Note: This example is a composite of several clients we have worked with through the Michigan Manufacturing Technology Center and the Center for Electronic Commerce

Specialty Ornamental Iron Works began life in 1975 as a provider of ornamental iron to home owners in the greater Detroit area. Primarily they made gates, stair railings, fences, and window grates. As time passed they settled into a routine in which about 70% of their residential business was make-to-order from a stock catalogue, with the remaining 30% requiring customization. Of the customized 30%, about half involved cosmetic changes (color or finish) while the other half required actual design changes.

The Company
In 1988 Specialty Ornamental began to expand its business to produce industrial products, i.e. railings for apartment houses, office buildings and factories. Along with this expansion came a new set of customers -- contractors and architects. As of 1997 Specialty Ornamental had 50 employees and gross sales of $1M. Over the years the industrial business has grown to about 70% of sales. The company believes that they are competitive in the residential market, but that business has stagnated because of changing tastes in the Detroit metro area.

Stock for Specialty Ornamental's residential and industrial business is pretty standard. They use a few common alloys of iron and aluminum. Sometimes though, a job will require steel, high strength aluminum, or a unique color of paint. Raw goods inventory for standard items is low because the company usually gets enough lead time to buy what it needs to fill orders. Exotic items are also not problematic because Specialty Ornamental has several suppliers for each of their specialty items, and the company gets good service from each of them. When an unusual order comes in a few calls usually assure that needed supplies arrive in short order.

When the industrial business began all interaction with customers was short term (i.e. job by job), and business communication took place via phone, mail, and fax. In the last few years the construction business has moved toward long term relationships with trusted suppliers, with this new business model backed up by networking technology. Now orders often come in via EDI, and payment takes place via EFT. To satisfy their customers, Specialty Ornamental has implemented a "rip and read" EDI system. Because everyone else seems to have one, Specialty Ornamental has also put up a Web site. The site is rudimentary, containing only a company description and some thumbnail pictures of products. But at least the company has a presence in cyberspace. The site is maintained by a consultant who works on an as-needed basis.

Specialty Ornamental's Information System staff consists of one full-time person who is assisted half-time by the one (and only) person in Accounting who is familiar with computers. Occasionally these people fantasize about making data processing more efficient. They see incoming EDI orders fed directly into the order scheduling system, and the accounts receivable system automatically primed when bar code labels are filled out to satisfy customers' demands for Advanced Ship Notices. These are great ideas, but the IS staff knows they cannot be implemented.

One problem is that the order scheduling process is unreliable and subject to frequent unforeseen changes. While the company seldom misses a deadline, they find themselves scrambling a lot. To make their system work they need a lot of impromptu meetings and hallway conversations. Specialty Ornamental fears (and rightly so) that more automation will only make it harder to do what needs to done to get orders out the back door on time.

With regard to the accounting system, change would involve some painful discussions with vendors and accounting personnel. The vendor is a problem because the present accounting system is not flexible enough to handle a new type of automated input. The software vendor claims that their new version will handle it, but that new version has been promised for a year, with no shrink-wrapped box in sight. Moreover, Specialty Ornamental will need help installing the new system, and they have not been impressed with their Vendor's training and technical support. Changing vendors, however, would require going to a new accounting package, and that thought is almost too scary to contemplate. Finally, if a new system were installed, Specialty Ornamental would have to worry about retraining some of its accounting personnel, and it knows how resistant to change those people will be.

Choices for Electronic Commerce
Specialty Ornamental has not done any rigorous analysis of their electronic commerce status, but they don't need to. Based on their technology in place and experience, their choices are pretty obvious. They can…

• Integrate EDI systems with respect to incoming orders.
• Integrate EDI systems with respect to outgoing ship notices.
• Attempt EDI with suppliers.
• Do something more with their Web site.

Again without rigorous analysis, its easy enough to preen the list. EDI with suppliers is out because it's a low pay-back activity that would be difficult and expensive. Low-payback because raw goods inventory is low and supply is reliable. Difficult and expensive because internal systems would need a major overhaul.

Similarly, its easy enough to cross "ship notice integration" off the list. It would be nice to get invoices out faster, but its not that big a deal compared to the challenge of choosing and implementing a new accounting system.

The choice boils down to two -- integrating incoming EDI with order processing, and exploiting the Web site. "Integration", however, really means a commitment to a complete reengineering of the order processing system and of who knows how many other related systems. Besides, for all the trouble, orders do get out on time, and customers are not complaining. How much can it really be worth to improve order processing? (Careful analysis might show its worth a lot more than one might think, but at first blush there certainly does not seem to be a lot of pay-back.)