Fisher Scientific's surplus solution Featured

9:37am EDT July 22, 2002

You have a large company with a commensurately large and complex problem to solve. It's obvious that technology is the solution, right?

Well, sure it is. But identifying just the right technology, how to acquire it and the best way to do it is the real trick to pulling it off.

Fisher Scientific has tackled such a problem with EinsteinsGarage, an online auction site that went live earlier this year with 12,000 items and $8 million in starting inventory. The solution seems simple enough, but the company's experience demonstrates that simple doesn't necessarily translate into easy.

Fisher Scientific, a $2.5 billion manufacturer and distributor of scientific instruments, equipment and related products to labs, schools and universities, was experiencing growing difficulty in dealing with the large quantities of surplus, returned and damaged products it had to liquidate.

Here's a glimpse at the scope of the problem: Fisher Scientific handles products manufactured in its own facilities as well as 3,200 independent suppliers and thousands of other producers. With warehouses spread out geographically, 260,000 products and a quarter of a million customers, the company had a logistical albatross on its hands.

Excess inventory, after all, ties up space, capital and human resources to hold, handle and liquidate it. In short, it's a pain and it can be expensive.

That problem became acutely apparent a few years ago when Fisher Scientific streamlined its distribution system and cut its warehousing facilities by a third, down to 20. It then squeezed its surplus inventory into fewer buildings, making the problem even more glaring.

Enter Rob Carskadden, now 33, and EinsteinsGarage's general manager. Carskadden had a penchant for being assigned to solve quirky and troublesome problems since joining the company in 1996. He had been looking at the issue of duplication throughout the company's operations, and was eventually handed the challenge of solving the surplus inventory problem.

Fisher Scientific had, in the past, tried to deal with the problem in the traditional way, with on-premises auctions at the warehouses. But the auctioneers knew little about the products, the company didn't get the attendance it had hoped and Fisher Scientific still had to handle fulfillment.

"It was an utter failure," says Carskadden.

Doing it in house

Carskadden concluded that no one knew Fisher Scientific's business better than the company itself, so why not handle it on its own? Most of the rest of the pieces were in place -- employees had the product knowledge and they knew how to purchase, market and distribute. Creating a marketplace for the products, it seemed, was the obvious choice.

Carskadden began by consolidating the surplus into a single location, the company's Raleigh, N.C., facility. Then he came up with a business plan for an e-commerce site, put on a 20-minute PowerPoint presentation to the company's top brass and got the OK to implement the concept.

"They said, 'Hey, run with it,'" Carskadden recalls.

He stumbled at first, however. Carskadden tried to use off-the-shelf auction software provided by a vendor, but found that he had to go to the added expense of paying software integrators to link it with Fisher Scientific's existing information technology. That led to the decision to use an applications service provider, or ASP, to set up, maintain and host the site.

Why an ASP?

As EinsteinsGarage discovered, using an ASP may be the wise route for any company considering an e-commerce solution, says Michelangelo Celli, director of marketing for CommerBuilder Inc., a Pittsburgh-based ASP.

While large companies may have the internal information technology resources to do the job in house, many, nonetheless, are choosing to use an ASP because of the shortage of information technology talent and the technological barriers. Mid-sized and small companies, says Celli, simply can't do it themselves.

But simply choosing an ASP is no guarantee of success, Celli warns. Unlike selecting an Internet service provider, the decision to use a particular ASP is not easily or inexpensively undone.

"When you choose an ASP, you need to understand that you're making a long-term investment," says Celli. "You're picking a partner. It's expensive to move after you've set up your business on their applications."

The EinsteinsGarage site is up and running, and while it did a modest $120,000 in sales in its first few weeks of operation, Carskadden has good reason to believe that revenue will grow substantially. The Winterberry Group, a market researcher that focuses on e-commerce, forecasts that the so-called "e-surplus" market will grow from $7.8 billion in 1999 to $93.3 billion in 2002.

Fisher Scientific has on its e-commerce site 90,000 registered users, a group that EinsteinsGarage plans to contact by permission-based e-mail. Additionally, Fisher Scientific in June acquired PSS World Medical, Inc., a leading specialty marketer and distributor of medical products and a potential source of additional surplus products.

The scope of EinsteinsGarage has expanded considerably since it was conceived. Other companies can put their own online sites within EinsteinsGarage and it has added calibration and repair services to its offerings, as well as product locating capabilities. It can help purchasers identify the best way to transport a purchase, and, in some instances, arrange to have some kinds of equipment donated to charity.

In the end, Fisher Scientific's executives asked themselves what they did well and what they wanted to accomplish, then identified someone to help them achieve their goal.

"No one knows our products and services better than we do," Carskadden says. "But I didn't want to have to manage the technology." How to reach: EinsteinsGarage, www.einsteinsgarage.com; Fisher Scientific, www.fishersci.com; CommerBuilder, www.commerbuilder.com; The Winterberry Group, www.winterberrygroup.com

Ray Marano (rmarano@sbnnet.com) is associate editor of SBN magazine.