e-Steel Forms Solid IT Foundation

1 2 Page 2
Page 2 of 2

MetalSite, e-Steel’s big rival, has also recognized the need to address integration, of course. In December 1999, MetalSite completed a first-phase test of its integration capabilities with Bethlehem Steel Corp.; this allowed EDI data on the steel maker’s products to be automatically transferred to MetalSite’s Web catalog without rekeying the information. While this capability is similar to e-Steel’s DataJet tool, e-Steel’s adding the webMethods technology takes its integration capabilities to the next level, experts say. DataJet automates the transfer of product data from a seller’s system to e-Steel’s catalog, while the webMethods middleware, once installed, maps both data and business processes so that information gets passed among the disparate systems of parties involved in the exchange, automatically, in real-time.

Together, these pieces give e-Steel a solid foundation for integration. "Since day one, e-Steel has had a more robust concept of what’s required," notes Thomas Abrams, an equity analyst who covers the steel industry with Credit Suisse First Boston in New York City. "But to some degree, the battle has just begun." Integration with everything that’s required for a transaction—from sharing inventory data among suppliers to work-in-progress reports and production data—won’t happen at e-Steel or any other e-marketplace for another 12 to 18 months, Abrams says.

Laying the Groundwork

Costello would have to agree. Even with all the early groundwork, he admits e-Steel is just getting into heavy lifting as far as integration is concerned. Most of the 3,500 e-Steel members are now just beginning to use the DataJet mapping tool as a way to get inventory from their back-end systems posted to the site without manually rekeying. And as a one-way pipe into the marketplace, DataJet is really only an interim solution, offering a level of integration far less than what large steel players are after. E-Steel’s real differentiator, Costello says, will come with the webMethods software, and that effort—which currently requires months of integration work with consulting partners—is only beginning at a handful of sites.

U.S. Steel in Pittsburgh, which is a minority stakeholder in e-Steel as well as a beta customer, is furthest along in integration, having used DataJet and started work with UEC as an integration partner for the webMethods software. Since February, when it made the decision to partner with e-Steel, U.S. Steel has done limited transactions on the site, mostly with nonprime sheet products—mill-downgraded materials, secondary products or excess prime offerings. U.S. Steel’s use of e-Steel has been limited mostly because it requires a high degree of integration to do any type of volume transaction, according to Robert McClintock, commercial systems manager for U.S. Steel.

Specifically, U.S. Steel needs to link proprietary manufacturing resource planning systems in each of its four plants, which run on IBM mainframes in Pittsburgh, to e-Steel so that materials available for sale could get automatically posted to the exchange. "To do any volume, we need to get inventory seamlessly transferred to e-Steel—the overhead associated with manually inputting data into the site would make it not worth our while," explains Gene Trudell, U.S. Steel’s general manager of computer services.

Integration on the back end is also required once a negotiation is consummated. There, U.S. Steel needs to be able to take the result of the deal struck on e-Steel and flow it through its back-end order entry systems built on Oracle Corp.’s Oracle Applications so that it can be invoiced, billed, shipped and so on, like any other transaction. Finally, to maximize efficiencies, there needs to be integration at the customer level so that U.S. Steel’s partners can seamlessly upload their purchasing requirements to the exchange.

McClintock and Trudell are confident that by working with e-Steel and UEC, they’ll be able to achieve the right levels of integration. However, they know it will take time and require significant development resources on their part as well as a willingness to reevaluate business processes. For instance, while DataJet addresses volume uploading of data to e-Steel, U.S. Steel realized it had no easy way to present inventory data for transfer since it resided in four separate plant systems.

As a result, U.S. Steel decided to change things on its end. With the help of UEC, it’s designing a common inventory database, from which U.S. Steel can apply business rules and let the webMethods software automatically handle the data collection and transfer to e-Steel. "You have to understand how you do business and take your understanding of that and objectively decide whether it’s the right way or if you need to change," McClintock says. Some of the integration pieces were put in place last summer to do volume transactions on nonprime sheet materials, and he expects to have pilot projects underway with select prime-sheet customers by the end of 2000.

At the $3 billion National Steel Corp., another early e-Steel customer, full-scale integration is going to take the better part of a year. The team there is working with e-Steel and integration partner UEC on determining how to adapt its supply chain processes to make the most efficient use of the exchange, according to John Davis, National’s general manager for information services and engineering in Mishawaka, Ind. "We’re truly reformatting our business model to take advantage of this new model, and no one can do that in two or three months," he says. "There is too much cultural change—all the things no one likes to talk about." (See "Culture Club," above.)

As of August, National had conducted numerous pilot transactions with customers over e-Steel. As pilots with additional customers come online over the next few months, it will continue to refine its integration needs. "We’re trying to figure out the touch points, where to hand off transactions and where it makes sense to integrate," adds Chuck Erickson, a systems engineer. Erickson says National has started to experiment with DataJet, but like U.S. Steel, he believes the real value of integration will come with the webMethods software. At this point, National is working with UEC to create new business processes to best leverage that software.

It was e-Steel’s ability to take the lead on development, including integration, via its ValueTrack program that convinced Ford Motor Co. to strike a partnership with the exchange to Web-enable its steel supply program. The alliance, which covers the auto giant’s global Tier 1 suppliers, including stampers and steel sources, is aimed at eliminating manual processes and giving the complete supply chain access to the same database of inventory, order and pricing information. "This will allow us full integration," notes Karen Kish, purchasing specialist in Ford’s raw material supply program in Dearborn, Mich. Ford and e-Steel are in the prototype phase.

Ford has essentially committed to providing its business processes to e-Steel and has devoted a couple of information technology professionals and Kish, as program manager, to work on the project; however, e-Steel and its integration partners are doing the bulk of the deployment and project management work. The effort, which is slated to go live in the first quarter of 2001, is separate from Covisint, a forthcoming online exchange for the automotive industry announced as a Ford-General-Motors-DaimlerChrysler partnership.

Given the scope of work required for integration, most big e-Steel customers—including National, Ford and U.S. Steel—don’t expect to take part in additional steel exchanges unless they become a key requirement for customers. But while many place their bets on e-Steel, some experts caution that a one-horse integration strategy can be risky. "You have to play the game that the strategy could change tomorrow if the market changes—you have to be flexible so you can get in and out of marketplaces at will," warns Forrester’s Yates. "It’s all about risk management and not putting all your eggs in one basket."

What’s risky business for some, however, is passion for e-Steel’s Levin. And with companies like Ford, National and U.S. Steel in his camp, he’s ready to take on the challenge. For now, couloirs and the sailing circuit might have to wait while Levin gives B2B e-commerce his best shot.

Related:

Copyright © 2000 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
Download CIO's Winter 2021 digital issue: Supercharging IT innovation