Web solutions making maintenance e-commerce a reality

Many of the e-commerce commercials out there today have both entertainment and educational value. I especially like those from IBM that portray supply chain problems being solved by IBM's electronic commerce solutions.

By Tom Singer September 1, 1999

Many of the e-commerce commercials out there today have both entertainment and educational value. I especially like those from IBM that portray supply chain problems being solved by IBM’s electronic commerce solutions. I admit that I find the folksy depictions amusing. They are also a reminder of how e-commerce is changing the way we think about buying and selling.

The commercials also constitute a statement of where the general focus is on e-commerce. They are about using e-commerce solutions to solve direct materials purchasing problems. By direct materials, I mean raw materials and finished goods. This focus shouldn’t be surprising because making and selling products is a fundamental part of our economy.

But the supply chain is more about pushing raw materials in one end and pulling finished goods out the other. Indirect materials also play a part in the process. Without maintenance, repair, and operations purchases, nothing would move through the supply chain.

So where are the e-commerce solutions for maintenance purchasing? Admittedly, the potential market is not as great as for direct materials. But it is still huge. Enterprise asset management (EAM) vendors are just starting to address this marketplace with a new generation of procurement solutions. Fully appreciating the potential impact of these solutions first requires an understanding of the shortcomings of current maintenance purchasing practices.

Most CMMS and EAM packages automate the purchasing process only within the buying organization. They provide tools to handle everything from requisition generation to invoice matching. But they don’t communicate directly with prospective suppliers. They cannot check pricing and availability on a real-time basis nor can they execute a purchase order with the supplier. A purchasing agent or buyer must do the legwork: Checking catalogs, calling suppliers, and faxing purchase order forms.

Despite the automation provided by CMMS and EAM packages, maintenance purchasing is still a costly, manual process. How costly is it? I’ve seen estimates as high as $100 per transaction. Even if this estimate is too high for your organization, you cannot deny that maintenance purchasing involves a lot of costly paper shuffling.

While this labor-intensive paperwork adds to the direct cost of procurement, it also generates significant indirect costs. Its length and complexity encourages people to find ways around the purchasing process. Such “maverick” activities increase extraneous purchases, promote inventory shrinkage and shop stock, and decrease the likelihood of getting the best price.

The most important impact of long, complex purchasing processes is on overall inventory levels. Because purchasing is such a hassle, we tend to buy more than we need. We stock non-critical items because we cannot arrange “just-in-time” deliveries to match our work order scheduling process. I have seen very few maintenance storerooms that don’t stock more inventory than is truly needed. This excess inventory results in unnecessary carrying costs. It is also a significant source of the obsolete parts that just about every storeroom carries.

So what role can e-commerce play in maintenance purchases? It can complete the automation process started by CMMS/EAM packages. By electronically closing the loop between buyers and suppliers, it should significantly reduce the cost and time involved in maintenance purchasing. It should also help reduce maverick purchasing and inventory levels. We should finally be able to manage the supply chain instead of bloated storerooms.

The ideal solution

What does the ideal maintenance e-commerce solution look like? A number of qualities are mandatory.

It should support a large number of suppliers. No buying organization should realistically expect 100% coverage, but it should be able to complete a significant portion (at least 50%) of its purchases electronically.

Setup costs should be minimal for both buyers and sellers. For the buyer, it should be as simple as removing the shrinkwrap packaging and installing the software. For the supplier, it should not require complex interfaces between its existing business systems and the e-commerce network. Any solution that requires major investments in systems integration is never going to get off the ground.

Transparent access should be provided to all subscribing suppliers’ catalogs, pricing, and parts availability information. The buyer should have to master only one interface to search all supplier catalogs.

It should feature “push-button” order placement. Once the desired part from the desired vendor is located, placing the order should be as simple as selecting a command button on the computer screen.

The system must accommodate the buyer’s purchasing rules, fully supporting whatever authorization and purchasing workflow policies the buyer believes it needs.

It should reduce the supplier’s cost of doing business. Any cost savings the supplier realizes from a more automated order process can be passed along to the consumer.

The solution should support contract pricing, reflecting any pricing deal a buyer has or may reach with a supplier. It should also provide the ability to obtain quotes.

The buyer should be able to track order status. Once the order has been placed, the solution should let the buyer electronically track and trace a shipment and be able to view what was actually shipped by date.

The solution should provide secure, 24-hr access. Sensitive, financial information and system access must be secured from unwanted users. Parts buying should not be limited to regular business hours.

The interface to host purchasing and CMMS/EAM packages should be transparent. There should be no double entry for the buyer. The e-commerce solution should be an extension of existing purchasing software.

The ideal maintenance purchasing solution is not revolutionary. Progressive companies have been pursuing it for years. Until recently, the lack of appropriate tools and communications media has thwarted any significant process.

In the past, electronic data interface (EDI) was considered a possible key for connecting maintenance buyers and suppliers. Companies have been buying and selling direct materials for years using EDI. However, this approach requires that partners use standard “transaction sets” to transmit purchasing information.

The typical EDI solution requires special software to extract information from each partner’s business system and map it into the appropriate transaction set. The resulting data files are typically transmitted by the originating partner to a mailbox on a proprietary value-added network (VAN) where they are subsequently picked up and processed by the receiving partner.

The cost and complexity of EDI severely limits its impact on maintenance procurement. Special software, VANs, and administrative and design overhead make it too expensive for most buyers and suppliers. Besides, it is basically a batch process. A significant portion of maintenance purchasing requires near real-time communications.

Now, the development of the internet and sophisticated e-commerce tools and standards has begun to make my purchasing ideal a reality. The web is a natural medium for transmitting e-commerce data. For any CMMS/EAM vendor with a web-centric architecture, transmitting information over the internet is relatively simple. No special communications or VANs are required.

The next link in the chain has been the development and acceptance of extensible markup language (XML) as a standard information exchange language for business-to-business internet transactions. XML provides the common dialect that allows diverse organizations and software packages to communicate. The final link is the development of a new breed of powerful e-commerce servers and middleware for implementing robust trading networks.

Much is promised by the e-commerce revolution. It has the potential to radically change the way we buy and manage maintenance, repair, and operations materials. Everything is in place and EAM vendors are rolling out solutions. I know it is only a matter of time before they reach their full potential. And I know that finally there are maintenance e-commerce solutions that can deliver on the full promise of this technology.

Tom Singer is an information technology consultant who specializes in designing, developing, and implementing systems solutions that meet client operational needs. He has worked both as a developer and integrator of CMMS solutions. He is a project manager with Tompkins Associates, a total operations consulting firm headquartered in Raleigh, NC. He can be contacted by phone at 630-472-1524 or by e-mail at tsinger@tompkinsinc.com.