By Doug Chandler, Executive Editor, Electrical Wholesaling
The electrical industry is said to be among the most advanced supply channels in the U.S. construction and industrial supply markets, in terms of its handling of product data. That being the case, it’s hard to know whether to pity the other channels or envy them.
Clearly, in terms of serving the information needs of sophisticated customers and pursuing transaction efficiencies, the electrical industry is in a better position by far. But getting where it is now has been a torturous and contentious undertaking for many of the individuals and companies involved. And the present situation – at some undefined midpoint along the journey to a nirvana of frictionless information flow throughout the electrical supply channel – is not without its controversies.
Ten years ago, the electrical industry embarked on a daring adventure when a group of distributors and manufacturers announced the creation of the Industry Data Exchange Association (now known simply as IDEA). The new association would be jointly owned by the leading distributor and manufacturer associations, the National Association of Electrical Distributors (NAED), St. Louis, Mo., and the National Electrical Manufacturers Association (NEMA), Rosslyn, Va. IDEA’s mission would be to develop, manage and promote an industrywide system for handling product data electronically. The centerpiece would be the Industry Data Warehouse (IDW), a single repository of comprehensive and standardized electrical product data that would be synchronized with manufacturer and distributor business systems throughout the industry.
The creation of IDEA was actually the culmination of many years of work and discussion in NEMA technical committees, joint industry task forces, board rooms, back rooms, hospitality suites and hotel rooms. The project was aimed at addressing three basic issues: the need to drive cost out of the supply channel by eliminating wasteful and error-prone methods of exchanging product information, the desire of manufacturers to regain control of descriptive and pricing data regarding their products, and the awareness that existing methods of handling data would be inadequate to support those who wanted to pursue the promise of electronic commerce.
Those were heady days, when the dot-com bubble was inflating with the sound of ten thousand hot-air balloons, when predictions were rampant that "disintermediation" would slay entire supply chains, when job titles such as "webmaster" still seemed whimsical and a bit ridiculous. Jumping in and starting something, finding a way to leverage the power of networked computers for the good of the industry, was a matter of survival.
Looking back, things have worked out as we might have expected. Some manufacturers, distributors and independent manufacturers’ reps (who were eventually brought into the mix) have taken the promise of synchronized data to heart and run with it (if interminable, grinding technical standards meetings and endless hours of troubleshooting computer code can be thought of as a form of running) and sought to make new converts along the way. Others have tried by fits and starts to participate, though skeptically – not entirely sold that it would work but not wanting to miss out if it did. Still others looked at the proposals, shrugged and went back to doing business as they had always done it. And those of a political bent have sought to work the angles.
From a technical standpoint, the progress has been impressive, though neither as smooth nor as fast as the founders of the movement might have hoped. The biggest technological success also became the source of IDEA’s financial success thus far, and it wasn’t even part of the original plan.
In the initial vision, manufacturers and distributors would connect to the IDW over a licensed wide-area network through a contract with since-defunct telephone carrier Worldcom. When IDEA hired Mike Rioux as CEO, a position he held for most of the organization’s first decade, until last month (see "Change of Command," p. 31), he examined the terms of the Worldcom deal and found that they were very unfavorable to IDEA. The association’s counsel found a way to get the organization out of that deal and IDEA embarked on a project to build a proprietary value-added network (VAN) dubbed the Industry Data Exchange (IDX).
By operating its own network, IDEA was able to offer electrical distributors and manufacturers access at rates well below comparable third-party VANs, with functionality tailored to the needs of the members, while creating a new source of revenue for the association.
The IDX has attracted members who are interested in using it for electronic data interchange (EDI) with suppliers and customers, outside their interaction with IDEA. Transactions with the IDW itself are free of charge. The system currently has 348 companies signed up as users, and handles on average 6.5 million kilocharacters per month.
"The IDX is almost a no-brainer for people, and that’s helping to fuel the other growth," says Todd Kumm, chairman of the IDEA board of directors and president of Dakota Supply Group, Fargo, N.D.
As for the IDW, the initial version was built to minimize human intervention in the belief that the fewer opportunities there were for people to mess up the data, the better for all involved. When that system proved so esoteric that no one but power users and ubergeeks could configure its incoming and outgoing data streams, IDEA made the decision to go back and rethink the interface.
The transition to IDW2 (the 2 has since been dropped) was a key turning point, and helped shift the conversation from technical implementation problems to the quality of the data itself, says Steve Bieszczat, vice president of information services for Activant Solutions, Livermore, Calif., who from the beginning has managed IDEA’s technologies.
"The IDW2 peeled back the curtain to the data content. If the machine’s really clumsy to use, the data could be fine, but you could never really tell. Now you peel it back and people can download data, and that highlighted some of the data issues," Bieszczat says. "Shining lights on things, they either run and hide or they clean themselves up. So there’s been quite a bit of focus on the manufacturer community – distributor back-pressure saying ‘fix this, fix this, fix this’ – but it isn’t at the rate it needs to be."
When IDEA was conceived as a way for electrical manufacturers to reclaim control of their data, the intent was to bypass third-party publishers of product data. These companies, the largest being Trade Service Corp., San Diego, published standardized data on the most common electrical products, with price lists and product descriptions for use by end users in preparing quotes. Trade Service’s influence was such that its product categorization scheme became the industry’s de facto standard. The information the third-parties published may or may not have been provided to them by the manufacturers. For products on which they couldn’t get data direct from the manufacturer, these companies would come up with their own estimates, a practice that rankled manufacturers who chose not to participate, as well as some distributors.
In hindsight, it seems the industry may have overestimated the ability or the willingness of some manufacturers to undertake the daunting task of collecting, scrubbing and formatting their data for inclusion in the IDW. Through several waves of consolidation since manufacturers began using computers, it was not unheard-of for the larger manufacturers to have a dozen or more different systems operating in isolation at far-flung plants. Gathering product data from all those systems and keeping it updated in real time could be a monumental chore, and some manufacturers have decided to invest their resources elsewhere. Even for those who do their best to provide timely and accurate data, synchronizing with their distributors doesn’t come easily.
"We’re still getting data with a lot of mistakes in it," says Bob Wittig, corporate IT manager for Independent Electric Supply, San Carlos, Calif. "Some manufacturers are spot-on and highly reliable, but the majority don’t seem to be able to produce high-quality data. That was the role Trade Service fulfilled for many years, cleaning it up, standardizing it. Now they’ve cut that out of the loop in some cases and people are now on their own to deal with the reality of the situation."
To deal with this reality, Wittig hired a database specialist from Materials Express whose full-time job is to check and correct the data. He receives a feed from the IDW and edits it, making sure there are no prices over $100,000, no missing units of measure, no missing UPC codes.
Many manufacturers are working with distributors to uncover the root causes of errors exposed through the IDW. A few years ago, IDEA created a data-match program to help manufacturers and distributors audit their systems item by item and resolve discrepancies.
Through the data-match process, lamp manufacturer Sylvania, Danvers, Mass., partnered with selected distributors for a close look at the data.
"In first-pass yield, we found double-digit errors for EDI orders, around 13 percent to 15 percent on a line-item basis," says John Wilson, manager, e-commerce and business development, for Sylvania. "It was a small dollar amount, but it still holds up an order. And our product line is only 4,000 to 5,000 SKUs, which is small compared to some other manufacturers."
Manufacturers who make a lot of customized products would have lower error rates, Wilson says, while some manufacturers that are not really prepared for EDI might see error rates much higher.
Through its analysis, Sylvania discovered that many of the errors were caused by new product introductions and discontinued products, combined with distributors not pulling down data updates on a timely basis.
Working together to reconcile such discrepancies has enabled both distributors and manufacturers to clean up their databases, correct mistakes and improve communications. "The process the IDW has facilitated got the ball rolling, and now we can go one-on-one with some manufacturers. We know how to do it, where the gaps are, and we’re able to eliminate a lot of bad data on our part and their part," says Wittig of Independent Electric Supply. "It’s made the whole process more streamlined."
The manufacturers who have wrapped their arms around synchronization and done the work to get the data right reap constant rewards from a more efficient supply chain. Few manufacturers, if any, have more pieces to bring together than Square D/Schneider Electric, but the company has made data synchronization a pillar of its channel strategy.
Ann Adams, who works in channel development/operations for Square D/Schneider Electric and is chair of IDEA’s Industry Standards Committee, is enthusiastic about the benefits. "We have seen huge reduction in the cost associated with manual intervention, both in the SPA best practice process and the inbound purchase order process. Regardless of how much e-commerce or how much EDI activity one participates in, if there’s not data synchronization none of those transactions are going to work the way they should," she says.
Square D/Schneider Electric refreshes its data on the IDW every Friday night so distributors can set up their systems to download the latest data over the weekend or on Monday morning, she adds. "We believe in IDEA and their services so much that, last year the decision was made to offer our authorized premier distributors the ability to use their premier co-op funds for 50 percent of the IDEA one-time membership fee and several distributor firms have taken advantage of this opportunity."
The benefits are there to justify the work and the cost of getting through the synchronization process, says Evan Gaddis, president of NEMA.
"It is a major undertaking, but it’s a matter of, ‘Pay me now or pay me later,’" Gaddis says. "Sooner or later, they have to tie these systems together. When you look at the supply chain and the cost, the economies of scale are all there. Let’s get there now."
To keep new product introductions and discontinued products from causing future discrepancies like those found by Sylvania, IDEA has created a lifecycle management function that flags products according to where they are in the path from introduction to the discount shelf. The system also has codes to alert distributors when there are suggested replacements for obsolete items and codes to alert them about product recalls.
IDEA’s standards committee reviews its product data categories on a rolling cycle and constantly considers new categories for inclusion, says Mary Shaw, IDEA standards director. Several initiatives currently under development give a sense of the direction the IDW will take in the near future.
As an example of IDEA’s constant evolution, this is a feature the IDW’s founders were adamant should never be included in the system. Demand from both manufacturers and distributors caused the association to reconsider, but the final solution arrived at in the standards committee keeps net pricing off the system while offering three ways to transmit it.
Steve Tecot, former owner of Tecot Electric (acquired by Rumsey Electric in 1997), was in the thick of all the projects that led to IDEA’s creation. (In fact, he’s glad to take credit for suggesting the idea in the first place, in a hotel-bar conversation about CD catalogs with Jim Ford, then CEO of Graybar Electric, John Haluska, then with Thomas & Betts, and Dave Crum of Crum Electric Supply.)
"One of the principles we had was that the IDW would be a one-to-many relationship, so the manufacturer could load the data once and keep it updated, and all the distributors would pull down the same data. We said we should never ever transmit distributor-specific data. Especially not net pricing," Tecot says. There’s no reason to have sensitive information like that in a system that’s being accessed by everyone in the industry, he adds. "There are easier ways to do it anyway. We included three fields for price group codes that the distributor could use with a matrix the manufacturer would send outside the IDW. I think, when everybody started screaming for net-into-stock costs, they didn’t realize there was already a solution in place."
Harmonizing with global standards
IDEA is helping develop industry-specific versions of standards ranging from United Nations Standard Products and Services Code (UNSPSC) sets, EDIFACT and a subset of ANSI ASC X12 standards for compliance with the United Nations EDI standards, XML standards based on RosettaNet, even RFID standards.
Data content expansion
Expanding the amount of enriched product data available through the IDW is becoming a critical factor for anyone who wants to develop e-commerce capabilities comparable to the big commercial sites – Amazon.com, Land’s End, Grainger – that are shaping the expectations of a whole new generation of buyers.
It’s a crusade for a handful of distributors, and their numbers are certain to grow. David Starr, director of e-business for McNaughton-McKay, Madison Heights, Mich., is charged with managing all the company’s websites, online storefronts, and everything that touches the customer via the Internet, EDI, peer-to-peer transmission or anything else. The major auto makers are Mc&Mc’s primary customers, and their sophistication in the use of data is considerable.
The data he needs from manufacturers so that he can offer clients such as BMW the kind of catalog that would ease their purchasing and his reporting capabilities is actually a small list: UNSPSC codes for each item; two images – one thumbnail and one high-resolution; a verbose product description with full nouns to aid searchability; a handful of features to help the buyer make a selection once he or she gets down to a half-dozen comparable products; and a URL linking to the manufacturer’s site for technical specifications, MSDS sheets and other details. The data fields for including this data are either already in the IDW standard or under development. The problem is getting manufacturers to provide the data, Starr says.
Catalog houses such as Grainger and McMaster-Carr can create their own online catalogs because they already own the content, Starr says. "For us, as full-line electrical distributor, my exposure is in the millions. There are 1.8 million products in our legacy catalog (a compilation of manufacturer catalogs). I refuse to build content for all those products. One issue is liability – if I misrepresent something, if the content is inaccurate and a product gets misapplied, I’d be exposed to legal issues."
Some distributors are looking beyond the existing IDW hoping to see a day when its value can be spread further through the vertical supply chain. Jack Justilian, vice president of marketing for Key Electric Supply, Houston, believes the next big opportunity may come offering the same seamless, sychronized product data to the contractor market.
"The next step, where we need to go as an industry, is to get our customers on the same numbers that we’re on, using the same database we’re on," Justilian says. "A few customers – large contractors – are doing it now. The hook is UPC codes and descriptive data, and having the contractors use the same data. Whenever they get an order and guy on jobsite calls on the phone and says, ‘give me four boxes of dadada,’ we in turn would give him an e-mail acknowledgment or an EDI acknowledgement back to his system. Then he would build up his purchase order in his system from the acknowledgement. So he gives the distributor a verbal order, he in turn receives an EDI formatted order with UPC codes and descriptions and prices, he in turn loads that into his system as a purchase order, so when distributor sends an invoice into the contractor, it’s a matter of just matching electronically that invoice to that receiver and paying for the stuff he received. That’s where we need to go."
When the IDW was launched, 62 manufacturers and 142 distributors representing approximately 80 percent of the electrical industry’s sales volume signed on as charter members of IDEA.
Today, 146 distributors are pulling data from the IDW, representing approximately 40 percent of the channel. 300 manufacturers have signed on to provide data to their distributors through the IDW.
Going back to the question of whether to pity or envy the other supply channels – the channels that have no IDEA. Perhaps doing business in those channels would be a more peaceful existence, but isn’t life a bit richer in an industry that’s pursuing a radical, collaborative vision?
Change of Command
Like a new sheriff in a prosperous but rowdy Western town, in walks Robert Gaylord, a retired U.S. Army brigadier general with no experience in the electrical industry, no expertise in technology, but an impressive track record of leading people in difficult circumstances and fostering communication. His mission: take over as chief executive of the Industry Data Exchange Association (IDEA), re-evaluate its operations and lead it to the next level.
In his last assignment before retiring, Gaylord was in charge of all of the Army’s public relations and advertising. There are indications that he may need his skills as a conciliator and communicator to dispell some of the acrimony that arose around the departure of his predecessor.
Gaylord succeeds Mike Rioux, CEO of IDEA for most of its first decade. Among Rioux’s accomplishments was the dismantling of an unfavorable agreement with Worldcom to host the industry’s data traffic via a value-added network (VAN), and the building of an industry-dedicated private network, the Industry Data Exchange (IDX). IDX offers electrical companies EDI transmissions at a rate significantly below market rates and free transmission of IDW traffic, simultaneously becoming a major cost advantage for IDEA’s members and the primary source of revenue for IDEA.
Rioux was widely respected among the industry’s data mavens, many of whom feel he was unfairly ousted from the position in a political coup. A post about Rioux’s departure on the blog ElectricalTrends, hosted by consultants Allen Ray and David Gordon, became a lightning rod for comments about the intentions of NAED President Tom Naber, many speculating that Naber intended to have NAED take over control of IDEA now that the IDX is generating revenue.
The commenters misunderstand the situation, says Naber, who insists he has no plan to take over IDEA.
"What NAED wants to see – and IDEA’s board – they want to get back to basics and focus on data synchronization in the electrical industry," Naber said in a phone interview with Electrical Wholesaling. "Contrary to rumor, NAED is not pulling all the strings; we’re just one voice in the whole process.
"NAED does not expect any revenue from IDEA or any of IDEA’s products," he continued. "What we really want – we expect IDEA to break even and pay for itself, but would rather see the revenue go back into making the channel more efficient."
Naber emphasized that the NAED board is passionate about IDEA’s ability to drive costs out of the channel, and said NAED has offered Gaylord and IDEA Board Chairman Todd Kumm a platform of support in the form of marketing, promotions and education to raise awareness of the benefits of IDW and IDX among distributors and manufacturers.
Evan Gaddis, president of NEMA, says the manufacturing community was supportive of Rioux, but that the chief executive of IDEA must have consensus support from all the stakeholders at the IDEA table – owners, the board of directors, manufacturers, distributors, software vendors and staff.
"We were satisfied (Rioux) was doing a good job, but some of the folks thought it was time for a change," Gaddis says. "If you look at the lifecycle of a CEO in a corporation – pick any manufacturing company, even any association, in the modern day – five years is a hell of a long time, and Mike was at IDEA longer than that."
Gaddis insists that people who have suggested Gaylord is one stakeholder’s chosen successor are completely wrong. Gaylord was chosen from an extensive headhunting process, and everyone had an equal vote. "We all agreed that whoever we chose, the choice had to be unanimous, and it was."
The attraction of leading IDEA came from the organization’s mission, says Gaylord. "I was interested in getting involved in a team that cared about something more than a financial profit at the end of the day," he says.
After a month on the job – two weeks of which were taken up by the holidays – Gaylord says he’s still gathering information and learning about the industry and IDEA’s place in it, and will continue to do so for some time before proposing a new strategic direction.
"It would be incredibly naive of me to change staff or try to turn this organization before I know what the customers want," he says. "So far, I’ve seen that we have a sound vision and a mission, a talented staff, customers absolutely overwhelmingly supportive of what we’re doing and what our staff is doing, and appreciative of the staff’s capabilities. Our products are appreciated. Why walk away from that?"
The board has appointed a strategic planning committee and expects its work to be done quickly. Initially, Gaylord says, the organization will focus on getting things right in the electrical industry before looking at other verticals.
He believes that despite his lack of background in the electrical industry or technology, he will be able to bring something important to the organization.
"Am I intimidated by technology? I’m not," he says. "Usually, it’s not the technology that trips people up, it’s the people. They’re the complex part – understanding their mindsets. Technology is often an excuse. When people talk about barriers (to adopting IDEA’s technologies) among small and midsize distributors, is it the technology? No, it’s the comfort zone they may be in. Our mission is to figure out a way to help them with data synchronization and reliability and the speed of movement of information."
With Rioux gone, Gaylord wearing the tin star, and the dust beginning to settle, the industry’s backline gunfighters have fallen silent and are willing to give him a chance to do his job. Those who’ve met him seem ready to trust him in hopes he can indeed move the industry’s data aspirations forward.
Says one, "Not having any industry experience is a concern, but that shouldn’t stop him from leading the charge. If we’ve kept trying the same old thing for 10 years, and it still doesn’t work, maybe we do need a kick in the pants."