Cost cutting can be an expensive proposition. Especially when it forces a company off the fighting edge of a technology.
Sears, Roebuck and Co. knows that. Initially it was one of the leaders in computerizing the way it bought, sold and moved goods. Automation projects have been under way at the retailing giant for more than 20 years.Then, in the late 1970s, "while many of our systems were growing old, we began limiting our investments due to a period of intense expense control," said R.J. Ferkenhoff, vice president, information services, Sears Merchandise Group.
Mr. Ferkenhoff made his comments in a recent speech at the National EDI Systems Conference & Exhibit. Electronic data interchange enables companies to conduct business through computers instead of with paper documents or telephone calls.
The impact of the cutbacks was almost immediate, Mr. Ferkenhoff said in his talk.
"We lost our edge," he said. And as Sears lost ground, others were gaining.
"User frustrations began to grow. Technology advancements were growing by leaps and bounds, and competition began to outpace us," Mr. Ferkenhoff said.
Catching up has required a massive investment in time, money, technology and work with national and international groups dedicated to creating standardized electronic messages that enable companies to communicate through computers.
Sears started its new automation campaign in 1985. Experts said Sears still isn't No. 1, but the company is getting close.
"They are moving very fast. They are moving at very nearly the same rate that Wal-Mart is," said Bob Payne, a partner with EDI, Spread the Word Inc., a Dallas-based publishing, consulting and market research company.
Wal-Mart Stores Inc. has won awards for the pace with which it is creating electronic links with its suppliers.
"Sears was the first one to announce a large-scale supplier implementation program," said Stephen Kramer, president, Kramer Consulting Group, a Bentonville, Ark., consultancy that specializes in retail automation.
To work effectively, computerized communications technology must be seen as part of larger, more complex systems, Mr. Ferkenhoff said.
"It must be viewed in the larger context of retail technology, for it is in this context that EDI can deliver maximum benefit to the retailing industry," Mr. Ferkenhoff said.
"More than any other technology in the recent past, EDI can bring about a true breakthrough in business communications and processes," Mr. Ferkenhoff said.
Yet for all its talk of creating new ways of doing business, Sears' approach to exploiting EDI has been highly pragmatic, Mr. Payne said.
Many proponents of EDI have said true use of the technology only takes place when computers are communicating directly. Though it talks of establishing truly electronic ties with its suppliers, most of the links Sears has created mimic existing systems, Mr. Payne said.
With Sears systems, computers don't communicate with each other. The high- tech links are just used to move information faster.
Sears encourages the companies it has electronic links with to print out the electronic documents it sends, such as purchase orders.
Use of EDI has grown far more slowly than many studies predicted. One of the main reasons for this, experts said, is that companies are reluctant to change the way they do business.
Understanding this is a fundamental element of Sears' approach, Mr. Payne said.
"You want to minimize the effort by a trading partner to begin, and you want to minimize the expense," Mr. Payne said. Putting electronic communications to work is less a technological movement, than a "motivational process of change," he said.