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  E-comm Innovator Award: Metalworking products maker Milacron wins our debut e-comm innovator award.
By BETH SCHULTZ
 Then, one summer evening in 1997, the answer struck Alan Shaffer, Milacron group vice president of industrial products. The revelation came as he was making his first Internet purchase, a book from Amazon.com.
The next morning, Shaffer dropped by the tax department to visit one of his favorite market researchers. He was anxious to tell her about his Internet experience and talk about the potential of e-commerce.
"I knew something would happen then," Angie Snelling says of Shaffer's excitement. What Snelling didn't expect was that Shaffer would come back in September and ask her to oversee the company's e-commerce initiative. "He really threw me for a loop. For one thing, I'd never implemented a computer system," Snelling says.
No matter. Shaffer says he picked Snelling because of her research capabilities, knowledge of tax law, fluency in German and familiarity with working overseas - international extension would be an obvious outgrowth.
The IT knowledge would come from Tom Williams, director of information management for WidiaValenite in Detroit, a Milacron business unit under Shaffer. The expertise on Milacron's product line would come from Michelle Gruda, who has worked for the Valenite unit for 19 years, most recently as marketing communications manager.
Neither Shaffer nor anyone on his handpicked team knew the Internet well. "When Shaffer hit Amazon.com, bingo! He realized e-commerce could be the perfect solution," Snelling says. "But we had to go on a voyage to discover the Internet."
Before this voyage could begin in earnest, Snelling had to determine just how serious Shaffer was about using the Internet as a channel to reach job shops. The answer, in short, was "very."
Shaffer had come to understand the needs of small job shops through various research efforts. Not only were shop managers looking for a convenient way to buy products, they also needed a way to keep up with new products and guidance on how to implement them.
From one survey, Milacron learned that 86% of the shops used PCs, and 50% had Internet access. Some 38% of the survey respondents said they used the Internet personally, and one out of eight people were already doing some shopping online.
Understanding the target customers made it easy for Shaffer to articulate a business strategy: "To provide a fully integrated, high service-level market channel for our metalworking products."
Shaffer, who oversees the $750 million industrial products portion of Milacron's business, quickly got the go-ahead from top management, support from the board and some working funds.
Says Snelling: "I was given a lot of capital and a lot of leeway." Although she won't reveal funding specifics, Snelling says it was a seven-digit figure.
Evaluating the offerings
With cash in hand, the e-commerce team set out to learn about the Internet market. "Off the top of my head, I could name Netscape as a player but not much beyond it," Snelling says. "We had to start at a rather elementary level."
Even people in IT weren't certain who was who in e-commerce, Williams adds. "We'd be talking to IT people and they'd say, 'Gee, maybe you should talk to so and so. He might know.' "
All told, Snelling and Williams say they investigated about 20 companies. What they found were basically three classes of e-commerce players, and they needed to focus on contenders in the Class A category.
Vendors in this top tier sold e-commerce packages for business-to-business transactions. Class C vendors were more or less bit players - "providers of software someone would use to sell wine out of his basement" - as Snelling puts it. Class B vendors fell in the middle, offering software best suited for business-to-consumer transactions.
After narrowing the field, Snelling and Williams realized they would need outside help to do more in-depth evaluations of the five top vendors and their respective offerings. So they pulled in GlobalLink New Media, an Internet firm in Bloomfield, Mich.
With GlobalLink's help, the e-commerce team examined offerings from BroadVision, iCat, InterWorld, Netscape and Open Market.
Team members based their evaluations on five criteria: product architecture; storefront interface; cost; the company's strength; and a catchall "other" category.
"We didn't go into our evaluations with any have-to-have requirements, but we certainly had preferences because of existing skills. And I knew what I was looking for process-wise and integration-wise," Williams says.
The software did, however, have to be flexible enough to support the order processing and shipping systems in Williams' WidiaValenite unit, as well as similar systems in the other two units in Shaffer's industrial products group.
While Williams explored the technology, Snelling considered business issues. She studied the candidates' financial stability, size and international presence, and checked reference accounts. Both concluded that Open Market of Burlington, Mass., was the best fit for Milacron.
Open Market's e-commerce lineup comprises Transact and LiveCommerce. Transact handles order management, security and customer authentication, while also calculating tax and shipping charges and providing other business functions. LiveCommerce is catalog software.
The basic Transact and LiveCommerce packages start at $65,000 and $45,000, respectively, but Snelling notes that for every dollar Milacron spent on the e-commerce package, it paid another dollar for customization and consulting. All told, it took the team 10 months to get milpro.com ready for the Jan. 4 launch.
Williams says of the project: Any e-commerce package, particularly one used in business-to-business transactions, requires a lot of extra effort. "The intricacies of buying, ordering, shipping and invoicing, of working with pricing, quantities, special shipment handling, back orders, acknowledgments, cancellations - this is not a simple process. Business systems and enterprise resource planning systems have been at it for years and years and have the processes down pretty well. You don't see that level of sophistication in e-commerce systems."
To help with the customization, the e-commerce team extended its relationship with GlobalLink, which developed the milpro.com front end and what became known as the Milpro Wizard, a sophisticated interactive application that site visitors can use to determine which Milacron product best fits their needs. The Wizard became a major initiative that included input from 120 people, says Gruda, who is now marketing manager for e-commerce.
"We asked ourselves, 'If we're going after the small customer, what kind of value can we add?' With the Wizard, we can give everyone individual service. We can bring the small shop up to the level of the large shop so it can compete against that large shop," Gruda says.
Milacron runs the Wizard application, which stores detailed information on some 50,000 products, on a dedicated Windows NT server. "We wanted it to fly," Williams says.
That server and the three others Milacron uses for milpro.com reside at an EMC Internet Services Group Web hosting center in Hopkinton, Mass. The e-commerce team partnered with EMC shortly after choosing the Open Market software, which EMC knows well.
"We wanted 24-7 service and very high availability, reliability and scalability," Williams says, adding that Milacron's single Internet connection and meager support capabilities would not be adequate. "We quickly came to the hosting decision."
Despite all of that, the e-commerce team emphasizes that milpro. com is not about creating an information system.
"This is not an IT project. This is a market channel," Williams says. "Of course, IT is heavily involved, but this is totally customer focused."
As the saying goes, money speaks louder than words. And in Mila-cron's case, the dollars are saying plenty about that focus.
With milpro.com's launch, the company kicked off an incentive program aimed at getting machine shops to order online. Anyone with Internet access can go to milpro.com and work through the Wizard or check out any of the 200,000 pages on the site. Browsers only have to register if they decide to become shoppers.
Milacron is sending each person who registers for the site four $15 "e-coupons" - one coupon for each product category represented on milpro.com. A customer has to order more than $45 worth of merchandise to use an e-coupon, Snelling says. The Milacron products online cost anywhere from $5 to $1,000.
If each of the 117,439 machine shops Milacron is targeting takes advantage of the coupon offer, the incentive program will cost the company slightly more than $7 million. Of course, each shop would need to order at least $180 worth of merchandise to meet the $45 per-coupon requirement, so the company stands to sell $21 million worth of cutting tools, grinding wheels and metalworking fluids. Minus the $7 million in coupons, the tally would come to a respectable $14 million.
Coupon redemption has been steady, but not overwhelming, Snelling says, noting that she can't release specific figures related to the coupon program or online sales. "We were worried we'd be flooded, but it's been controllable," she says.
The company is also running contests to entice its sales force to visit job shops and promote milpro.com's use. Milacron has even struck a deal with America Online through which Milacron salespeople are handing out AOL start-up CDs to machine shops that don't have Internet access.
The first 80 or so salespeople that send in 200 contact cards get a gift valued at $2,000. At year-end, the person who has the most registered customers in his or her cyberterritory gets a $10,000 bonus. To top it off, the salespeople don't have to worry about channel conflict. They get commissions from all sales, including those through milpro.com.
"We're spending an equal amount on marketing milpro.com as we are developing the site," Shaffer says.
But even if sales don't come through the site, Milacron still gains by providing invaluable online services. "Milpro.com will enhance every aspect of our business, whether the economy goes up or down," Shaffer adds.
And Snelling says, "E-commerce touches every part of the company. It has forced us to take a good hard look at everything we do and ask how and why."
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Doing e-commerce on the Web is almost a given these days, but doing it well isn't. A great e-commerce initiative requires a thoughtful business plan, the backing of the entire company, intimate knowledge of the customer base and, of course, a strong architectural underpinning. Using these criteria, Network World honors metalworking products maker Milacron as the recipient of its first-ever E-comm Innovator Award.
