Case Study: Emerson Electric Inc. and Innovation - ' Cyber'

Cyber-clout

The new system is also making the company a lot smarter—and tougher—about policing its own checkbook. Case in point: Comparing purchases from local distributors against items each division holds in stock, Emerson's MIN team found that In-Sink-Erator, a maker of garbage disposal units, and other divisions were buying steel, bolts and other items at premium prices from local distributors and then storing the goods in inventory. That made no sense: The whole point of paying more to buy from local distributors is because the distributor holds the inventory and can deliver it when it's needed. In most cases, units will now buy from national distributors that charge less.

Yet despite the success of MIN so far, the key to future gains will be how well the commodity teams use the information provided by MIN. Instead of having 12 divisions buying aluminum die casts from 20 or 30 suppliers, for example, the commodity team would be able to analyze the 12 divisions' needs, figure out the appropriate number of suppliers and negotiate volume discounts. The divisions could then buy off of those contracts, and Emerson could then use MIN to make sure it delivers on volume commitments made to suppliers, and to make sure it's getting the price agreed upon.

Emerson has little choice in the current economic climate but to keep cost-cutting—and upping the ante on what the Net can do for the bottom line. Stategic sourcing is just the start.

Mark Roberti is a New York-based freelance technology writer and former editor and writer for The Industry Standard. His work has appeared in a variety of publications, including The New York Times, The Asian Wall Street Journal and The International Herald Tribune. Comments on this story can be sent to editors@cioinsight.com.