Companies such as Instill, a Palo Alto, Calif.-based provider of end-to-end electronic commerce for food service distributors, can handle most of the complicated details of converting to an e-commerce business, said VP-Marketing Andy Cohen. In exchange, Instill charges a sliding electronic-transaction fee that starts at $2.50 for each electronic order and drops with volume.
Mr. Cohen would not release total figures on Instill's revenue or volume, but he said 7,000 customers use the company's services and order millions of dollars worth of restaurant supplies and food annually.
B-to-b code problems
A major obstacle to seamless e-commerce for food service distributors is standardized product descriptions and codes, Mr. Cohen said.
For example, the restaurant industry may have 50 distributors with 50 different codes for the same bottle of ketchup. Because bar codes are limited almost exclusively to retail products, there is no consistency among b-to-b products.
"Gordon Food Service, a big distributor in Michigan, might call [ketchup] HZ143. Alliant, a distributor in Chicago, might call it 7364, and so a restaurant would see all these different codes," Mr. Cohen said. "Because they use the codes, not the names, it's very difficult for the restaurants to know what they're buying.
In e-commerce, standardized product codes are even more essential because customers likely won't have a distributor's sales representative nearby or on the telephone to explain.
"It's kind of an invisible problem that you don't know it's a problem if you're not close to it," Mr. Cohen said. "But it's been a huge piece of work that's gone on behind the scenes that had to happen for e-commerce to work in the industry."
Shooting for standardization
Though not a client of Instill, Gordon Food Service is now developing its e-commerce capabilities, primarily in response to requests from some of the distributor's largest customers among restaurants, hospitals, schools and other institutions.
"We've kind of been dragged into the e-commerce world by our customers," said Jack Kronberg, e-commerce manager at Gordon, Grand Rapids, Mich. "Several large customers wanted us to do EDI [electronic data interchange], so we are doing it."
Mr. Kronberg said the network at Gordon has been developed piecemeal as customers requested it, but standardization is a key goal for the future.
"We're becoming much more standardized in our EDI processing, which will enable us to bring in large numbers of transactions from our large customers," he said.
The network, which Gordon expects to launch to its more than 25,000 customers by early fall 2000, will start with online ordering, eventually developing into a full self-service system through which customers can place orders, check inventory, download invoices and review accounts online.
"We've risen to the challenge of providing [the high-volume customers] with the service they want, but we have not taken advantage of efficiencies that automation brings internally as well as externally."
Mr. Kronberg said his company can learn from the models that Instill and others have developed for fully automating food service distribution.
"One of the largest initial obstacles we've run across is, just because we will be processing EDI or through the Web, we're finding we also need to re-engineer our internal processes so we don't have a great-looking front end and the back end is a horse and carriage."
Mr. Cohen said one of the most common errors he sees when a distributor converts from an old-fashioned method of order and delivery to an automated system is failure to make sure the old-fashioned ways of doing things are still in place.
A telephone desk where clients can call if technology fails or problems arise in the order is the easiest way to ensure the business transaction is completed to everyone's satisfaction.
"This is something that Charles Schwab & Co. has addressed really well on the retail side," Mr. Cohen said. "You really need an off-line backup if you're going to deliver high-quality service. That's something we've learned is extremely important."
He said that especially with food service distributors, an unfilled or incomplete order can break a business.
"There are things that happen where the phone line goes down, the distributor system goes down and they're unable to place an order electronically," he said. "A restaurant's food is their [livelihood]. If they don't have that, they're out of business."
Mr. Cohen said as businesses rely even more heavily on high technology, that sort of low-tech solution will become even more critical to success.
"Even when technology is bulletproof, there's still going to be things that go wrong," he said. "Especially in a b-to-b setting, it's not acceptable for them not to be able to get to your Web site.
"It's one thing if you're ordering from Amazon.com for a birthday present--you can wait a day. You can't wait a day on a business-to-business setting. It would be a disaster."
He said that in the early days of Instill, when it was a regional distributor, the company founders were so worried about making sure San Francisco Bay area clients got their orders that they bought pickup trucks to guarantee orders would be filled, even if they had to pick up the merchandise at a warehouse and deliver it personally.
"That's what it takes," Mr. Cohen said. "You've got to have that mentality to be a successful b-to-b e-commerce company."
He said Instill has helped resolve several challenges for food service distributors, but others may arise as more businesses expand into e-commerce.
"Allowing the restaurants to order [online] sounds pretty straightforward, but when it's really complicated, most of these distributors don't have Web sites and don't have electronic catalogs," he said. "We've had to do a lot of integration into their back-end systems . . . so they could do online commerce in the first place."