1stWindows Press Page
E Business Evolving Rapidly
From March 2001 Window & Door
Implementation is still limited, but Web-based systems for business-
to-business transactions are projected to be the norm within two years
By John G. Swanson, Editor
Few doubt E-commerce is coming to the window and door business. Talking to a variety of experts, however, you get different views of what it might look like.
Will dealers sell to builders, contractors, and even homeowners via the Web? Will manufacturers? Will the Internet spawn new distribution channels? Or is the Web simply another part of the infrastructure used to conduct business in traditional ways? It depends on who you ask, but the answer may be yes to all those questions.
Even with the fall of the dot-coms, Web technology is being adapted in an expanding number of ways. Many window and door manufacturers are busy developing E-business systems. Although few Web-based quote systems are in place, many of the larger manufacturers are looking to develop or adapt proprietary product configuration and ordering systems for use on-line. Recent announcements for such plans were made by Andersen Windows and Nortek. Generally, manufacturers are looking at ways to improve business relationships with their dealers and/or distributors by providing them with E-business tools and an infrastructure to better serve their customers. Others suggest other broader market activities may be more significant. Rather than proprietary systems developed by manufacturers, E-business may increasingly hinge more on emerging connectivity systems and the adoption of common exchange platforms which will be used by distributors, dealers, and even builders. One of the more well-known examples of this concept is BuildNet, which is rolling out its exchange platform in several markets around the country. Applications in this industry can be seen in the example of Texas Plywood and Lumber, a door and millwork distributor based in Grand Prairie, TX, which began accepting electronic orders from builders using the BuildNet system last November. Another notable development in the market is 1stwindows.com. Created by a California distributor, the site is expected to be used by about 1,000 builders and contractors for purchasing windows and doors within a year. Contrary to the expectations of many within the industry, the site has also been selling windows and doors to homeowners over the Internet since the middle of last year, reports Douglas Lopez, president of the company. Currently serving customers on the West Coast, 1stwindows.com will soon roll out nationally with window partners covering the rest of the country as well, he reports.
Looking at what’s currently available and listening to the predictions of experts, it’s clear there will be more than one model for E-commerce in the window and door business. What model will dominate is hard to predict, but the experts agree whatever is coming is coming fast, with rapidly evolving technology. Pointing to software that already allows a window to be configured and ordered on a jobsite using a Palm Pilot, Richard Boyce, president of Bid Master, suggests many of these new technologies will emerge over the next six months. Most suppliers agree. It is a matter of months, not years, before E-business practices start to be adopted in one form or another within the industry.
E-commerce continues to be a topic that everyone talks about, states Jim Naas, configuration product manager for Friedman Corp. “But the window and door business isn’t taking a typical ‘B2B’ or ‘B2C’ approach. It’s using the web for leverage to do a lot of things.” He points to not only transactions, but information exchange. Companies are turning to the Web to provide customers’ with access to information about orders, product availability, delivery status, and much more, he notes. “No one really thought a window could be sold over the Internet,” states Sherif El-Dibani of Computers Mean Business. “For the window and door industry, the Internet’s not about making money, it’s about trying to save money.” This view helped to insulate the industry from the boom and bust of all the Internet companies, he suggests. As a result, the window and door industry is not backing away from the Web, but actively exploring potential ways it can be used.
Despite last year’s crash of the dot-coms, talk about E-business hasn’t stopped, agrees Mike Owens, vice president/sales and marketing for WoodWare Systems. “It’s just become much better refined.” Like some other observers, he suggests that a considerable amount of caution exists in the market. “How long is it going to take to get everybody there?” That’s the most question building product distributors ask, reports Byron Hansen, director of E-commerce systems for Distributrion Management Systems, Inc. In answering the question, he states, the software is available to address a lot of users needs, but not everything is in place yet. In some areas, there’s no broadband or DSL infrastructure. It may need to wait until the builder can spec a job on his Palm Pilot. He notes, however, that using current configuration packages, it takes about a minute and a half to order the first window for a job. After that, with default values already in place, the remaining windows for a project take just seconds. As these tools evolve, there will be increasing pressure to take advantage of them. “The scratch pad and the faxed order will no longer be acceptable,” he states.
Despite the fact that a distributor has developed one of the first up-and-running Web sites that allows fenestration products to be ordered electronically, suppliers suggest that, within the window and door industry at least, it is among manufacturers where E-commerce is being pursued most agressively. “There’s so much competition with manufacturers expanding and stepping on each others’ turf,” Naas states. “They see maintaining or expanding their dealers bases as key.”
The primary interest is in systems which would allow a replacement window dealer, for example, to go into a home, take measurements, configure the order, and get the quote. In some cases, the dealer may be directly linked to the Web, he states. In other cases, he may dial up only to get the
latest pricing information or to place an order or orders. “Manufacturers see
a real need to create an effective dealer or front-end platform,” states Naas. “They want to provide functionality to help lock in their relationships.”
El-Dibani also sees the use of the Web to facilitate the dealer ordering cycle as the primary area of activity within the industry. Like Naas, he reports that most companies are looking at some type of hybrid system, rather than a live, over-the-Web E-commerce system, right now. The dealer, at this point, is not going to log on every time he places an order, he explains. As wireless technology improves and costs continue to come down, computers will at some point be on-line all the time. Currently, however, the model being looked at most frequently, he continues, is the use of the Web to download updates of a price book to a quoting/order entry system, and then use of the Web to upload collected orders to the manufacturer’s system.
“It’s not being done that much yet, but that’s what people are looking at,” El-Dibani adds, “That’s what they’re talking about.”
Manufacturers want to make it as simple a process as possible for their distributors to order from them, states Jim Brown, vice president of sales and marketing for eTechLogix. “They see a strong configuration system as key,” he notes, “yet they want to make it as intuitive as possible to place an order.”
Brown sees these systems migrating to the Web quickly, not only as a means to accept and acknowledge orders, but also to allow transfer of a variety of other information quickly as well.
Like the other suppliers, Brown reports there’s very little in place right at the moment, as far as Web-enabled systems go. Looking at the top 100 manufacturers in this country, however, he estimates there are at least a dozen major initiatives underway. Additionally, a still larger group of companies have said they intend to implement an E-commerce strategy.
“There’s a tug-of-war going on between what’s the latest and greatest,” states Chris Ransford, vice president of marketing for Soft-Tech America, “and what’s realistic, particularly for an industry with fairly narrow margins.” In addition to cost issues, he points to comfort issues as a factor still. But, he adds, the technical aspects of providing configuring and pricing of simple and even complex products over the Web have been addressed. These types of systems, already offered by manufacturers, will migrate more and more to the Web, he predicts.
In addition to simplifying the order process and eliminating mistakes, Ransford notes that the use of the Web will offer real benefits in providing customers with access to a manufacturer’s latest information and capabilities. It’s also a great equalizer for dealers, he notes. In non-Web systems, different dealers are often working with different versions of a manufacturer’s catalog and price book.
“We see it all growing, the whole B2B process,” says DMSi’s Hansen. There’s a lot of interest among his company’s wholesale distributor customers, but the the actual demand isn’t necessarily there yet, he notes. “Most know this is the future. There may be some question of when, but it’s commonly accepted that this is the way we’re going to do business.”
“The basic needs are still there,” states Woodware’s Owens, looking at his millwork distributor customers. “They’re looking for better ways to sell products and handle their sales channels more cost effectively.” He suggests that most business owners see the Web as a useful tool and they’re looking at E-commerce among their long-term objectives. But, he adds, “They’re just as likely to have higher priorities.”
E-commerce generated a lot of talk and excitement among building product distributors last year, and then things fell off, suggests Bidmaster’s Boyce. He sees the crash of the dot-coms as one reason, but also suggests that many companies in the industry have simply been too busy. He states that traditionally, the development and sales of quoting tools picks up when the economy is slow. People have to prepare more bids to get the same number of jobs, he explains. The same motivations is getting people looking at Web-based systems now.
Among distributors, Hansen states, the major concern continues to be improving efficiency overall. The main goal is to find new ways to add value for less cost. E-commerce is seen as a tool that enables distributors to continue to deliver value, as it enables customers to get information quickly and easily and provides the means to facilitate reduced handling, inventory, and transportation, while still maintaining service levels, he states. With mergers and consolidation, some firms look to E-commerce as a way to maintain viability, he notes as well.
Efforts to lower costs are a big reason for distributor interest in E-commerce systems, agrees Boyce. He points to a National Sash and Door Jobber Association Study which estimates that 7 percent of the cost of most millwork products is tied up directly in the sales process. About half of that figure, he states, involves the simple processing of the transaction, and E-business is seen as a tool to take much of that cost out.
Millwork and window and door distributors are beginning to have more defined ideas of what they want to do as far as E-commerce is concerned, reports Owens. One example, he states, is that a lot of companies are simply looking for a way to handle transactions in place of their existing EDI systems. They’re looking at the Web simply as a more cost-effective way to transfer orders and information, but they’re not looking to do anything with “a lot of pretty pictures.”
Beyond that, Owens sees a lot of companies looking at ways to open up their systems to provide more access to information It may be about product availability or order status, but currently, he reports, the Web is primarily being used to provide this information to remote or branch operations. In some cases, it’s being provided to outside salespeople and, in a handful of instances, customers.
Construction Supply Chain
As far as E-business is concerned, manufacturers and distributors may not have the only say in how E-business develops. A lot may be determined by the success of several emerging companies which aim to serve as connectivity providers and electronic transaction exchange hubs for the entire construction industry. Several companies are actively pursuing the market, but the best known of these, perhaps, are BuildNet (which currently has relationships with a number of manufacturers, including Andersen and Jeld-Wen) and Channelinx (which has been more actively signing up companies at the dealer/distribution level), but several others are actively pursuing opportunities in this market. Others include Buildscape, which is currently working with a number of building products distributors around the country, and USBuild.com, which is targeting the production homebuilding market.
Suppliers to Wal-Mart have systems in place, so they know when shelves are emptying, and it’s time to ship products to replenish supplies, explains BuildNet’s John Wagner. The concept of his firm, and a number of competitors, is to bring supply chain management to the construction industry and take costs out by enabling firms to go from a “just in case” to “just in time” mode.
The process begins by convincing builders to shift from a system where they fax orders for various products to the point where they generate purchase orders electronically. These orders, in turn, are received electronically by the supplier, which could be a one-step or two-step dealer, which, in turn, could relay the information to the two-step distributor or manufacturer, all automatically, Wagner explains.
Handling construction products, including overhead and carrying costs, etc., adds 4 to 8 percent to the cost at each level, he states. In discussions with window manufacturers, he notes, his firm has heard estimates that they could cut their costs as much as 20 percent if they could get out of the stock window business into the just-in-time, made-to-order model.
E-commerce and, more importantly, synchronizing the supply chain makes this possible, Wagner asserts. He points, however, that it’s not a question of cutting out the middleman either. The builder’s preferred supplier, offering local staging, delivery, and service, continues to be used under this model.
As a company, BuildNet can supply any level of software desired to aid in this process, he points out. As a supplier of construction management software to a significant number of builders, BuildNet is developing the demand side of the E-commerce equation, enabling a significant portion of the market to place orders electronically. For distributors, dealers, and manufacturers, it can provide a variety of services, ranging from complete ERP systems, ordering and configuration systems, or simply connectivity and synchronization to enable each firm to understand communications from others to be understood in its own system’s native code.
Many software suppliers more closely aligned with the window and door industry see these supply chain approaches to the market as having an impact, while others are more skeptical. DMSi’s Hansen suggests that for window and door distributors and manufacturers they may serve a role very similar to that of a VAN (value-added network) provider in today’s EDI systems. These systems simply allow one company’s back-end system to communicate with another’s, he states.
Boyce states that he’s convinced these types of systems are going to affect how orders flow for windows and doors. The key element driving it, he suggests, is the builder on the jobsite. He can save costs by scheduling labor because he knows exactly when windows or doors are coming, whether two doors are back-ordered, etc. Wireless technology will enable him, from the hood of his pick-up, to punch in sizes, check availability, and place an order.
While the builder of previous generations was slow to adapt to technology, Boyce points out, cell phones and lap tops are now common. The market is increasingly dominated by younger people who grew up using computers and want the latest gadgets.
Owens offers some reservations, not about the systems, but about the market in general, and how fast it may adapt to this technology. A number of distributor customers report that many builders don’t want to take on the responsibility of configuring and ordering windows or doors. “They just want to call the inside sales rep and let him do the take-offs,” he notes. “Yes, there are largebuilders that look at their costs and look at automated systems, but there are a lot of small and medium-sized builders who are more focused on what Alan Greenspan is going to do next.”
Bringing connectivity to all parties involved in the construction supply chain may promise to take costs out of the system, but it also presents conflict. Currently, software suppliers note, most window and door manufacturers are looking at proprietary quoting and ordering systems.
“Looking at the exchange networks, there’s not much interest among manufacturers in having their product one of many,” reports eTechLogix’s Jim Brown. When most talk about E-commerce, he continues, window and door manufacturers foresee a “private network” which links them up with and provides specific capabilities to specific customers. He suspects that’s what more distributors are considering too.
The whole impetus for many manufacturers to develop a dealer front-end system is to enhance the dealer/manufacturer relationship, Friedman’s Naas states. “The manufacturers want something proprietary, that enables them to offer an enhanced level of service.” He also notes that there simply isn’t that much interest in putting a configuration and ordering tool directly in the hands of the builder.
Computers Mean Business’s El-Dibani sees manufacturers primarily interested in proprietary systems too, but cautions that they need “to put themselves in the dealers’ shoes.” What will software do for the dealer? How will it make the dealer’s day-to-day business activity more efficient? He also asks whether such software will allow the dealer add other products such as siding, roofing, and installation charges? “The point is that if the software is designed to address the manufacturer’s needs with little regard to what dealers really need,” he states, “it is a wasted investment on part of the manufacturer.
While he foresees different companies maintaining unique systems which meet their own needs, Wagner warns that proprietary approaches to E-commerce have their limitations. The builder, for example, doesn’t want to go to 100 different sites to order all the thousands of different products needed for the typical home, he states. The real costs savings, up and down the supply chain, he notes, comes in automated purchasing.
Boyce shares the concern about proprietary systems. The builder, and even the distributor, doesn’t want to have to learn how to use a different ordering system for each manufacturer. Web-enabled ordering systems can certainly feature the manufacturers’ look, with its logos and color schemes, but the user has to know how to use it intuitively.
A proprietary approach doesn’t serve the dealer, 1st Windows’ Lopez points out also. He asks what it would be like to use different word processing programs to write letters to different suppliers.
This issue highlights the fact that E-commerce is likely to raise a whole host of questions as it progresses. “We’re driving down a road with no maps,” says Lopez. “It’s all uncharted territory.”
El-Dibani sees E-commerce potentially disrupting some traditional distribution channels. One potential development, he foresees, is “super” dealers emerging on the Web, allowing builders or contractors to place specs for a job on a site, and then receive bids from a variety of manufacturers.
However it develops, E-commerce will come quickly, El-Dibani notes. In addition to the benefits it offers, he points out the new ASP or application service provider model that is moving into the software/computer services industry. Customers are billed monthly for services, rather than making a large capital investment in systems. The cost of taking advantage of new technologies ia coming down significantly as a result, he states.
Friedman’s Naas also sees use of these technologies accelerating quickly. “We’ll get to the point soon where we won’t have an ‘E’ anymore. This approach is just going to be ‘commerce,’” he concludes. “Technology eventually loses its identity and simply becomes a standard part of the infrastructure.”
What Happens When Windows Are Ordered Over the Web
On-line since Summer of 2000, 1stwindows.com has proved to be successful selling name brand windows at wholesale prices, reports Douglas Lopez, president and founder. Started as a subsidiary of California Distribution Center, Inc., a Signal Hill, CA, based dealer, the site offers products from a variety of leading manufacturers.
“It’s not about price,” Lopez states, explaining why people are buying windows over the Internet, “It’s convenience.” They want to save money, but more importantly they want to save time, he says. In general, the online-buyer tends to have a little higher education level, and they have or want to develop a better knowledge level about the products they buy, he notes also.
The site’s customer base consists of about two-thirds building professionals and about one-third homeowners. And though it may surprise many in the industry to hear consumers are ordering their own windows, Lopez reports no problems so far. The site provides a lot of information about measuring and ordering windows, and full phone support is available as well. Looking at consumers, he suggests, that as an industry, “We need to give them more credit than we do.”
From a company standpoint, he says the site as generated a tremendous amount of new business. While California has been in a “window recession” in the past year, he states his firm has enjoyed extremely strong growth. At the same time, this type of E-business takes a lot of the load off, as so many aspects of the business are automated. “It really does give you more time for customer service.”
As for customers of his traditional “bricks-and-mortar” operation, some use the Web site, others are “never going on-line.” That’s okay, he states. “We don’t want to lose customers and we’re going to support them.” He notes that he still goes out on calls to show people samples and offer other traditional “customer services.”
As for the reaction of manufacturers, he describes it as “mixed.” Some are supportive, others are concerned about their relations with other dealers. “Just about all of them,” he adds, “want to find out what we’ve learned.”