How The Internet Can And Will Improve Supply Chain Efficiencies

There's little doubt that the Internet will dramatically change the building product supply chain and distribution system making it easier, quicker, cheaper to shop, price and order products and materials. Here's a look into what the future may hold.

By Keith T. Brown, Chairman, BuildNet

January 3, 2001

Keith T. Brown

Imagine you're on the job site and you're short 60-feet of Schedule 40 PVCà

à Through your wireless phone, you're able to access your back-office software system, which looks directly into your supplier's back-office software system.

à You check price and availability, issue a purchase order, and sign off on a delivery date and location.

à Best of all, you do all this without ever leaving your truck.

àAnd, the information you use is in real time.

àMoreover, changes made to the order or job status automatically update all the pertinent systems.

That's what business-to-business e-commerce is about - using the Internet to make your business more efficient and productive.

Replacing costly paperwork

It's no surprise the Internet has emerged as the fastest growing communications medium in history. Candidly, it is dramatically changing how businesses operate and share information. Why? Business-to-business e-commerce-the ability for the computers controlling any link in the supply chain to talk across disparate platforms to any other link in the supply chain--often replaces cumbersome, costly paper transactions with electronic communications.

It enables buyers and sellers in fragmented markets to reduce supply chain inefficiencies, particularly in industries characterized by large numbers of buyers and sellers, a high degree of fragmentation among buyers and sellers, and significant dependence on information exchangeà..like the home building industry.

Designing an Internet-based procurement system

The Internet is also changing the landscape for home building professionals. Take BuildNet, a leading provider of management software to homebuilders and suppliers in the residential construction industry. The BuildNet E-Building Exchange is being designed to provide secure Internet-based procurement, e-commerce and information services for homebuilders, suppliers and manufacturers. We expect to rollout the program later this year. In preparation for the rollout of our system, we've established relationships with many major homebuilders, suppliers and manufacturers. We also have a strategic relationship with Electronic Data Systems (EDS), which is hosting BuildNet's transaction hub, and mortgage.com.

Our goal is to address many of the supply chain inefficiencies that affect homebuilders. Right now, builders, suppliers and manufacturers lack accurate and timely information on product requirements. Building materials are transferred multiple times through the supply chain and most procurements are paper-based and labor intensive.

Using the Internet, builders will be able to confirm pricing and product specifications, place purchase orders and add both product and order information automatically to both their own and their suppliers' management systems. In addition, manufacturers will be able to place product information and catalogs on the system for access by homebuilders and suppliers, thereby reducing the costs of printing and updating costly promotional catalogs.

For homebuilders, benefits of such an Internet supply chain system would include:

Streamlining procurement by automating paper-based purchasing processes and enabling cost-effective communication with suppliers;

Enhancing efficiency by enabling homebuilders to control ordering and delivery of building materials, thereby improving construction planning.

Better planning should allow homebuilders to build homes more efficiently, which should enable homebuilders to get better returns on capital and increase customer satisfaction.

Lastly, homebuilders will benefit by having better access to product and price information from multiple suppliers.

For suppliers, benefits would include:

Increased administrative efficiency by enabling suppliers to sell materials and products and track inventory, delivery and payments through a secure e-commerce solution.

Suppliers should be able to reduce time spent on manual, paper-based communications and fulfillment.

The system also should reduce working capital costs by enabling suppliers to more accurately track demand for materials and products from builders and provide more lead-time on requirements. This would mean less excess inventory, which should result in reduced carrying costs and improved profitability.

The system also should increase the information flow between manufacturers, suppliers and builders, allowing suppliers to aggregate an optimum mix of products, deliver products in a timely manner, consult with builders on materials requirements and product selection and provide other value-added services.

For manufacturers, potential benefits of Internet-based procurement systems include:

cost-effective, timely and accurate dissemination of product information. Compared with the costs of developing a stand-alone catalog and Web site, manufacturers using such a system should be able to reduce costs. Manufacturers will be able to immediately update product information, technical documentation and builder specifications, and should save on printing and promotional costs.

Manufacturers also should benefit from targeted marketing efforts and increased brand recognition. Collected data should enable manufacturers to more effectively offer and track targeted rebates and affinity programs. Lastly, accurate, real-time scheduling, pricing and purchasing information should give manufacturers enhanced forecasting tools.

For more information, contact:
Keith T. Brown,
Chairman
BuildNet
Research Triangle Park, NC
Phone: 1-800-849-9700

See Also:

Brown Discussion

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