B2B in the Flooring Industry

While some EDI systems currently exist to facilitate commerce between manufacturers and retailers, those systems are woefully out of date, and in light of newer technology, do not allow for any sort of cost-effective upgrading. Once more, these EDI systems, which rely on VANs to operate, are costly and are therefore prohibitive to most retailers – particularly in the contract market. The following highlights the current status of B2B in the flooring industry.

The most common flooring industry transactions between trading partners are:

  • Product information (vendor to dealer using paper-mail)
  • Price agreement (vendor to dealer using paper-mail)
  • Product availability & reservation (dealer to vendor by phone)
  • Purchase order (dealer to vendor by phone or fax)
  • Order tracking (dealer to vendor by phone)
  • Invoice (vendor to dealer using paper-mail)
  • Claim submit & resolution (vendor to dealer by paper-mail)

Using the Internet for transactions can lower costs, speed processes, reduce errors, and increase hours of operation for manufacturers, distributors, and dealers alike:

  • The cost savings potential is real, but lower than some outside experts guess
  • There is widespread industry interest in exploiting the Internet

Most flooring dealers are limited in their use of technology:

  • Most dealers either do not use computers to run their business or use them only for accounting and document processing
  • 3,000-4,000 dealers do use flooring systems provided by a software vendor and many of the larger dealers/retailers use custom-written systems
  • EDI has been available for several years in the flooring industry, yet less than 200 dealers use it, and only the largest (e.g., Sears, Home Depot) use it for orders
  • Mills have offered free, full service, transactional web sites for over a year, yet dealer use grows slowly despite initial enthusiasm and enrollment

It is clear that manufacturer self-service Internet sites do offer value. However, dealers with flooring systems want an integrated capability to eliminate re-keying costs and errors for product, pricing, purchasing, ship notice and invoices.

EDI does provide such an integrated capability today, but it has its own drawbacks:

  • It requires that dealers use an EDI-capable flooring system
  • VAN costs are an obstacle for some dealers
  • Purchase order have limited flexibility and slow turnaround
  • EDI is complex to use, and not always reliable

Several third parties have proposed flooring industry B2B hub exchanges, but there is limited industry enthusiasm for this approach:

  • Transaction costs will be unattractively high (to recoup the hub's development and operating cost), wiping out cost savings opportunity for participants
  • Proposed middleman (hub) solutions raise concerns about information security, reliability and performance, and introduce a potentially inflexible extra step or chokepoint between buyers and sellers