PC Week Online
September 22, 1997
The way most pundits see it, business to business
Internet commerce will knock a lot of middlemen out
of the supply chain. So, what's a poor intermediary
to do? If you're $2 billion Boise Cascade Office
Products Corp., you find ways to add value that an
electronic medium can't duplicate, and you embrace
the Internet as another way to make it easier for
customers and suppliers to do business with you.
The Itasca, Ill., company, which is a go-between
for 1,200 manufacturers and 17,000 customers, already
has EDI (electronic data interchange) relationships
with its major suppliers. However, Boise Cascade
plans to tap the Internet to lower costs and improve
relationships with its smaller suppliers. At the same
time, the company is launching an aggressive Internet
effort to simplify the buying process for its
customers. The company must offer value-added
services, "or we won't be around if the
manufacturers start to provide all the services we
could provide," says Laura Longcore, electronic
commerce manager for Boise Cascade.
Experts say Boise Cascade will be insulated for a
time because it offers a cost-effective way for
customers to buy supplies. "But the Internet is
already threatening the value of such
'store-and-forward' companies," notes Mike
Moriarty, vice president and co-leader of the
emerging technologies practice at A.T. Kearney, in
Chicago.
One service Boise Cascade provides that can't be
replicated over the Internet is a personal
relationship. Boise Cascade's customers, particularly
the Fortune 1000, like to get a weekly phone call or
visit from a sales representative. "What you do
is complement what the sales rep does, so the rep
gets out of the order-taking business and focuses on
selling, consulting and customer service,"
Longcore says.
VALUE IN THE MIDDLE
Boise Cascade's first step toward its value-added
middleman approach is focusing on its customers,
because reducing costs on that end goes directly to
its bottom line. The company started offering
Internet order placement in January, and so far,
about 700 customers have signed on, exceeding
expectations. Longcore figured about 1 percent to 2
percent of customers would sign up in the first year,
but that number is on pace to increase to 5 percent
by year's end and 10 percent by the close of 1998,
she says. Customers are taking to the new approach
because the intuitive nature of Web browsers makes it
easier and faster to place orders over the Internet
than by manually filling out forms, adds Laurie
Beeson, vice president of marketing for Boise
Cascade.
Customers go to Boise
Cascade's public home page and enter the order
site by typing in a user ID and a password. From
there, they can peruse an online catalog of about
10,000 products. Or if they make regular purchases,
they can call up "easy order forms" or file
a template to order the same products they buy every
month. Purchases are made online with common credit
cards, such as Visa, American Express and MasterCard.
By the end of the year, customers will be able to use
digital cash to buy products.
Boise Cascade even has an answer for managers
afraid of employees going online and making
extravagant purchases. Through the use of IDs and
passwords, the system knows who is making a purchase
and what he or she is authorized to buy.
Boise Cascade's Internet effort has already paid
for itself. The company paid "in the low hundred
thousands" to set up the system, and after six
months of operation, it has saved more than $1
million by reducing the time customer service
representatives take orders on the phone, Longcore
says.
Right now, about 80 percent of Boise Cascade's
customers make their purchases over the phone or by
fax. While some big customers have EDI connections
with Boise Cascade, most find installing a VAN
(value-added network) too costly. The Internet is at
least 20 percent less expensive than using a VAN
because it cuts out the cost of VAN transmissions,
Longcore says. And customers don't have the added
expense of buying new equipment and hiring experts to
enable their systems to talk to Boise Cascade over a
VAN.
The muscle behind Boise Cascade's Internet
ordering system is I-97, a combination of E-commerce
software developed in-house, and ECXpert, a package
from Actra Business Systems Corp., of Sunnyvale,
Calif. Boise Cascade used ECXpert to integrate I-97,
which sits on a Solaris Web server, and its 3090 IBM
mainframe, where all of its product and ordering
information is stored. ECXpert has allowed Boise
Cascade to translate its order status data on its
mainframe into the new industry-standard EDIINT
(Electronic Data Interchange Internet) document
transfer protocol.
"That allows the documents to be transmitted
in a secure fashion on the open Internet," says
Mike Uomoto, a product manager for Actra, a joint
venture of Netscape Communications Corp. and GE
Information Services. "EDI over the Internet is
much more cost-effective with EDIINT and is just as
reliable and secure as traditional EDI
implementations."
The next step for Boise Cascade is replacing its
homegrown E-commerce application with Actra's full
Internet commerce application, called SellerXpert. That new system, which will sit on the Web
server, uses ECXpert to communicate with the
mainframe, and brings a host of other E-commerce
functions to bear, such as order management, payment
and a next-generation electronic catalog, which will
be stocked with Boise Cascade's legacy data, Uomoto
says.
Boise Cascade looked at other products besides
SellerXpert, including offerings from Open
Market Inc., but a full implementation tying those
systems into its mainframe would have run into the
millions of dollars, Longcore says. The company also
looked at alternatives to ECXpert, such as Templar
from Premenos Technology Corp., but that particular
product limited it to using only EDI formats.
On the supply side, Boise Cascade expects to work
more closely with vendors next year to establish
Internet E-commerce connections. The savings to Boise
Cascade won't be as dramatic as that from cutting out
the administrative costs of manual customer orders,
but there are soft costs it can reduce. For example,
by cutting paper out of the process, the company will
get more accurate information and fewer returns.
Also, online transactions will improve warehouse
receiving procedures, eliminating the need for
workers to crack open boxes to see exactly what's
inside. Thanks to lower costs, "the Internet
allows us more flexibility to partner with new
suppliers than using VANs," Longcore adds.
How quickly Boise Cascade establishes Internet
links with suppliers will depend largely on interest
from those manufacturers. Interest isn't
overwhelming, but the company is starting to hear
from smaller suppliers that haven't been able to take
advantage of EDI.
If the smaller suppliers can't get electronic
access, they won't be able to enjoy the benefits
coming to those who have EDI connections. For
example, Boise Cascade will install a next-generation
warehouse management system in about a year. The
system is expected to improve the efficiency of EDI
transactions and give suppliers real-time access into
Boise Cascade's systems that track demand and
inventory-stocking levels.
If the "exploration" reveals that only a
few vendors want Internet access to the new system,
it may be to Boise Cascade's advantage to give it to
them. With business-to-business Internet commerce
taking off, this is no time for a middleman to
alienate its partners.
