Streamlined approach Featured

7:50am EDT January 30, 2004
From a business perspective, Parker Hannifin is blessed to have more than 400,000 customers, 105 divisions that operate as separate business units and thousands of distributors across the globe.

From a technology perspective, it might look more like a curse.

How do you tie together more than 600,000 parts and 8,600 distributors scattered around the world in a way that will make it easier for almost half a million customers to do business with you?

"There were a lot of manufacturers scrambling to do some sort of electronic transactions with their customers at the time we started this (in 1998), but because of our history with other technology, we had a more mature attitude of what we could and couldn't get from it," says Bill Eline, Parker Hannifin's CIO. "We approached it from the strategy of, how do we take emerging technologies and raise the bar on our current capabilities to the next level?

"And it needed to be a level that everyone could participate in. If you don't hit the sweet spot and the technology is not something everyone can use, then it has no value."

The company's old Web site was a navigation nightmare for its customers. Its organization mirrored that of the company, which made sense to Parker employees but not to a distributor in Denver. Each of Parker's business groups has several divisions, each with its own specialty. Some parts were sold by multiple divisions and some were not.

"Our supply chain is really complicated," says Lorrie Crum, Parker Hannifin's vice president of corporate communications. "We might have a customer who is dealing with two or three groups, and within those groups, six or seven divisions, and for each of the groups, maybe five different distributors. They don't care that the part they need comes from our gear pump division in Minneapolis.

"In the past, they had to navigate the organizational structure. You had to know which group and which division made the part."

Because the products Parker sells are not plug-and-play, a high degree of expertise is often needed on-site, which is why the company has 8,600 distributors worldwide.

"That complexity means lots of challenges, but also opportunities for growth," says Crum. "We don't want to just sell parts, but engineered systems and customized configurable pieces. We were well-regarded by our suppliers, but they said we were just about impossible to deal with.

"They wanted one invoice, one place to go to manage multiple orders, and wanted everything put in one box called one order rather than worrying about each division that has ownership of something in that box."

The focus at Parker needed to change from an inside-out view to outside-in. Structuring a Web site based on the organization of the company didn't make sense to customers, so Parker set out to make it easier for customers to do business with it.

"I think it's that simple," says Eline. "And it's not just our customers, but all of our business partners and our suppliers. We are trying to reduce costs of doing business with one another."

The solution was to consolidate everything from the divisions into one master catalog, add in all the functionality customers were asking for such as online order management and engineering collaboration, and do it in a way that made it easy for customers to find what they were looking for.

The transition was eased by the fact that Parker management more than a decade ago had put everyone on compatible IT systems. They weren't all the same, but they worked and were already tied into the back office systems such as receivables.

The company's previous commitment to e-business also allowed it to do more of a slow turn rather than a complete 180.

"We didn't just wake up one day and decide to do e-business," says Lorri Schmidt, Parker's director of e-business. "We have been doing it for more than 10 years, either through a mainframe or dial-up with our divisions. We had been doing business electronically with our OEMs (original equipment manufacturers) and distributors for some time. The Internet was just the next logical migration.

"This initiative was top-driven. Our CEO is behind this 100 percent, and it's been pushed down from there."

Eline says customers helped drive the importance of the initiative.

"All the divisions around the world have been trying to figure out how to do this," says Eline. "The corporation came up with a format that could be supported uniformly throughout the organization. There wasn't a lot of resistance from our employees because we have customers that wanted us to do this. It's not easy, but it's straightforward, with an end goal that's been identified.

"Some didn't make it a priority the way we wanted, and others underestimated how much information they had gathered in nonelectronic formats over the years. That took longer than we hoped. But it progressed quite well for the volume of data we wanted to organize across the company and present to the world."

The undertaking was monumental.

"It required every one of our divisions to input into the Parker master catalog database the part numbers and descriptive words a customer might use to search for it," says Crum.

Some parts had the same numbers, and items that were sold by multiple divisions could now only be credited to one. As the company monitored usage, additional search terms were added to match customer requests.

Customers can check order status, configure a custom part online, obtain detailed engineering information and check their order history. Search functions have been optimized so distributors can use very specific attributes, such as pressure rating, to find the part they need for a particular application.

Parker also has a secure way to communicate with trading partners and apply differentiated pricing. When a distributor logs in, it sees its prices, not just a generic price before a discount is applied. It also only sees the products it is authorized to sell.

"Everything is there for everybody," says Crum. "The engineers can log in with them and can say, 'You need to add this,' or 'You have the wrong piece for your application.' It provides an important forum with us to interface with them, and they have an easier time doing business with us."

Eline credits the success of the project to the backing of senior management and a global approach.

"Sometimes what we tried wasn't right, but we got the total backing from our senior executives," says Eline. "This was something that had their day-to-day understanding and support, and it still does. The other key was doing a global deployment. In the past, we would try something here or there to try to figure it out, and then roll it out. Well, it never rolls out because it gets stuck somewhere."

Parker continues to add to the data and functionality of the site.

The more information that's included, the fewer phone calls that are made. Not counting order-taking, the site handles 300,000 hits per month from customers checking payables, searching the catalog or performing other data retrieval. That's 300,000 phone calls that are avoided, and the system is only currently implemented in 64 of 105 divisions.

"Any way we keep a customer from inefficiently contacting us for information is a win for us and a win for them," says Eline. "If we pass on a signal to reorder from a supplier and do it through our portal to their system with no human interaction, that's a win for the system." How to reach: Parker Hannifin, www.parker.com