Office supplies distributors heed call for Web ordering
By Staff -- Purchasing, 3/23/2000 2:00:00 AM
Of all the trends affecting office supplies distribution today, perhaps none is more significant than purchasing's demand that suppliers be e-commerce enabled.
One office supplies distributor executive describes customer response to her company's electronic commerce offering as a "tidal wave." A "revolution" is how another characterizes the changes she sees in supplies distribution because of e-commerce.
Figures available from big office supplies distributors show that a growing proportion of annual sales to corporate customers is being transacted online. These suppliers say sales conducted electronically, which vary from distributor to distributor, make up roughly 12% to 30% of all annual sales to corporate customers.
With more than 110,000 users currently representing 9,400 companies, Boise Cascade Office Products's Terry Kallen has seen online sales double each year since 1997. Then, 2%-3% of corporate sales were transacted online. In 1998, this figure grew to 6%. By 1999, it was up to 12%. "I wouldn't be surprised to see it reach 25% for 2000," says the manager of emerging technologies."I don't know if it will continue to double after that, but our winning new business is highly dependent on our being Web-enabled."
Many corporate purchasing operations select office supplies as one of the first commodities to be ordered online by requisitioners. There is little risk, they say, in putting the low-dollar, high-volume purchase online. Rewards are great as processes at many companies to order supplies tend to be paper-intensive. Buying office supplies online eliminates many steps involved in the process, dramatically improving efficiency and reducing costs of purchasing.
Taking this streamlining one step further, office supplies distributors today are working closely with corporate purchasing managers on efforts to further customize, or personalize, the ordering experience for end users, simplifying it and eliminating much of the training process. (Distributors manage all business rules behind the ordering process and handle the logistics.) This way, distributors say, users will be more likely to order off an agreement with a preferred supplier, increasing volume and further lowering costs.
Options are many
"Customer response is tremendous," says Anne-Marie Keane, vice president of business-to-business electronic commerce for Staples.com, of the trend toward electronic commerce. Staples.com is Staples Inc.'s e-commerce business that sells office supplies to the business customer via the Internet. Another trend she sees among corporate customers: Supply chain management.
Benefits of ordering office supplies online precipitate the rush among corporate buyers to develop such e-commerce systems. With an e-commerce system, buyers gain decentralized ordering with centralized control. Streamlining internal processing results in soft cost savings. In implementing the buy-side ORM system available from Ariba internally, Staples looked at its own process flow and found there were 20 steps requisitioners had to go through to purchase office supplies. With the Ariba system this process has been streamlined to three steps. That's significant soft dollar cost savings of 70%, says Keane.
Hard cost savings are realized by higher compliance to corporate agreements by requisitioners. As purchase volume increases, corporate buyers have capability to manage the account to achieve additional savings.
Some of Staples's customers are setting up systems that link users directly to suppliers with extranets. Staples's online product for its national account customers is called StaplesLink. The site integrates into the supplier's back-end system, providing users with access to real-time pricing, order status and inventory.
Others customers are purchasing and implementing buy-side, or third-party, systems such as those offered by Ariba, Commerce One, or any of a host of others, says Keane. One benefit to using a third-party system is that end users have just one interface, which reduces the amount of resources that must be spent on training.
Still other customers are working with business partners who have developed an online supplier base, such as Standard Register's SMARTworks (PUR: Oct. 21, '99; p. 80). "We're just starting to hear from customers that they are taking this path," says Keane. How it works essentially is that a remarketer creates a system with preferred suppliers and offers it to customers as a value-added service. This option is particularly attractive to small and midsize companies. "It's building a stronger bond with an existing customer base," she adds.
The choices available to corporate purchasing organizations are many. "Instead of becoming simpler, it's becoming more complicated," says Keane. Therefore, she says it's important for buyers to think about relationships with existing suppliers before setting up an e-commerce system. Other considerations include cost of developing and implementing a system and the number of suppliers that are to be included in such systems.
Another question buyers may want to ask is whether they need to integrate such buy-side systems into their company's ERP system. "If customers want us to house the catalog, we provide the data in a format that they need." While Staples had been working with third-party organizations on a customer-by-customer basis, now the supplier site has XML language capability. Staples's interfacing with third-party systems that also use XML will help improve efficiency for customers in this area.
Keane also gets inquiries from customers about portals being created around vertical industries, i.e., Chemdex. The key there, says Keane, is getting suppliers on board. She likens buyer interest in using a portal to thinking behind HMOs. "It's the relationship that's important. An individual selects an HMO based on the doctors that belong to the plan. A purchasing manager will choose to buy through a portal based on the suppliers that are involved."
Further simplify the process
"Certainly, e-commerce is one of the big trends impacting office-supplies distribution, says Terry Kallen, manager of emerging technologies, Boise Cascade Office Products, Itasca, Ill. "It's revolutionizing the way businesses do business with each other. Processes and selling channels are being dramatically changed or eliminated because of industry's move toward e-commerce. Sales reps and call centers are still there, but their roles are changing. They're now providing more value-added services to customers."
Kallen sees e-commerce as having little effect, however, on distribution's processes once the order is taken. "The same processes are in place as if we were to take orders via facsimile or telephone."
Where Kallen is seeing an impact is warehouse cut-off times for delivery. "Now, our rules state that an order must be placed by 4:00 p.m. for next-day delivery. Some users want to order at 10:00 p.m. or on a Saturday and receive delivery the next business day. Use of the Web is changing distribution from this perspective."
Kallen also sees change resulting from a rising number of workers who telecommute, which she says is partly due to increased use of the Internet. "It makes a big difference whether we deliver to a home or business."
By installing e-commerce systems, corporate purchasing organizations are looking for control over end-user activities. In the past, buyers had been involved in processing of orders. With an e-commerce system, buyers are empowering end-use requisitioners to place their own orders. Purchasing, says Kallen, needs to be comfortable that its guidelines are being followed.
As a result, office supplies providers need to support business rules. "As each business is different, we are supporting hundreds of business rules," says Kallen.
Boise has always tailored screens viewed by end users. As such, the supplier ensures that an organization's language is being communicated to users. "We at Boise may refer to a cost center, where a customer may call the same thing a budget code." By doing this, the company helps to eliminate or reduce time and money spent on training. It also automatically fills in forms based on data provided by end users."
Performing such tasks for customers leads to a trend toward predictive selling which is made possible by collecting trends in end-user purchasing or an order history. With this data, the supplier can more adequately gauge what the end user's future purchases might be.
Admittedly there are two sides to this issue, says Kallen. "By tracking orders, the system helps keep end users from having to search for products. Users can spend hours searching for product. Wouldn't it be nice if the system knew what the user is looking for? Capability is there to develop more sophisticated systems, to make ordering of office supplies a non-issue, something no one has to worry about. We will manage the business rules and the logistics."
Now, Boise is building a new system that it will introduce this spring. This system is expected to address some of these issues: Customization, e-commerce's impact on customer care, customer resource management, strides made in terms of usability.
At first, Kallen says that not much research was conducted on human factors associated with end users ordering supplies online. "Now, there are experts who have been studying these issues (where to put buttons, etc.) that we can consult. These experts can provide us with guidance on making it easier for users to place an order. This is our goal. Some organizations will still want training and we will always provide this service to these customers, but we are more focused on making ordering via the Web easier."
Activity increases
"Electronic commerce is growing so fast," says Bob King, CEO, Corporate Express. "It's amazing." Roughly 15% of the office supplies provider's annual sales to corporate customers are online; that's about $400 million.
For now, Corporate Express is continuing to support the electronic commerce efforts of BT Office Products (SyntraNet), as well as its own (E-Way). Corporate Express recently completed its merger with BT. Eventually, King sees the company conducting its Internet sales on one platform, "combining the best of both worlds."
"We've hit the ground running," says King, of results of the new entity's efforts at integrating internal systems of the two companies. "Sales activity is now increasing."
Like Keane of Staples, King sees two big trends occurring with office supplies distribution: Adoption by corporate customers of supply management strategies and electronic commerce. "Corporate buyers are looking to reduce the number of suppliers they do business with, streamlining the purchasing process," he says. "Like in production purchasing previously, buyers are working to improve internal efficiencies. Electronic commerce is a way to do this."
Flexibility is what customers want most from Corporate Express, King says. Use of an electronic commerce system gives them control over their business. They can set parameters enabling end users to see and purchase certain products.
"However, we must keep it simple for end users," he believes. "Not everyone is a technology geek. Once they get in there and start using the Internet, they like the experience. They are not intimidated. In fact, they like the experience better than using a paper catalog. Customers browsing the electronic catalog see clear pictures of the product. Ordering is more accurate."
"Office supplies are a good place to start for many organizations," says Monica Luechtefeld, vice president of marketing, Business Services Division, Office Depot, Delray Beach, Fla. At the end of 1999, the distributor boasted of more than 185,000 users, up from 6,000 in 1998. These users represent 3,700 companies. For the year, Luechtefeld was looking to have 30% of corporate business online.
Office Depot opted to build its site not as a standalone entity, but with a door to the company's back-end enterprise system, says Luechtefeld. As such, the site provides corporate buyers with access to information on the supplier's "live" inventory stored in its warehouses. The supplier custom designs site for corporate purchasing managers (i.e., limiting access to product categories, etc.). The site contains the organization's contact pricing. Users log on with assigned IDs and passwords. Office Depot also works with several third-party providers to integrate its system into customers' internal enterprise systems.
Now Playing: 