Business Drives Technology at Swagelok
This manufacturer of fluid system component technologydelivers product via one of the world’s larger distribution systems.Thirty manufacturing sites supply 240 independent sales and service centers onsix continents. How do they do e-commerce?
byClyde E. Witt, executive editor
E-businessis about infrastructure, integration and customer service — not aboutmaking obscene amounts of money by going public. E-business is about work— hard work. E-business is the old economy with new tools. And althoughit’s about hard work, one company — Swagelok Company in Solon, Ohio— together with a global network of independent sales and servicecenters, makes e-business appear easy. When the trend in e-commerce was to dosomething — anything — Swagelok had already done the hard part, orat least most of it.
Itselectronic initiatives and programs of the past 20 years were suddenly anovernight success. Some would call it luck, others might call it astutelong-range planning. Whatever you call it, the eStore has become a power toolin the hands of Swagelok’s independent sales and service representatives.And in this case, the power tool has not replaced the craftsmanship of manuallabor.
Inmanufacturing there are usually three major pieces to the puzzle: product,sales and service and, between those, distribution. “Without theindependent distributor, you don’t get the full value of atransaction,” says Larry Vandendriessche, director of marketing and theperson who directed the creation of eStore. “That drove us to push ane-commerce model that went through our independent distribution.”
And thebeauty of Swagelok’s e-commerce initiative is that there has been noadverse impact on material handling in its distribution centers.
MattLoPiccolo is director of distribution and logistics. He says the key thing tomaking life in the distribution center more livable as the independentrepresentatives offered e-commerce, was that the operational folks in theSwagelok distribution centers didn’t have to change anythingoperationally to accommodate what the independent representatives and theircustomers were doing with e-commerce.
“Withthe systems and processes we built in the ‘80s and ‘90s, theautomation systems that we’ve constantly upgraded, we were ready,operationally, to support e-commerce changes taking place at the independentsales and service centers,” says LoPiccolo.
He addsthat the interface into the distributors’ businesses with the SwagelokCommunications System — behind-the-scenes technology — has changed,but the fundamental principle of having real-time information (the distributorplaces an order and the SCS translates it into a paperless pick list in thewarehouse) is still there.
How to get started
Startingabout two years ago, Vandendriessche and his team, working withSwagelok’s independent representatives, studied end-user orders to seewhat percentage were correct. A surprising percentage had minor errors thatcaused customers to get the wrong part or prevented customers from doing thejob. He also found that in a good percentage of cases, intervention on the partof independent sales representatives caught errors before they happened. Therepresentatives questioned the orders and thus added value by catching theerror.
“Sowhat we wanted to do with eStore,” explains Vandendriessche, “wasto preserve all this good stuff and automate all the boring, routine stuff thatdidn’t add value for the end-user.”
Henotes that the eStore architecture automated all the transactional pieces ofthe ordering process, and left the human element in. Every transaction throughthe eStore is supported and reviewed by a representative at the independent salesand service center who is familiar with the end-user and the geographic regionwhere the product will be used.
“Serviceon a Web order might be even more important than conventionally placedorders,” Vandendriessche adds. “We learned that people shopping onthe Web look even harder for the established brand because there is a perceivedless connection with the point of sale. In keeping with Swagelok’sbusiness model, the Swagelok Products eStore design does not allow for adisconnect between point of purchase and point of service, both of which occurwith the independent sales and service center.”
Becausee-commerce is as much about integration as it is infrastructure, the eStore isdesigned to turn on the front end of the business. It automates the piecebetween the independent representative and the end-user as opposed to otherprograms that focus on the manufacturing and distribution ends, and thedistributor.
“Webuilt an infrastructure with electronic transaction methods that enable ourrepresentatives to receive both eStore and EDI orders all over theworld,” says Vandendriessche, “so the end-user [who might have 20plant sites] can access a single method of transaction entry and processing,though their orders may be processed and shipped by multiple independentSwagelok representatives.”
It’sthe many-to-one-to-many model, says Vandendriessche. Many end-users send ordersthrough one transaction center. The center routes the orders to manyindependent service centers who, in turn, individually send products to theend-user. All that the end-user has to worry about is its integration to thetransaction center. And the independent representative only worries about oneintegration to the transaction center, and can thus serve his many customersthrough that single point with only one system integration.
“Whenyou have an independent sales- and service-based network,” saysVandendriessche, “the trick is to make that end-user/sales-and-serviceconnection painless. To make it like a one-to-one relationship they enjoy onthe phone or in person.” He says, with humor, that in the eStore thereare 10,000 one-to-one relationships.
Itwould have been impractical for each independent sales and service center tobuild a complete e-commerce site for use by their customers. So, to bridge thisgap, Swagelok took on the task to build a basic e-commerce infrastructure thateach independent representative can customize and offer as his own. This allowseach to work with his customers to run ordering transactions from theend-user’s purchasing department, through the Swagelok-built infrastructure.The entire transaction thus remains between the end- user and the independentdistributor. Swagelok only facilitates the movement of the transactions throughthe shared infrastructure.
How it works
Swagelokis an international company with independent sales and service centers on sixcontinents, dealing in 43 local currencies. In creating the eStore, theSwagelok team talked with end-users and the independent representatives.Vandendriessche says one of the important questions the team asked of both partieswas where their businesses were headed. And although no single entity respondedwith the perfect answer, all answers became parts of the puzzle.
“Wegathered people from within every function of our company and looked at 128projects,” recalls Vandendriessche. “We ranked the order of theprojects and came up with a handful that made sense to do.”
One ofthe insights Vandendriessche and his team gained was why people visit Websites. In the industrial world, people come looking for information more thananything. Procurement is not what’s happening on the Web. Big companiesdo not go shopping on the Web, using tools like an eStore. Instead, bigcompanies shoot out orders using tools such as EDI. As a business, you have toknow how to catch those orders before your competition.
But thearchitecture of the Swagelok Products eStore allows for a lot of individualsupport not found in EDI. Forexample, every order received through the eStore of an independent sales andservice center is reviewed by a trained representative at that location.It’s not a matter of point and click, although it might appear so to thebuyer. When an order for a special part comes in from an end-user, therepresentative can use a section of the system called “auto quote”to determine availability (pricing and lead times). The representative thenresponds to the buyer with an e-mail, including appropriate pricing and leadtimes. If the request for a special part is too complex (and this happens abouthalf the time, says Vandendriessche), the auto-quote system sends the requestto the customer service desk at Swagelok. The customer service desk thenresponds to the query.
Afterthe buyer has received the e-mail quote from the representative and is ready tomake a purchase, he clicks the appropriate button, and the request goes in asan order with the sales and service center. For those special parts, or partsthat are not in inventory at the independent sales and service center or in theSwagelok distribution center, the representative puts the request into thequeue for Swagelok’s manufacturing plans.
Allelectronic orders are handled, based on the end-user’s instructions.“Each order is placed directly into the business system of therepresentative that is chosen by the end-user,” says Vandendriessche.“The end-users love it because they have to integrate only once. Theindependent representatives love it because they don’t have to doanything since the order goes directly into their business systems.”
Anotherfunction built into the eStore is to have local people deal with localcurrencies. For example, to have a single entity in the U.S. handle local salesand value-added tax management — considering the array of companiesSwagelok’s independent distributors do business with — could be costprohibitive. It already has independent sales and service representativesaround the world dealing with local issues, so adding eStore to those localrepresentatives was not a problem.
Anotherbenefit of working with local sales and service centers, says Vandendriessche,is that this independent network stops the parent company from makingU.S.-centric decisions that might not be the way the end-user’s countrydoes business.
Meanwhile, back at the DC
Becauseof the electronic systems in place, and adequate forward thinking, LoPiccolosays the people at the fulfillment end of the business have been able to focuson operational efficiency without being distracted by trying to get e-businesspieces up and running.
“Andbecause of that,” he adds, “Our company has been able to focus alot of our resource dollars in the e-business area without having to say,‘if we do this project or that project we have to change theinfrastructure of how we do order fulfillment.’”
Askedwhat he would recommend others do if supporting an e-business, LoPiccolo says,first, adopt corporate support and leadership that is service- oriented.“Doing business on the Web didn’t change our business model,”he says. The other recommendation LoPiccolo makes is to give your companyadequate time to establish the e-business. “It takes time to put in placethe right infrastructure to do e-business,” he says. “Our materialhandling, order fulfillment and electronic systems have evolved over nearly 20years. You don’t get there overnight.”
LoPiccolonotes that you have to strategically and realistically map out where yourbusiness is and where you want to be. The business has to drive the technologyneeds.
“Wedidn’t alter our business around the electronic technologies,” heexplains. “Our systems are designed to be a supplement and tool toachieve our ultimate goal — to support the independent representatives asthey help their customers win.”
Henotes that a trap many companies fall into is the notion that “if I buythis system all my problems will be solved.” Not so. The system has to bean enabler to how you want to solve your business problems.
Thebenefits have been many, says Vandendriessche:
•End-users, can now work with the independent representatives in any way theychoose. Each end-user is different. The ability to access the transactioncenter gives flexibility no one company could provide.
•The independent representatives really like the idea that there is no typingfor order entry, therefore, no errors once the entry has been made .
•The access to information has been heavily used. Web activity has, tripled involume over a six-month period, reaching 4,000,000 page hits per month.
•The cost of procedures that put Swagelok products into the hands of end-usershas been reduced. You take a lot of cost out of the transaction when youautomate order entry.
•The eStore architecture has the benefit of delivering a comprehensive body ofSwagelok product information, yet enables the independent representative tooffer it in a customized local package. That’s important becauseit’s the local independent representative who knows the local culture.One size does not fit all, especially in e-commerce. SCF
Looking at the Web Site
Theend-user can access the eStore by registering with an independent servicecenter, and can then select from tools to build an order. Vandendriessche saysone of the things Swagelok recognized while developing the eStore architectureis that people think differently when creating an order and dealing with the Web.An engineer might think more creatively and actually build his project, goingfrom piece to piece, ordering each piece along the way. A purchasing agentmight run down a list of parts while someone else might choose to reorder aprevious purchase.
To accommodateall the possibilities, there are five ways to access the same information.“The selection tools help the end-user look for what he wants,”says Vandendriessche, “and gives him the products based on what job hedescribes.”
All thestandard 8,000-10,000 company inventoried products can be purchased through theeStore of any independent representative. Plus there are many custom-assembleditems — non-stock items — the local distributor can carryspecifically for a customer or the customer’s local code requirements.
To helpprotect confidentiality, the end-user’s connection to an independentsales and service representative at the eStore can be configured so theend-user who might be using a customized part is the only one who can see andreorder that part.
Theend-user can also enter special instructions per line item on the order. Maybehe needs 15 pieces. He enters, ‘Ship me 10 pieces today and the rest bynext Monday.’
Vandendriesschesays the eStore architecture had to be flexible enough to work the same waypeople work and communicate if doing business face-to-face. For example, whenthe distributor is looking at the screen, reviewing the order before it’sentered into the system, he sees comments item- by-item, not as part of onelarge order or attached at the bottom of the order.
TheeStore architecture allows for a blend of humans doing what they are best at— making rational decisions and questioning, and automation doing whatit’s best at — routine or repetitious functions.
Anotherunique aspect of the eStore architecture is customized individual accounts. Forexample, if a customer is building an oil rig in the North Sea, it might have aparts list prepared to create the structure. Through an individual account, thecustomer can put in his own part numbers, link them to Swagelok part numbers,and use them in existing drawings. When they bring up the bill of material fora specific drawing, the system brings up all their custom part numbers. Peoplethink in terms of their own numbers, says Vandendriessche, not in terms ofvendor numbers.
