Wesco Distribution, a US$3.9 billion company, is one of the largest U.S. distributors of electrical products and other maintenance, repair and operating supplies to large companies. Wesco stocks more than 140,000 items from hundreds of manufacturers. In addition, its customers order more than 900,000 other maintenance, repair and operating items from Wesco that the company doesn't stock.
Until recently, when Wesco sales representatives received orders for such nonstocked items, they had to call the manufacturers directly or check their Web sites for pricing and availability. That information was then relayed back to the customer in a separate phone call. Although orders for nonstocked items account for only 20 percent of Wesco's business, gathering information on those purchases for customers took 40 percent of the sales force's time, says Russ Lambert, Wesco's director of e-commerce.
To address the problem, the company decided to dock its logistics systems with those of its major suppliers. But Wesco had to find a standard way to query and pull information from heterogeneous supplier systems over the Web and into its own 20-year-old, proprietary, green-screen systems. That was the most difficult part of the project, Lambert says.
The company built an Internet gateway with a common set of doorways that created inbound and outbound pathways to the legacy system. XML code was written both to pull data into Wesco's legacy system and to integrate supplier systems with the gateway. Wesco used Austin, Texas-based Vignette Corp.'s content management software and San Jose-based BEA Systems Inc.'s WebLogic application server as its core technologies for the project.
Since the e-procurement system went live in June, Wesco's 1,000 salespeople in 400 locations have been able to directly access the finished-goods inventory systems of major suppliers. Now, while a customer requesting nonstocked items is still on the line, a salesperson can send a query over the Web to the supplier's system with a one-button application, receive an answer in about 10 seconds and communicate that to the customer.
Wesco's new system has cut phone costs by reducing the duration of each call by at least six minutes. It has also increased sales of nonstocked items and saved an enormous amount of time for salespeople, Lambert says. He estimates that the company could save nearly $12 million annually if the new system saves 1,000 salespeople just three hours per week (at $75 per hour).
"More and more, distributors are moving away from stocking inventory to becoming supplier reps," says Andy Chatha, an analyst at Dedham, Mass.-based ARC Advisory Group Inc. Wesco's e-procurement system provides the visibility into supplier systems that allows distributors to carry less inventory and thereby cut costs, he adds.
Considering that it has cost about $400,000 to date to implement the system, demonstrating return on investment has been a "slam dunk," says Lambert. The system is also bound to have a positive impact on customer perception, he says. Because of Wesco's system, customers know when they call that they're making a real-time order against in-stock supplies, Lambert says. "It has been a great proof-of-concept about the power of direct linkage in the supply chain," he says.