False starts don't mean end of race

By Len Williams President Progressive Solutions Inc. www.progressive-solutions.com

llfhen I was approached to offer my views on the future of e-commerce in the wood products industry, I was delighted. Despite some highly publicized industry failures, I still believe that e-commerce will become an increasingly vital tool for wood product companies to reach customers and improve businesses. But before ecommerce can be successful, we must understand why it has failed in our industry and shore up our business practices to ensure we're truly ready to put it to use.

Nowhere have the shortcomings of e-commerce been so visible as in the wood products industry. I believe this is because many e-commerce providers who moved into this industry didn't understand the unique nature of the wood products industry. Time and again, I witnessed technology experts make grand proclamations like "e-commerce will revolutionize how you do business." A myriad of Web sites and Web portals, auction houses and exchanges were set up with promises of spectacular benefits. At one time, there were 32 companies offering e-commerce-type solutions to the wood products industry. I know of only a handful that remain today.

The problem was, few understood the challenges of introducing e-commerce to an industry that traditionally has made limited investment in business information technology. In many ways, the wood products industry just wasn't ready for the leap to Internet-based transactions. With automation of day-to-day transactions (purchase orders, invoicing, shipping, inventory, etc.) still not pervasive, and little standardization of business practices and terminology across the industry, it was (and continues to be) very difficult to implement business-to-business ecommerce. In most cases, those who tried were set up for disaster.

To learn from the failures associated with the first wave of e-commerce, we must recognize that in an industry with already tight margins and items that are near commodity pricing, real savings come from automating and streamlining processes, not from selling items over the Internet. Those who have the clarity of vision to see the big picture and adopt a step-by-step approach to a practical business model will succeed.

In my view, the revolution is not e-commerce. The real revolution will be the standardization and automation of business processes throughout the industry. Out of this ecommerce will grow.

Right now, e-commerce technologies are best used to improve how information is distributed, to other businesses and consumers. Providing better customer service and faster information turnaround are currently the most practical and realistic applications of Internet technology.

At Progressive Solutions, we see this taking place in three forms: Electronic Data Interchange (EDI), Webbased interfaces to a company's operations, and net exchanges. The key to the success in any of these applications is effective business software, such as Progressive Solutions' Lumber Track, running in the background.

The demand for EDI is higher now than ever before. Major companies throughout the supply chain-primary producers, wholesalers and retailers-are demanding that suppliers interact with their EDI systems for purchase orders, shipping documents, receipts and invoices. To do business with these companies, wood products suppliers are going to have to adapt.

Legacy EDI systems use private networks and communications protocols to transmit electronic transactions from one business to another. Newer EDI systems use XML (Extensible Markup Language) so that secure transactions can take place over the Internet, saving the costs of transaction and private network leasing. At Progressive Solutions, we have developed numerous custom Application Program Interfaces (APIs) for legacy EDI systems. Progressive Solutions is also developing an XML interface as part of its business-to-business (B2B) e-commerce capabilities.

Web-based interfaces allow a company to set up a website where customers can use standard Web browsers like Microsoft's Internet Explorer or Netscape to get inventory information, place or change orders, and check delivery status. Customers can easily find basic information themselves, freeing up sales personnel for more in-depth customer inquiries. Norbord's Onbord online customer access Web site is one example of a PSI customer using a Webbased interface to Lumber Track to improve efficiency and customer service.

Network exchanges are interactive trading sites where members buy and sell lumber and building products through bid/ask or auction mechanisms. Despite a bumpy start in the industry, PSI recognizes this emerging business opportunity. We are working closely with industry-led consortiums, such as ForestExpress, whose industry knowhow and drive for efficiency will provide the impetus for success.

Moving into the future, I believe that electronic information-exchange technologies will continue to expand, particularly as a way to "free up" sales people and other resources. And, based on the gradual standardization of our industry, the volume of Internet-based sales and transactions will also expand, but will represent only a portion of sales, say for repeat or pre-negotiated orders. That said, the foundation for the second generation of e-commerce in the wood products industry must be user education, industry standardization and automation of processes and procedures. Companies who begin this process now will be in the best position to take advantage of the second wave of e-commerce.

Remember, it's not who is out of the gate first, but who is moving fastest in the right direction.