NEW ORLEANS — Portola Packaging Inc. took a mundane task — monitoring customer complaints — and put the process online. The result helped reinvent the San Jose, Calif.-based closure and bottle molder.
In early 1999, the plastic packager totally scrapped its old ordering system, set up a new, automated approach and even started a new software company that will offer Portola's system to other processors.
The change will give Portola a leg up on what will prove to be a fast-growth industry, said Portola Chairman and Chief Executive Officer Jack Watts.
"We found that over half our defects were customer complaints not related to product or manufacturing," said Watts, who spoke at Plastics News' E-Business Strategies & Opportunities briefing, held Feb. 22-23 in New Orleans. "We'd had the wrong delivery date or the wrong color or the wrong quantity.
"We looked at it pretty rigorously and thought that the only significant improvements could come from using the Internet."
Other companies are coming to the same conclusion. A smattering of panelists and audience members at the PN conference said they are considering converting fairly routine in-house operations — such as inventory management, shipping and production flow — to a more effective, electronic-based system.
The savings that firms achieve by harnessing the power of the Internet can make a dent in company administrative costs, according to several experts. But the path to total e-business still is being laid brick by brick.
About 80 percent of manufacturing and processing companies in the world supply another processor, said Archie James, IBM Corp.'s global marketing executive for midmarket business. Doing that more effectively should be a major focus of e-business, said James, who moderated a session at the New Orleans conference.
"I don't think we know about all the capabilities that exist in this wonderful medium" he said. "[The issue is] what are the back-office, ugly processes that can be improved through use of the Internet."
Companies can spend anywhere from several million to tens of millions to create a wide-spanning, e-commerce system, said Chuck Skerya, director of business development at Manugistics Inc., a Rockville, Md., software developer and computer-business consultant. Companies might not have any choice but to forge ahead. Those processors that gain the cost savings from going electronic first might make others obsolete, he said.
"In reality, if you're not doing this in 24-36 months, you might be out of business," he said. "Companies will be expecting to transact business in an Internet environment. The cost structure is such that a company can't afford not to compete."
Yet, the shift to e-business is less than a year old at many firms, Skerya said. Only a few firms have grasped the mechanics of moving to the new model.
Companies still must look at the big picture, define roles and study the flow of information, suggested Bradford Mattson, executive vice president of Valley Forge, Pa.-based CertainTeed Corp. and president of the firm's exterior products division. But over the next 18 months, what is set in stone today could be entirely different, he said.
"There's no e-commerce yet, in my view," said Mattson, a conference speaker. "There's the Internet and the intranet. But I don't see any e-commerce going on."
Yet Mattson's building products company, which is North America's largest vinyl siding extruder, is taking some baby steps. CertainTeed has signed a partnership agreement with Internet company BuildNet Inc. to sell products over its Web site. In the future, building products distributors will assess the product they want and hit a computer key to order it.
But the site has not been launched yet. BuildNet, based in Research Triangle Park, N.C., is spending much of its time raising the financial resources to run the site, Mattson said.
CertainTeed also plans to offer marketing support materials over its own Web site. The time savings in ordering products or marketing materials on the Internet could save 8 percent of CertainTeed's administrative costs, he said.
For Portola, its online ordering system has netted the firm savings of about $750,000 a year, Watts said. Portola had annual sales of $190.7 million last year.
Food distributors now click on a computer-screen icon to order a product and can check its delivery status instantly. The system also has reduced order confusion, Watts said.
"Now, we're able to display product and let customers see for themselves before ordering."
The firm also looked at the time required to process telephone or fax orders, Watts said. Each order could cost $50-75 to process, time eliminated by the click-and-buy approach used now.
Portola executives a year ago started a sister company, Sand Hill Systems of San Jose, to develop and sell the software to other companies wanting to adopt a similar online ordering/tracking system. The company claims it can start a processor on its computer software in about a week.
Other companies have differing demands. Injection molder Nypro Inc. of Clinton, Mass., takes what it calls "the McDonald's approach" to becoming a global supplier, just like the fast-food chain, said Mike MacKenty, vice president for information technology.
But that has its challenges, too, he said. The company is in the midst of coordinating its 24 molding plants in 11 countries on one computer system and sharing technology and training between those facilities, MacKenty said.
The company also will report production and scheduling information to customers on an online system. The work not only takes time but a degree of caution to do things right, MacKenty said.
"It's not the time to bring the shotgun and blast away at everything out there [in the supply chain]," he said. "We have an opportunity to find value and doing things [over the Internet] that are a plus for our customers."
Yet, some auto suppliers — one area served by Nypro — are indeed blasting away at plant inefficiencies. Toledo, Ohio-based Dana Corp. — with more than $10 billion in sales — is attempting to put its plants worldwide on the same page with e-business.
Largely through acquisition, Dana facilities now operate more than 30 different enterprise resource planning systems, including separate systems for inventory and shipping, said James Woodward, e-commerce director.
The company wants to winnow that down to one system for each of Dana's 10 core products worldwide, said Woodward, who spoke at a March 6 automotive e-business forum in Detroit. By Sept. 30, the firm expects to have 50 plants on the universal computer platform, he said.
Others already have bundled seemingly ill-fitting pieces. W.W. Grainger Inc., a 72-year-old, Chicago-area industrial supplies firm with $4.3 billion in sales, has transformed itself into "Digital Grainger" by offering more than 220,000 catalog items online, said Tom Condon, vice president of the Digital Grainger unit.
Condo said the challenge for Grainger when it started evaluating the site two years ago was in organizing a diverse product mix used by 1.4 million customers and 12,000 suppliers.
"We offered a spaghetti bowl of things not connected properly," Condon said. "We organized them in the supply chain to better serve our market, customers and suppliers."
For many companies, working with e-business will mean more than new computer software and mouse pads.
Berry Plastics Corp., a packaging company in Evansville, Ind., was asked by aerosol-can customers and others to move into the fledgling arena.
The company has set up "e-Berry," a team of executives that will create an online ordering system, said Curt Begle, who manages a Berry e-commerce team.
Berry hopes to have its pilot project tested with several customers by summer. But the company also is looking at replacing many of its in-house communications systems that link 11 plants, Begle said.
The cost of the entire package could cost Berry anywhere from $50,000 to $5 million. Future needs are uncertain, Begle said.
"No one's sure exactly what they're looking for yet in e-commerce," he said. "Right now, it's about order processing, but times are going to change. But all we know is that the earlier you enter as a player, the better you're going to be."