By BUILDER Magazine Staff. The technology vision we hear of most often is that of an industry-wide, e-commerce system in which orders and payments are automatically exchanged between builders, subs, and suppliers. But while that seems far in the future, individual builders are implementing pieces of it in their own markets.
The Fischer Group, a Cincinnati-area production builder, has launched a new, homegrown e-commerce effort that it claims is saving time and money. As Fischer's business grew in recent years, so did its paperwork burden. Not only was it paying large mailing costs, but its supervisors were spending hours each week processing forms, often losing critical ones such as subcontractor's invoices. "We had a paper monster that we needed to tame," recalls John Cann, the company's manager of information systems.
In September 1999, Cann read a magazine article about sending purchase orders using extensible markup language, or XML. By the following February he had written an e-commerce application and was testing it with one supplier. Now all the company's larger suppliers and subs are on board, and 70 percent of purchase orders and invoices are electronic. Supervisors receive invoices on hand-held computers, check them off, and the payments are automatically deposited into vendors' accounts. The system can also handle drawings, selection sheets, and other documents. Cann will soon add a scheduling application that will tell subs when they need to be at a particular job and vendors when it's time to make a delivery.
Photo: Richard Borge
Rather than making the application Web-based, Cann decided it would be more reliable if users could download the application to their computers. "First we wrote applications that would take the information that we were currently using and send it to an external server that vendors could access," Cann explains. Vendors were given an application that would let them download data from the server and send back requests for payment. "Once we generated that, we had the loop," recalls Cann. "It started with purchase orders, but soon included all drawings and selections." One key to success, says Cann, was to implement the system gradually. He approached the company's major subs and vendors first, sold them on the idea and concept, then let them sell it to the company's other business partners.
He approached training the same way. "We took baby steps," he says. "We took it a step at a time and trained people before going on to the next step." For instance, some supers were afraid of accidentally authorizing an electronic payment, but once they got comfortable with the system that fear went away.
One oft-cited problem with an industry-wide XML system is that it would require all suppliers to describe their products the same way. Industry groups such as the Pro Dealer Exchange are slowly making that happen, but meanwhile, Cann says that it's not that big a deal for one builder to work with its own suppliers. "We maintain our vendors' resources and pricing already," he says. "Lumberyard A may call a board a 2x4x8 grade 2, while lumberyard B may call it a 2x4x8 select. In my internal databases I track both. It doesn't complicate things for us because we've been doing it for years."
Cann estimates a savings of $12 per purchase order, with a total savings over the past two years of about $1,000,000. The system paid for itself in three months. "We're also doing sales force automation," he says to make a comparison. "We've spent a lot more on that system, and it doesn't have nearly the payback."