Opening the Spigot
It used to be that if you were in the market for a new faucet, you could have any color as long as it was chrome. Plumbing fixtures were meant to be practical, not pretty. Then, in the mid-1990s, baby boomers started fixing up their homes or building huge new ones with gourmet kitchens and swanky bathrooms. Chrome got the cold shoulder. Goosenecks, gold, and built-in water filters got the welcome mat.
That's when faucet maker Moen Inc. decided it was really in the fashion business, selling jewelry for the bathroom and kitchen. The 54-year-old company needed to churn out new faucet designs in fresh finishes like silver, platinum, and copper as often as Donna Karan introduces a new ready-to-wear line. Moen President Jeffrey A. Svoboda calls it the "9-to-5" strategy. If consumers had a choice of new styles and were able to mix parts, they might buy a new faucet once every five years instead of every nine years. "We would double the size of the market and enjoy a gain in market share," says Svoboda, who spent 20 years at General Electric Co. (GE ) and another three at Black & Decker Corp. (BDK ) before joining Moen in 1996. The only problem: Moen was selling many faucets designed in the '60s and '70s. The sleepy Midwestern company was lucky to introduce one new line a year.
Svoboda decided it was time to open the spigot. How? By using the Internet to design jazzy products--fast. Sure, everyone believed that the Web could help speed communications, but few thought it could turbocharge product design and, in turn, manufacturing. Yet by collaborating on designs with suppliers over the Web, a new Moen faucet goes from drawing board to store shelf in 16 months on average, down from 24 months. The time savings makes it possible for Moen's 50 engineers to work on three times as many projects, and introduce from five to 15 fashion (er, faucet) lines a year.
The change is paying off handsomely. More products reaching the market faster has helped boost sales by 17% since 1998--higher than the industry average of 9% over the same period. Moen has jumped from No. 3 in market share to a tie for No. 1 with archrival Delta Faucet Co. Both claim about 30% of the $2.5 billion North American faucet market. Now, Moen is the star performer in the lineup of its parent, Fortune Brands Inc. (FO ), contributing one-sixth of its $5.8 billion in 2000 revenues. "Better communication means more rapid deployment of ideas," says Svoboda.
That doesn't mean big budgets and fuel-injected scheduling. Moen is taking the steady-drip approach to the Web. Since 1997, technology chief Tim Baker and his now 20-member Internet Program Office have been setting priorities, laying out what can be accomplished with the resources they have. So far, Moen's Web work has cost only $1.5 million, with money spent to hire software developers for in-house work and on outsourced features like an online design room that allows customers to mix and match shower fixtures. This is the new model for an effective Net strategy, say consultants: methodical, with a focus on the bottom line. "Companies are starting to ask what's the return on investment and how strategic is the Web to their core business," says Tim Byrne, a vice-president at Mercer Management Consulting Inc.
Moen has known the answer for years. First, the company focused on clearing its own clogged pipes in product development. Moen's engineers typically work six to eight weeks to come up with the design for a new faucet. Until three years ago, they would burn that design onto CDs and mail the CDs to its suppliers in 14 countries that make the hundreds of parts that go into a faucet.
That's when it got tricky. Suppliers at times found they couldn't meet Moen's specs. So they would make changes, burn a new CD incorporating their suggestions, and send it back to Moen. The faucet maker would then combine the changes from all its suppliers. If some spec changes were incompatible with others, the whole process might start all over again. Going back and forth once would take two weeks. Doing it several times could extend the design process up to 16 weeks or longer. The extensa pull-out faucet, introduced in 1999, was so troublesome that it took 17 weeks just to finish the design. The $294 faucet is a smash hit, selling in the hundreds of thousands of units.
Imagine sales if Moen had been able to get the extensa to market five months sooner. Svoboda did. That's why, in late 1998, Moen started sending electronic files of new product designs by e-mail. A few months later, it launched ProjectNet, an online site where Moen can share digital designs simultaneously with suppliers worldwide. Every supplier can make changes immediately. Moen consolidates all the design changes into a master Web file. That way, design problems are discovered instantly and adjustments can be made just as fast, cutting the time it takes to lock in a final design to three days.
Next, the company attacked the cumbersome process of ordering parts from suppliers and updating them by fax or phone. In October, the company launched SupplyNet, which allows parts suppliers to check the status of Moen's orders online. Every time Moen changes an order, the supplier receives an e-mail. If a supplier can't fill an order in time, it can alert Moen right away so the faucet maker can search elsewhere for the part. Today, the 40 key suppliers who make 80% of the parts that Moen buys use SupplyNet. The result: The company has shaved $3 million, or about 6%, off its raw-materials and work-in-progress inventory since October.
Moen's approach is like light speed compared with competitors. Many still rely on fax machines to do most of their business. The percentage of companies using the Net to speed the supply chain in the construction/home-improvement field, which includes plumbing, is expected to rise to just 7.7% in 2004, up from 3.2% in 2000, according to Forrester Research Inc. By comparison, the auto industry is expected to reach 26%, up from 6%, over the same time period. "Moen is a step ahead of its peers in embracing Internet technologies," says analyst Navi Radjou of Forrester Research.
A lot of the credit goes to Svoboda, who studied at the School of Improving Productivity Through Technology. That is, GE. Svoboda, 50, spent most of his career at the corporate giant, running manufacturing plants in GE's appliance division. His marching orders were to cut out the fat, speed products through the assembly line, reduce inventory, and free up cash for new investment. He has applied the same philosophy at Moen, only with an Internet twist. "Anything that could take time out of the process is a huge advantage for managing cash for the business," says Svoboda. "The Web is a natural."
Moen may be ahead of its peers, but there's plenty of work to do. Technology chief Baker's most sensitive task is CustomerNet, the company's attempt to wire wholesalers, which account for 50% of the company's business. Unlike suppliers, who depend on Moen for most of their business, the company has little sway with wholesalers that buy plumbing, heating, and other products--not just faucets--from many manufacturers. Most still order by fax, even though that process causes errors up to 40% of the time.
Moen execs are undaunted. They're courting wholesalers with the same methodical determination that has made Moen a Web-smart company. By the end of the year, they expect the trickle of online orders to turn into a steady stream, clearing the final blockage in the pipeline.
By Faith Keenan