a parent company, PSDI, Inc., Bedford, Mass., with huge depth in enterprise asset-management software and a variety of marquee suppliers that includes McNaughton-McKay, WESCO Distribution, Westburne, Motion Industries and more recently SourceAlliance.com, MRO.com is positioning itself as an online marketplace and information portal in the VerticalNet mode. Its marketplace thus far includes distributors of bearings and power transmission products; electrical products; filtration products; hydraulics and pneumatics; mill supplies; janitorial and paper products; packaging; pipe, valve and fittings; and tooling products. MRO.com also develops and markets desktop requisition and online procurement software called MROBuyer and MROSupplier, the latter of which lets customers build a custom catalog, updated around the clock, using their preferred suppliers from the MRO.com marketplace.
BestRoute.com, an entrant nearing the starting line, takes yet another tack with a dedicated warehouse for supplying electrical distributors' slow-turning C and D stock. Led by Mike Gambino, a veteran of several electrical manufacturing companies, BestRoute.com gains added market presence through an equity alliance with multi-sector distributor Hughes Supply, Orlando, Fla.
Giants of e-procurement: With so much e-business heating up in the electrical industry and surrounding neighborhoods, it's easy to think the initiatives underway there are the most critical to any electrical distributor's longterm livelihood, but wait-there's more you need to know. Over and above all the systems being developed for various market niches of electrical and MRO products stand giant e-commerce companies that are developing online marketplaces and Internet-enabled procurement systems for the largest industrial and commercial companies out there. These e-commerce movers and shakers are the ones most likely to determine how the electrical industry serves many of the Fortune few in the future.
The leader of this pack, in terms of size and the number of major alliances formed, is probably CommerceOne, Inc., out of Calif., picked by companies such as General Motors Corp. and Shell Oil to develop Internet-based e-commerce marketplace systems. The fight to take the spotlight from CommerceOne is ferocious. On the same day GM and CommerceOne announced their partnership to create an online marketplace, Ford Motor Co. and Oracle Corp. announced a similar venture. Like SAP, Inc., Oracle has a huge installed base of enterprise software systems already running in many large companies, particularly firms such as BMW and BASF in Europe. The company is also pursuing the creation of custom Internet marketplaces. Ariba, Inc., meanwhile has formed alliances with MCI WorldCom, Motorola, Chevron and DuPont.
While the four companies mentioned have taken an early lead, it's foolish as always to disregard Microsoft Corp. While Microsoft seems to have taken its eye off the ball of its BizTalk enterprise servers-some analysts have gone so far as to dub it nonexistent vaporware-many software companies are betting that as soon as the company gets its XML-encrusted Windows 2000 operating system fully underway, the BizTalk system will emerge as an open e-commerce platform in a big way.
All five of these companies have thrown their weight fully behind the XML protocol. XML is a markup language similar to the HTML read by Web browsers, but far more flexible and powerful because it allows tags that describe the nature of the content found in a Web page or a database, not just how it's displayed. XML also allows groups of users to define their own tags, which makes the language almost infinitely flexible. The upshot of this is that your browser will know whether it's looking at a price or a phone number-it could even know whether the price is suggested retail or a special discount. By all accounts, this language is likely to shape the next few waves of electronic commerce development for everyone in business.
The electrical industry, having gotten itself moving in the direction of electronic commerce with clean, organized data and a fast, secure network for talking amongst its members, seems to be in a position to capitalize on the coming upsurge in e-commerce traffic much more efficiently than distribution channels still locked in a paper-and-fax purchasing system. With so many systems emerging to address so many different parts of the market, a distributor's most important decision may no longer be whether to take part, but in how many different ways.
Ariba, Inc. - Mountain View, Calif. www.ariba.com Ariba has been highly successful forging alliances with big, big-name companies to develop e-commerce marketplaces and electronic procurement systems. Its list of clients and allies includes Chevron, DuPont, EDS, Ernst & Young, Motorola, MCI WorldCom and Charles Schwab. Its primary products are purchasing applications, a business-to-business e-commerce network platform and other development tools for net-based markets.
BizTalk - Redmond, Wash. www.biztalk.com Microsoft's BizTalk program for promoting XML-enabled e-commerce using its Windows 2000 operating system seems to have stalled, but given the support already gathered from major software companies and users-including electrical industry stalwarts such as Prophet 21-the lag is likely to be only temporary.
CommerceOne, Inc. - Walnut Creek, Calif. www.commerceone.com CommerceOne is the reigning heavyweight champion in developing e-commerce marketplaces and Internet-based procurement systems for major customers. It was chosen by GM to develop its online marketplace, a coup that will give CommerceOne strong leverage with all of GM's suppliers. Other clients include Shell Oil and Deutsche Telekom. Its core software products are called MarketSite and BuySite. CommerceOne is also the creator of a huge international network of e-commerce portals called the Global Trading Web.
Industry Data Exchange Association (IDEA) - Rosslyn, Va. www.idea-inc.com Owned half by the National Electrical Manufacturers Association (NEMA) and half by the National Association of Electrical Distributors (NAED) and controlled by an evenly-balanced board, IDEA is the association charged with creating the electrical industry's e-commerce infrastructure. Its first products are the Industry Data Warehouse (IDW), a central repository of standardized data on electrical products, and IDXchange, a proprietary, secure, industrywide network for accessing the IDW and conducting electronic data interchange (EDI) among industry partners.
MRO.com - Bedford, Mass. www.mro.com A developing marketplace portal offering numerous sources of supply for a wide range of maintenance, repair and operating (MRO) supplies, MRO.com has signed up electrical industry powerhouses such as WESCO Distribution, Westburne, and the entire network of Allen-Bradley distributors through an alliance with SourceAlliance.com. MRO.com is owned by PSDI, Inc., a developer of enterprise asset management software, and which also markets software products for buyers and sellers.
Oracle Corp. - Redwood Shores, Calif. www.oracle.com Oracle, a huge software company with a considerable share in the large-scale database systems market, has staked a place for itself in developing online e-commerce marketplaces and procurement systems. The company scored its largest win with a deal to develop a marketplace for Ford Motor Co.
OrderZone.com - Lincolnshire, Ill. www.orderzone.com Developed and managed by W.W. Grainger, OrderZone.com brings together a half-dozen major suppliers of MRO products to let customers buy from all six through one Website interface. The site offers consolidated billing and shipping as well. This is just one of several e-commerce initiatives Grainger has fielded. Its big red catalog was one of the first to go online as part of a shopping site.
SAP America - Newtown Square, Pa. www.sap.com/usa/ SAP is best known as an enterprise systems developer to major industrial companies, both in the U.S. and around the world. Its foray into the online marketplace and procurement system market is fueled by its massive installed base of enterprise software.
SourceAlliance.com - Raleigh, N.C. www.sourcealliance.com Rockwell Automation introduced this e-commerce vehicle for integrated supply and national accounts last year and then spun it off as a separate company. The e-commerce procurement system offers electrical products to customers nationwide through local Allen-Bradley distributors. A recent deal with MRO.com gives it added product range. The fact that many of SourceAlliance.com's distributors also belong to SupplyFORCE.com may prove a sticking point down the road.
SupplyFORCE.com King of Prussia, Pa. www.supplyforce.com Started by Affiliated Distributors, Inc., and led by A-D's CEO Bill Weisberg, SupplyFORCE.com began life with 243 A-D distributors, a $35 million warchest and the entire national accounts and integrated supply service infrastructure of A-D. The support of strong independent distributors from the three core MRO product areas-electrical, industrial and PVF, may give SupplyFORCE.com an edge with multi-site commercial and institutional accounts. Overlap with SourceAlliance.com is giving some distributors the willies.