Progressive Distributor

On the line

MRO.com works to connect buyers and sellers in a point-and-click world

by Richard Vurva

While still in its infancy, the burgeoning business-to-business electronic commerce craze is already causing restless nights for many distributors.

A majority of MRO distributors, recognizing the Internet’s potential as a marketing tool to promote their products and services, have established a Web presence. A survey by Progressive MRO Distributor shows more than two-thirds of distributors have Web sites. But many companies have discovered to their chagrin that simply putting up a Web site may not be enough.

Having a Web page doesn’t guarantee hits. Many customers find it laughable when all they get after clicking to a distributor’s site is a picture of the company’s building and a line card. Unless given a reason to stop for a cyber visit, most customers don’t bother to return.

A second issue that distributors are trying to address is how to utilize the Internet to conduct business. It can be a monumental task to design a system interface that connects the distributor’s business software to the huge variety of procurement software programs used by customers.

A new solution
A company that made its mark developing maintenance management software is launching an Internet portal called MRO.com intended to unite buyers and sellers of MRO materials.

Its suite of products includes mroBuyer, a self-service desktop requisition tool for maintenance, repair and operating materials and services; and mroSupplier, software that connects distributors and suppliers to the mroMarketplace, where suppliers can manage their electronic catalogs.

MRO.com is a wholly owned subsidiary of PSDI of Bedford, Mass., provider of Maximo enterprise asset maintenance software. Maximo is currently used by 80,000 end-users at 7,000 client locations.

Companies such as Amoco, British Airways, Cargill, DaimlerChrysler, General Motors, Weyerhaeuser and U.S. Steel use Maximo to track equipment reliability, control spare parts inventory, schedule maintenance tasks and increase workplace productivity.

“For years, our clients have relied on us for inventory control, for preventive maintenance to maintain their capital assets in their plants, for work order tracking, for labor reporting and labor histories,” says Norman “Chip” Drapeau, PSDI president and chief executive officer. “We think it’s a natural transition that they’ll come to us to help them procure their supplies online and come to us as a knowledge base of information.”

Drapeau believes MRO.com has a leg up on the competition because it integrates with asset management systems and with enterprise resource planning systems such as SAP, Oracle and PeopleSoft.

“We’re not just an electronic procurement system. We help you solve your plant downtime, your inventory problems and your procurement problems,” he says.

Friend or foe?
Will online ordering cause the demise of the traditional distributor? Or, can distributors find a way to work alongside electronic commerce companies like MRO.com to remove costs from the supply chain?

These are questions distributors ask as they watch customers choose various electronic procurement solutions and wonder what ramifications those choices will have on their relationships with those customers. Many distributors view online marketplaces as a new form of competition.

Drapeau disagrees. He says his company is a friend, not a foe, of traditional distribution.

“We’re trying to lower the cost of the entire supply chain,” he says. “We’re not necessarily trying to advantage the buyer over the seller or the seller over the buyer. Our study of the industrial marketplace has shown us that if a buyer pushes a supplier too hard, those costs come back around. So the only real sustainable advantage we can bring is by lowering the costs on both sides.”

Yet critics of online marketplaces say sites that act as a middleman between the purchaser and the distributor and collect a transaction fee unnecessarily add costs to the chain.

“Those people have a point, if a high degree of the customer’s spend is with one distributor,” says Rory Isaac, senior vice president of national accounts for McJunkin Corporation. The pipe, valve and fittings distributor uses MRO.com products as a key platform for its B2B e-commerce initiatives. Isaac says when customers purchase from more than one distributor, however, they need a single source where they can go for accurate real-time data that includes up-to-date pricing, inventory availability and technical information.

“Buyers don’t want to look up information in my catalog one way, go to Grainger’s catalog and look it up another way, then go to Applied’s catalog and look it up still another way,” Isaac says.

He believes companies such as MRO.com can help take costs out of the supply chain.

“True, they’re adding some costs with the transaction fees,” he says. “But if it works, and if you truly do put the person who needs the material in touch with the warehouse that’s shipping the material without having to go through all the intervening steps we go through now, that transaction fee could be very reasonable.”

Bidding on MRO
Would you rather buy a used car sight unseen or purchase one that comes with a complete maintenance log and a few spare filters in the trunk? That’s the difference between buying used plant equipment from some Internet auctions and participating in the exchange being established by MRO.com, according to Richard Burns, director of auctions.

While many other B2B exchanges conduct auctions, Burns says MRO.com’s tie-in to Maximo gives it a unique twist. Say, for example, that a Maximo user has a piece of equipment that’s no longer needed and wants to auction it to the highest bidder. The seller can provide the buyer with a detailed description of when maintenance was performed on the equipment, and a list of bearings, seals, belts, hoses and other parts used on the equipment, drilled down to the manufacturer’s part number.

“We also can check the inventory of spare parts they have in stock to determine if those parts can be used on any other piece of equipment they own,” Burns says. “We can draw those parts out of inventory and offer them for sale with the piece of equipment.”

Internet auctions through companies such as eBay have quickly caught on among consumers. Boston-based Forrester Research says more than $8 billion of business is conducted through online auctions, a figure projected to grow to $52 billion within a few years.

MRO.com plans to participate in a variety of business-to-business auction formats.

“We plan to offer equipment auctions, MRO material auctions and private inventory sharing of MRO materials in a network,” says Burns.

He says a focus group of Maximo customers revealed that end-users desired a place where they can easily auction off used equipment, spare parts inventory and surplus MRO supplies. Distributors likewise expressed interest in auctioning off overstock.

Building a network
McJunkin is one of several distributors that have signed on as suppliers to mroMarketplace. Others include bearings and power transmission distributors Applied Industrial Technologies, BC Bearing, IBT, Dynavest and Motion Industries; electrical distributors McNaughton-McKay, Wesco and Westburne; industrial supply distributors E&R Industrial and W.W. Grainger; and pipe, valve and fittings distributor Ferguson Enterprises and Marmon Keystone.

The company recently announced an agreement giving customers of SourceAlliance.com access to MRO.com’s suite of procurement products and services. SourceAlliance.com, backed by Rockwell Automation, is an independent company formed to bring together electrical product industry suppliers and distributors.

While focusing its attention first on the nation’s largest distributors, MRO.com also intends to attract smaller companies to its network.

“Our strategy is to start with large companies on both the buy and sell sides that have the wherewithal to implement highly specialized, high-function, full- service products,” says Drapeau. “But clearly that’s not the end game for us. The long-term win is enabling the majority of the market, which is the small distributor, with a low-cost solution.”

PSDI formed alliances with four software providers in the industrial distribution marketplace to enable distributors who use their software to tap into the MRO.com network. The alliances with Eclipse, NxTrend Technology, Prelude Systems and Tribute will allow users of each company’s programs to make product, inventory and order status information immediately available to industrial buyers via the Internet.

Gettin’ sticky
Internet companies use the term “stickiness” to describe their desire to make their sites attractive and useful enough that visitors will want to visit it again and again.

A key to driving visitors to any Web site is developing content. PSDI’s January acquisition of Modern Distribution Management, a newsletter focused on the industrial distribution marketplace, was intended to allow MRO.com to deliver news and management information related to distribution firms, manufacturers of MRO products and users of MRO goods and services.

“Our goal is to make MRO.com the place to go for MRO,” says Rob Bloom, vice president of marketing communications.

“Content, community and commerce are what we are all about. We want people not only coming to the site to check it out, but coming back and using it as part of their daily routine,” he says.

Content involves more than just editorial matter. It also includes accurate product descriptions and technical specifications of MRO parts and materials. Without easy access to such data, it can be difficult for buyers to search for companies to supply the products they need.

To help standardize such data, PSDI also acquired Intermat from Strategic Distribution Inc. Intermat is a provider of MRO content management tools and cataloging services. Its Standard Modifier Dictionary features more than 6,500 unique formats for clear, concise, accurate descriptions of MRO parts and materials.

“Product classifications, item attributes, technical specifications and digital assets are crucial to the buying experience for the maintenance and purchasing professional,” says Walt Vanderlaan, vice president of corporate development. “Without it, efforts to reduce costs for both the buyer and supplier will not be fully realized.”

Many-to-many connection
Distributors looking to offer electronic commerce solutions for customers often express frustration over having to deal with a variety of customer procurement systems. One customer may use an enterprise-wide business system from SAP, another is hooked into Oracle, while a third company relies on PeopleSoft.

If distributors want to tie in to more than one customer’s procurement system, it requires distribution software that can interface with several procurement solutions.

MRO.com appeals to distributors who need to integrate seamlessly into a variety of enterprise systems.

Bill Stevens, president and chief executive officer of Motion Industries, says his company elected to do business with MRO.com for two reasons.

“First, for its ability to help capital asset-intensive industries tackle the complexities of MRO materials and services procurement. And second, for its integration to enterprise-wide business systems that so many of our customers use,” he says.

Ralph Buntyn, senior vice president of marketing for Motion Industries, says the objective is to first transition customers who currently use Motion’s Midas dial-up program to an MRO.com-enabled catalog. Midas, which stands for Motion Industries Data Access System, allows customers to access Motion’s system to check inventory, place orders and gather other data.

“Customers are looking for solutions that connect their plant environment to the marketplace,” Buntyn says. “We have a large industrial customer base that requires an online procurement solution that addresses the breadth of their MRO needs. We believe MRO.com is positioned to provide that solution in a unique fashion.”

He adds that e-commerce will also make it easier and less costly to reach small to medium-sized customers. It’s more cost-effective for smaller customers to order a product from an electronic catalog than to make a sales call on that customer.

Another reason that distributors are signing on with MRO.com is because they like the concept of a Web-based community that can be accessed by multiple buyers and suppliers.

Many Internet procurement applications require catalog content to be delivered in specific data formats, forcing distributors to input product descriptions, photos, pricing and other technical data into more than one format.

“One of the toughest challenges distributors face is putting data into all those different formats,” says McJunkin’s Isaac. “It is very difficult to get reimbursed for that. My hope is we can put our data into this MRO.com network and give access to anybody who wants it.”