GE UNIT BEHIND PUSH FOR ONLINE PURCHASING

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DETROIT—As Gloria Wandyez at Textron Automotive Co. tells it, she and her staff of six buyers no longer fritter away hours pushing paper. Instead, she's enlisted the aid of a purchasing computer network from General Electric Information Services to cut out the dead time and make better use of her staff's talents. Now, by using the system, order processing time has shrunk from 72 hours to less than a day, said Wandyez, Textron purchasing director for resins, coatings and systems.

Textron, an automotive plastics parts supplier in Troy, Mich., is one of several companies completing a three-month test of GE's new software. The Rockville, Md., GE division introduced the software package in June 1996, as one of the first Internet-friendly mechanisms to streamline the purchasing process — traditionally a drawn-out, tedious affair at many corporate offices.

The electronics package has proved to be a hit internationally at Fairfield, Conn.-based GE. The multibillion-dollar company plans to use the network, called TPNPost, for eight of its business units. To date, both its GE Lighting and GE Capital divisions are using TPN, which stands for Trading Process Network.

The company now hopes to market the service to outside firms, such as Textron, which can integrate the software with internal operations.

But the system originally was designed for GE's sole use. By the end of summer, GE will use TPNPost to order $1 billion of supplies and services from 1,400 vendors, said TPNPost product manager Rochelle Cohen. By year-end 1998, that figure could balloon to $4 billion from GE and other TPNPost subscribers, she added.

``It's a virtual shopping mart for purchasing departments,'' Cohen said by telephone from her Rockville office. ``The system allows any company to use the computer and take advantage of volume buying power and time savings. A huge pipeline of suppliers can be integrated into a single network.''

The trick will be getting those companies to make the switch from their accustomed, paper-heavy buying procedures, said Barbara Riley, electronic commerce research director with Gartner Group Inc. in Stamford, Conn.

``It can be pretty successful,'' Riley said. ``But GE has to sell their case for businesses to use it. And that requires showing companies that they can save significant amounts of money using the service to augment their purchasing activity.''

There's little denying that the market is swelling. By 2000, the amount of Internet business-to-business transactions is expected to range anywhere from $2.2 billion to $150 billion, according to figures from various technology research firms. Whatever the numbers, expect the industry to continue cresting, Riley said.

Textron, an early backer of GE's computer-purchasing vision, buys into those optimistic projections. The company, which recorded $9.3 billion in sales for 1996, just completed a pilot program with 30 of its top suppliers.

By September, the company plans to conduct computer-driven bidding on a mandatory basis with most of its 700 materials and parts suppliers, Wandyez said.

When that occurs, about $500 million worth of Textron transactions will be made over GE's system. For every bid request sent out, the company will save an hour compared with the traditional quoting system, Wandyez said.

The company currently sends more than 2,000 bid requests a year. That translates to time savings of more than 83 days a year.

``From the purchasing standpoint, it's a winner,'' Wandyez said. ``We were looking at ways to eliminate nonvalue-added activities and busywork. We spend hours collating pieces, mailing and faxing data, putting spreadsheets together and performing other activities unrelated to making a purchasing decision.

``It just isn't time well-spent.''

The software is expected to consume much of that busywork. Instead of having Textron buyers sort through a supplier list, the system automatically pre-qualifies eligible bidders by their standard industrial classification, or SIC, codes. Instead of Textron having to send supply requirement manuals, its vendors now can access the manuals themselves via computer.

More importantly, the main headache-inducing culprit of the current system — that of laboriously creating and sending bid requests — now can be dispatched by computer. Textron even developed a standard computerized bid format sheet that eliminates the typing of proposals. Plus, whenever the request goes out, the supplier's computer sounds a notifying beep.

With quote requests arriving in real time, suppliers can respond in hours instead of days, Wandyez said. And because every supplier receives the same information at the same time, no one can gripe of favoritism.

``The system encourages ethical behavior,'' she said. ``It's more difficult for a supplier to gain an advantage.''

The information also comes back to Textron truncated and simplified, said Phil Somers, Textron's purchasing director for components.

``A big factor is the bid summation form driving the decision process,'' he said. ``In the past, if we received a written bid document, our buyers would have to read it, interpret it and put it into a bid summary on a spreadsheet. This system summarizes the information electronically.''

Textron is moving forward as a gung-ho convert. Plastic component and stamping suppliers were expected to sign on to the program by June 1, while tooling and engineering service suppliers were handed a Nov. 1 deadline.

Another large supplier, ITT Automotive Inc. in Auburn Hills, Mich., is also eyeing use of the software. The company is just beginning its three-month pilot program with 25 suppliers. If it's successful, ITT would like to add another 100 suppliers to the on-line quotation system by end of the year, said ITT vice president of purchasing Dennis Racine.

In both cases, supplier costs are fairly minor, said GE Information Services spokesman John Berry. All it takes is subscribing to an Internet service and receiving free training from GE. Suppliers also must fill out a pre-qualification form detailing their products and services.

To subscribe to the service, Textron and other customers paid about $7,000 to conduct the pilot program. The cost to subscribe on a full-time basis was not disclosed.

GE also is moving forward rapidly with the program. At GE Lighting in Cleveland, the length of the bid process for most items has been cut from 28 days to just seven to nine days, said Ron Stettler, manager of global sourcing systems. Moreover, the time saved has allowed the division to send its bid requests to more suppliers — lowering the cost of goods by 5-20 percent because of increased competition. The firm now sends bids to plastics companies in both the United Kingdom and Hungary, Stettler said.

Of course, the thought of an expanded supply pool doesn't necessarily thrill GE's vendors. One of those suppliers now on GE's system, CCC Machine Works Inc. in Memphis, Tenn., now must compete with suppliers overseas and domestically for jobs to ship machine parts and repair GE's presses.

``We know it's similar to how a fax machine was viewed a few years ago,'' said CCC Vice President Carey Conlee. ``It's going to be mandatory and the standard way to do business. But if GE looks more at overseas suppliers, it's more difficult for us to compete in price.''

Yet, tough decisions are becoming the way of the world. Textron hopes to cut its purchasing staff by 20 percent in the next few years and its costs by 5 percent a year to appease a lean automotive industry, Wandyez said. TPNPost is one way to achieve those goals.

And at GE Lighting, the division hopes for similar economies of scale. That includes shaving time in creating complex drawings sent with bid proposals to machine parts suppliers. Now, the drawings can be digitally scanned and stored in the system.

Time is especially of the essence in the automotive industry, where Textron makes its living.

``In the past, it's been difficult to handle the sheer volume of information in a timely manner and make a quick sourcing decision,'' Textron's Somers said.

``On top of that, we face the pressure of an automotive industry that runs on compressed timing. They want it all now, and we're now better able to give that to them.''