Grandpa's Got Some New Moves

[From iSource Business, September 2001] In this age of e-everything, Newark Electronics' paper catalog remains one of the distributor's greatest assets. At 1,700 pages, it is a standard fixture on the desks of design engineers and purchasers of maintenance, repair and operating (MRO) goods. Our customer base loves to flip through the catalog, look at the pictures and see the hot, new engineering products, says Tony Chien, vice president and general manager of e-commerce at Newark. They have been ordering from the Newark catalog for 10 or 20 years, and they don't want to give it up.

Chien has the figures to back up that claim: the 200,000 copies of the catalog Newark sends out every year help to generate more than 10,000 orders a day and $630 million in annual revenues. That sales volume has made Newark the largest small-order stocking distributor of electronic components in North America, as well as the largest unit in the worldwide catalog distribution division of Newark's parent company, U.K.-based Premier Farnell plc.

Newark's customers like the catalog so much, in fact, that as they have migrated their purchasing online through such e-procurement platforms as Ariba, Commerce One and Oracle they have looked to the distributor to move its 150,000 sales keeping units (SKUs) into customized e-catalogs. Our large, Fortune 1000 customers are installing these purchasing systems to save them a lot of money, Chien explains, and they want us, as a major supplier, to support them. Newark also has been forming partnerships with companies such as SAP, Requisite, TPN Register and various e-marketplaces that call for the electronics distributor to provide uniquely configured online catalogs.

e-Catalogs: The Hard Way

Moving 150,000 SKUs into customized catalogs for multiple customers turns out to be exactly as complicated as it sounds. Newark's challenges have included adapting its product data to each customer's formatting and content requirements, assembling the product mix and pricing appropriate for the customer, and putting the resultant catalogs through a rigorous quality assurance (QA) process. The company's in-house team of software developers, which started working in 1999 on an ad hoc basis, using SQL scripts to generate the catalogs, found that it took up to two weeks to complete each project.

Once Newark had completed a catalog, the company faced the equally daunting task of keeping it up to date with current product and pricing information, a process that consumed 10 to15 man-hours per customer catalog per update. In addition, even as the company began to expand the number of online catalogs it was syndicating to its customers, the complexity of the catalogs was increasing, according to Dianne Ahrens, director of business development and Internet partnerships at Newark. In the early days, the emphasis was just on part numbers and descriptions and price, Ahrens explains. Now they want more detailed parametric data and images.

In 1999 Newark's team posted e-catalogs for 10 customers. In 2000, as e-business continued to grow, the company completed 22 projects, with additional requests coming in from customers at a rate of one or two a week plus quarterly updates for the catalogs already online. The work was growing like mad, Chien says, overwhelming the team of two SQL programmers that the company had working on the catalogs and requiring hundreds of hours of management time for quality assurance. Ultimately, Newark concluded that it needed to adopt a specialized tool for preparing and maintaining its online catalogs.

Automating the Process

Newark's criteria as it looked at solutions from several e-catalog providers were straightforward. It needed to be able to handle the wide variety of online catalog formats and taxonomies but also to adapt to requests for non-standard formats or SKU-based subsets of the company's full list of products. The flexibility to publish one edition of a catalog while work was already underway on the next edition was necessary, as was the capacity not only to generate a catalog quickly, but also to do so with a high degree of accuracy. Finally, the solution needed to make the QA process as painless as possible; and to make the process hassle-free from the perspective of Newark's customers.

After considering its options and reviewing providers' offerings, in February 2001 Newark went with an e-catalog solution from Santa Clara, Calif.-based Cardonet, a privately held company founded in 1997 and funded by a group of venture capital firms that includes Sequoia Capital, Giza GE Capital and Yozma Venture Capital. Cardonet targets both the buy side, with software that builds a unified catalog using information pulled from multiple supplier catalogs; and the sell side, with software that syndicates a supplier's catalog to multiple customers, each of which may require different content and formatting.

Using Cardonet, Newark was able to extract product data from its existing catalog systems and consolidate the information, in a uniform manner, in an internal master catalog. With the data residing in the master catalog, Newark's staff is now able to create a profile for each customer, a template that specifies the type of information that the customer wants to see, as well as how the information is presented.

For example, a profile can include customer-specific pricing, product sets, delivery schedules and data formats. The software then automatically pulls information out of the master catalog to generate an e-catalog that can be made available to the customer either through the Newark Web site or through the customer's e-procurement platform. Because Cardonet built its software on a so-called open architecture, Newark was able to use its own pricing engine with the system rather than employing the software provider's built-in pricing engine.

The Cardonet implementation took two months and cost Newark about $150,000 for the software and consulting services associated with the installation. The software provider's services group worked with Newark to automate the catalog management and syndication process, training the distributor's staff and working with them to prepare the first couple of custom catalogs. Cardonet's strategy is to help its customers own the catalog-generation process as rapidly as possible, according to Itay Meiri, Cardonet's CEO. The idea behind our system is that we want to enable the customers to do it themselves.

When Less Is More

Having implemented the Cardonet system in February, Newark set a target of bringing 60 new custom catalogs online in 2001. By mid-2001 the distributor had 45 catalogs online, with 60 further requests pending. Newark found that the turnaround time to get each custom catalog online fell from about two weeks to less than a couple of days, while the distributor can now post catalog updates within a day.

The new software also allowed Newark to reassign one of the two SQL programmers working on the custom e-catalogs and replace him with a lower-level operator. Meanwhile, the time necessary for procurement managers to put a catalog iteration through a quality assurance process fell from about two hours to 15 minutes because, as Chien puts it, we have a very high level of confidence that the data is right and that it's clean and the way the customers want it. Newark has not tried to quantify its return on investment in the e-catalog software in terms of salary savings, but Chien cites a ballpark estimate of a 200 percent improvement in productivity and a payback period of less than one year.

For customers, the transition to the new software has been transparent, Ahrens says, except that Newark now is able to get a new e-catalog online more rapidly than in the past. That reduction in the implementation period can help reduce the time it takes for a Newark customer to begin deriving benefits from an e-procurement platform, which in turn can strengthen that customer's loyalty to the electronics distributor. Everything you hear about implementing e-procurement right now concerns the lack of enabled suppliers, Ahrens says. To be able to tell someone that you can literally be live with them in less than a week's time gives us a huge competitive advantage.

Will Newark's newfound ability to rapidly deploy online catalogs spell the end of the paper catalog? Chien doesn't think so. He believes that, with 200,000 copies going out semi-annually, the catalog continues to support the Newark brand. There are things you can do with a big paper book that you can't do electronically, Chien says, such as attaching notes to a page or photocopying an entry. So we see the need for both. The catalog will be around for a while, just like our sales branches and our call centers. Our objective is to offer all the channels to the customer and let them choose what is most cost-effective for them.

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