IT: Foundries' Next Battleground.

Remember the Luddites? They were the 19th-century British craftsmen who, upon learning that new technology threatened to displace their textile jobs, rioted and destroyed the textile machinery. That's one way, I guess, to respond to the advent of technological change.

Today's Internet (you know, that thing that Al Gore invented) and information technologies (IT) have brought about perhaps the biggest industry buzz since NAFTA. And, when it comes to online auctions, more than a few foundrymen and suppliers think that the Luddites may have had the right idea.

While there are some who think the "D" in dot-com stands for "devil," it's a fact that one-third of all U.S. manufacturers are now procuring online. Among the metalcasters, Citation is one that believes that material e-procurement offers a better way (it estimates that 55% of any foundry's sales are spent on purchased goods and services), and has parterned early with Metalmaker to affect system development.

Having digested the two firms' concepts at their e-Business Supplier Summit this fall, it's becoming clearer that online buying may be only the tip of the iceberg of what IT may deliver. That is, given the industry accepts that an open, free-flow of information that allows suppliers and customers a "linked" view of your inventory, shop floor and shipping dock will be more the norm than the exception.

As 2001 approaches with the expectation of additional open foundry capacity, the continuing arrival of 5% price reduction letters from OEMs, and even more imported castings, the possibilities for the next significant opportunity for major waste removal may lie in the office. Properly applied, creative IT concepts (beyond the buy-or-sell) may pose a true competitive advantage in the short-term, and be required to play the game tomorrow. A few things to consider:

Speed--With Dell Computers' current inventory-free approach, the automakers' talk of a car built in 5 days (a 92% improvement) and the like, the day could come when your customer's customer is the one actually driving your daily production, requiring operation management tools unlike anything you've seen. If significant IT strides (up and down the chain) have not been made by a few years from now, you may find yourself too far behind to supply the sophisticated customer of tomorrow.

Lower Transaction Prices--While the ability to view real-time quotes from multiple suppliers will naturally drive prices down, and lower inventories should now be possible, the real benefit is apparently found in a more efficient transaction process for both the buyer and seller. As multiple time-wasting and error-prone processes are streamlined into a fluid function, 55% of current transaction costs could be gone in 4-5 years, says Mike Stovall, Citation's procurement director. Incidentally, he believes smaller foundries stand to gain even more as the system allows them to leverage truer market pricing.

Global Competition--The Economist recently noted how strikingly far ahead the U.S. is in IT. So even if the unit price war is lost to an offshore foundry, you may be able to begin to position yourself on a different and potentially more important plane--being able to share inventory, production and other real-time information in the way the customer wants it.

Perhaps the greatest benefit gained by an early IT focus is the ability to understand its prospects and claim the pole position for the next wave, whatever that could be. As the computer is linked deeper within your operation, the day may come when equipment manufacturers can monitor and perhaps even operate equipment via the Internet-and alert a local field technician directly to your plant for a maintenance function. The possibilities are endless.

If you're now thinking that I've been doing some early celebrating at the eggnog bowl, just remember how. most viewed the Internet just 5-7 years ago. The prediction that computer processing power would double every 18 months (Moore's Law) has proven true, and only the creative limits of the human mind can stymie its application.

With the more immediate procurement trend, I too have some concerns, namely how the buyer will account for the technical help, consulting and troubleshooting that makes up the augmented product currently being procured. That said, foundries should be careful what they wish for as they flex their "buyer's muscles." The irony: that a foundry could relegate the "service" they currently rely upon out of the process through the use of these new "service entities."

Stovall related today's e-commerce landscape to the progression of the PC. "First you had DOS, which was clumsy, but better than anything else at the time. Ultimately, many years later, Windows was developed. We believe that when it is the most cost-effective way of doing business, everyone will do it."

This latest wrinkle of the information age seems destined to change the industry, albeit in perhaps an altogether different way than we can conceive today. In other words, we might be wise to take an exploratory, rather than Luddite, view. Stovall reminds us of the actual words of Charles Darwin: "It is not the strongest of the species that survives, not the most intelligent, but the one most responsive to change."

Michael J. Lessiter

Editor/Publisher