LOCAL DISTRIBUTOR "ORDERZONES"?
W.W. Grainger recently announced a new, one-stop-shop MRO procurement site at www.orderzone.com. Besides Graingerís industrial supply items, any potential customer can buy uniform services, lab products, office supplies, safety supplies and electronic components from different, big-name, national distributors. The site offers a unified front end for customers with: one registration, one search engine for all distributor databases, one order form and one invoice paid however they might like. Presumably other complementary, national, best-of-channel distributors may apply and join this on-line marketplace.
What type of customer will buy from this site? Large MRO buyers have not generally been using big distributor standalone sites for order entry because they have their own established and rigid ways for buying. Big MRO buyers have also been pre-occupied with assessing a number of e-MRO procurement software solutions. Testimonials from the 30 or so companies/institutions that have installed these e-MRO packages to date have reported sensational ROIs for a number of reasons. Widespread installations for these e-MRO solutions have still not occurred because the packages are very expensive and complex.
But, if MRO buyers still want breakthrough solutions sooner rather than later, will many of them settle for simpler web-based purchasing solutions? An excellent case example of choosing a simpler solution stars Pharmacia & Upjohn. This firm has put contract suppliersí icons on the corporate intranet so that employees can click on an icon to go outside the corporate firewall to the distributorís site and often into a specially designed, sub-catalog set up for the company to buy what they need. This approach still empowers the end-user and cuts internal paperwork costs dramatically. Orderzone.com could allow these simpler, fall-back Internet purchasing deals to be built quickly with great cross-selling benefits for the participants and even more paperwork consolidation benefits for the customer.
Should local, independent, distributors competitively respond? If so, how? First, use Orderzone as a vision study. Then survey the interest that large, local, standalone plants might have in using a simpler, standardized web-solution as Pharmacia & Upjohn has done. If there is interest, get a local consortium of best, complementary distributors together and get quotes for creating both individual and unified web site capabilities. Perot Systemís Time0 division did Orderzone.com, and Isadra (www.isadra.com) offers the same distributor consortium solution at a very affordable price.
Local consortiums could then have two big opportunities with an orderzone knock-off. They could maintain their local edge with the large, local, stand-alone buyers that might now or soon be seeking a 20/80 intranet/web solution. And, the consortium could cross-sell the bottom 80% of their cumulative base of total accounts on a do-it-yourself, web order-entry basis. This would reduce the transactional costs for both old and new accounts enough so that these accounts could become profitable. At the present time, most cost more in total transaction costs than they generate in margin dollars.
Are e-MRO software solution providers and Orderzone.com stimulating an emerging market opportunity that local players could win? What are the projected cost/benefits for local distributor consortiums that invest in a unified, cross-selling web solution? Are these questions worth answering?
Article 8.3 Merrifield Consulting Group, Inc.