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As director of technical standards and systems for Procter & Gamble (PG
), Michael Walsh oversees a web of technology that spans the globe. P&G's computer network links 900 factories and 17 product development centers in 73 countries. The global network enables the $39 billion consumer-products colossus to produce and market 300 of the world's best-known brands, including Tide, Folgers, and Crest. That breadth also carries a cost: It has become increasingly difficult to make such a wide swath of products with speed, efficiency, and quality.
To help solve the problem, Walsh tapped software from MatrixOne Inc. (MONE
) to automate P&G's product development process. Dubbed the Corporate Standards System, the software lets researchers comb a database of 200,000 product designs to see if they already exist in another part of the company, eliminating redundant efforts. CSS also has trimmed product design times in half, because it lets far-flung developers cook up formulas together on the Web and enables managers to measure their progress against timetables. When things fall behind schedule, the software automatically sends an e-mail reminder to a worker when they need to, say, approve the packaging of a detergent. "New collaborative tools like CSS make global science easier to do," says Walsh.POTENTIAL SAVINGS. P&G is in the forefront of perhaps the most important trend in business e-commerce: collaboration technology. It has been five years since companies started using the Web to share information and streamline purchasing. Now, despite the slowdown, Corporate America has begun using new Web software tools to help employees and business partners work together to make products faster and more cheaply. A July study of more than 350 executives by Deloitte Consulting found that 57% believe collaborative e-commerce is critical to their business over the next year. That's driving companies to spend $10.6 billion on collaborative software this year, growing to $33.2 billion by 2004, according to the Aberdeen Group and AMR Research.
The latest tools are coming from a new generation of companies, including MatrixOne, Agile Software, and Logistics.com. Collaboration functions also are being added to older supply-chain programs. In contrast to early collaborative software such as Lotus Notes, the new tools are easier to use and to customize.
The recent ascent of collaboration stems partly from a dissatisfaction with the limitations of electronic marketplaces. Many public e-marketplaces are essentially auction houses: They don't offer the means to form deep business relationships online. Through online collaboration, a manufacturer can, say, share its sales forecasts with suppliers so they can fine-tune inventories--resulting in potentially enormous savings. Yankee Group Research Inc. estimates that over the next five years, collaborative commerce can save companies $223 billion by cutting inventories and slicing production costs. "Collaborative commerce will substantially enhance the profitability of firms," says Raphael Amit, professor at the University of Pennsylvania's Wharton School of Business.
It's still early, but some companies are seeing gains. Limited Logistics Services, the shipping arm of clothes retailer The Limited Inc. (LTD
), used to float bids to 35 trucking companies via phone or fax, and the truckers would send back offers. Efficient it was not. Sometimes, LLS had to air-freight shipments because it couldn't find any trucks. Now, LLS uses a Web service, Logistics.com, that invites shippers to bid on jobs and develops an optimal delivery plan by weighing factors such as traffic congestion and truck availability. Instead of LLS paying for pricey one-way trips, Logistics.com finds shipments from other LLS warehouses to fill trucks on return trips. The service also enables truckers to learn enough about a shipment to offer the best price. If LLS divulges that it has a flexible delivery time on a shipment that will only partly fill a truck, for instance, that gives a shipper more time to line up other goods to fill the truck. Thanks to the service, LLS has sped up its average delivery time by a week, increased the reliability of its shipping rates by more than 10%, and cut its delivery costs by $1.2 million, or 3%, this year.
Manufacturers, too, stand to gain from collaborative technologies. This March, SCI Systems (SCI
), a $9 billion contract manufacturer, rolled out Agile's (AGIL
) software to four of its factories to coordinate production plans with customers and suppliers. SCI Systems builds tech gear for companies such as Nortel Networks (NT
). In the past, SCI engineers and manufacturing customers would phone, e-mail, or fax product specifications to one another. This process created errors and bottlenecks when product-design changes would get stuck on an engineer's desktop. Now, SCI workers update and view the changing product specifications in real time. Vincent P. Melvin, SCI's chief information officer, says the system has increased quality and cut production setup times by 20%. "Everyone can find the right information at the time they need it," says Melvin, who plans to roll out the software to all 50 plants this year.KEEPING SECRETS. What's the future of collaboration? "We're still three years away from seeing collaborative technology becoming more routine," says analyst Barry Wilderman of Meta Group. The biggest factor slowing adoption is that employees and departments tend to hoard data. For inter-company collaboration to work, businesses must build trust so they can better share information.
Collaboration aficionados are forging ahead. They expect that the expansion of broadband technology will trigger yet another wave of collaborative applications. Since April, for instance, Johnson & Johnson pharmaceutical researchers have been using Internet 2, a souped-up version of the Net that's in development, to brainstorm on videoconferences in cyberspace and analyze test results. But even without an Internet upgrade, collaborative commerce technologies are already paying off for P&G and a host of other companies. If these pioneers keep logging productivity gains, they'll soon have a lot of company in the collaboration fan club. By Spencer E. Ante