IT spending upbut firms still leery
By Staff -- Industrial Distribution, 5/1/1998
Chicago, Ill.--Electronic distributors remain leery of doing business on the Internet even as they increase their spending on information technology.Companies surveyed by the National Electronic Distributors Assn. spent an average of $150,000 on information technology last year. Forty-two percent of the respondents said they are somewhat uncomfortable with conducting business via the Internet. The main reason cited was security, with cost and inappropriate usage also major factors.
Regardless of their comfort level, 45 percent of the respondents believe the Internet will be an important business tool in the next year. Distributors also said they are using it with 15 percent of their suppliers. Most business owners say the Internet's primary use is for communications such as e-mail, with about one in four indicating business transactions have taken the lead.
More broadly, most Industrial Distribution Assn. members have not increased their IT spending significantly, according to one measure.
An I.D.A. study tracked expenses on data processing equipment and salaries as a percentage of annual sales last year. One hundred and fifty firms reported spending just under one percent of their sales total on technology, with about 80 cents of every dollar going to computer upgrades and other new equipment, the rest on salaries.
"The trend has been pretty flat since 1992," says I.D.A. executive director Gary Buffington. He says many companies surveyed, which do not include the industry's biggest players, "are still in the first generation of technology adoption, which is performing the basic functions of the industry. They're not using it yet to enhance customer service or to sell products."
Shearer Industrial Supply Co. of York, Pa. is not conducting much commerce electronically yet, but the company is fully EDI capable. It will invest more than $250,000 in new technology this year, the highest amount ever, says corporate operations manager David Kominsky. New items include an upgrade so outside salespeople can dial into the network, a LAN file server, optical filing, software upgrades for 37 PCs and more.
"We just wish (all) our vendors would get on the ball and do the same thing," he says. "We're trying to get them EDI and bar code capable so we can start taking some of the costs out."
For now, Kominsky believes his company will use EDI more to manage integrated supply relationships than for securing new business. "We feel the Internet is a viable option for commerce, but the problem is we're not seeing a lot of customers with the capability to dial in on the Internet. They do have e-mail."
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