At furniture dealership KlingmanWilliams (www.klingmanwilliams.com) the building’s dingy brick exterior masks a completely modern business. The building began a century ago as a cotton warehouse; today, it is full of chrome and glass cubicles containing sleek computers and expensive furnishings. President Dick Klingman started the business a decade ago with three employees and his checkbook; today, the dealership has 150 employees and generates $40 million a year in sales.

To comprehend just how far the building and business have come, though, you have to understand how completely the Internet has changed the way the dealership does business.

The dealership uses the Internet to establish intimate links with its main supplier, Herman Miller Inc. (www.hermanmiller.com), the second-largest furniture maker in the U.S. As a result, a KlingmanWilliams employee working with a customer can get up-to-the-moment information on pricing, products, and availability and can configure an office plan on a laptop. The employee can have the laptop automatically generate an order and check Herman Miller’s databases so that, in less than two hours, the customer will know precisely when the furniture will be delivered. In the past, because information wasn’t always current, it might have taken weeks to decide on an order, and it would have been several more weeks before a delivery time could have been specified.

What is going on in KlingmanWilliams’s old warehouse is just one of countless ways thousands of companies are using the Internet to share data in new and powerful ways. In the process, these companies—whether Herman Miller, auto makers General Motors Corp. (www.gm.com) and DaimlerChrysler AG (www.daimlerchrysler.com), or drug maker Bristol-Myers Squibb Co. (www.bms.com)—are finding impressive efficiencies in their supply chains.

As far back as the turn of the 20th century, efficiency experts in celluloid collars marched around offices and manufacturing plants with clipboards and stopwatches looking for ways to cut seconds out of internal processes. Ninety years later, the business process redesign movement pledged to use computers to generate efficiencies on a grander scale, by letting a company’s various units cooperate more effectively. What’s new is that the Internet allows businesses to look for efficiencies outside their walls, to try to streamline interactions with business partners and suppliers so completely that all the different companies operate as one.

At a time when many are scoffing at the hype that surrounded the Internet, and when projections of everything from sales to stock prices are being brought back to reality, the supply chain is one area where the Internet seems to be fulfilling its early promise. As Nitin Nohria, Chapman professor of business administration at Harvard Business School (www.hbs.edu), sees it: "The Web takes re-engineering to a whole new level. Web-based applications and services cut across organizational boundaries—redefining upstream linkages with suppliers and downstream linkages with distributors and customers."

When Herman Miller was founded in 1923, the company made traditional home furniture. In the decades that followed, it evolved into an innovator in contemporary home and office furniture design. Hardly content to play second banana to industry leader Steelcase Inc. (www.steelcase.com), Herman Miller determined it could do better. In an industry where one manufacturer’s gray-tweed cubicle with overhead storage looks remarkably like the next guy’s, Chief Executive Officer Michael Volkema couldn’t depend on design alone to give Herman Miller the advantage. He turned to the Internet.

Herman Miller has spent $500 million on technology to improve design, order entry, and manufacturing since 1995. The results have been worth it. Herman Miller finished its 2000 fiscal year, ended June 3, with $1.94 billion in revenue, up 90% in five years. Although Herman Miller was the industry leader in on-time shipments before 1995, a paltry 75% arrived when the company said they would. Today, 98% of Herman Miller’s orders arrive on time and are accurate when they reach the customer.

Volkema says the company’s high-tech conversion was serendipitous. In the early 1990s, the company began buying back used furniture from big customers, reconditioning it, then selling it to small and midsize customers. The furniture was cheaper, easier to order, and was delivered quicker. When sales increased, Herman Miller learned that customers were willing to trade choice of selection for speed and convenience. So, in 1995, Herman Miller opened a new division, SQA (Simple, Quick, and Affordable), and a new factory that linked all sales and purchasing operations via the Internet. The technology allowed Herman Miller to deliver products within two weeks instead of eight.

The new technology also allowed Herman Miller to reach beyond its traditional base of large corporations and sell new furniture cost-effectively to a new group of customers, small to midsize businesses.

SQA worked so well that Herman Miller used it as the template for the entire company. Herman Miller’s largest customers, such as Nationwide Financial Services Inc. (www.nationwidefinancial.com), can use a Web site to see pricing schedules, to view products, or to place orders. Once the order is received digitally, the product is delivered within 28 business days or it’s free.

Volkema’s plan encountered plenty of resistance. Board members were wary of spending a half-billion dollars on technology to fix a system they didn’t think was broken. Dealers and salespeople were also skeptical. They feared their business would slowly erode as Herman Miller began to sell directly to customers.

KlingmanWilliams, which gets 80% of its sales from Herman Miller products, felt it had little choice but to go along—then found that the change enhanced its business. When Dick Klingman used to visit a client, he lugged around order forms, brochures, notebooks, and sample binders the size of a Manhattan phone book. He sometimes spent the better part of a month with a client poring over fabric swatches and paint samples, drawing sketches, and calculating prices.

Today, Klingman’s son Thom, who works in business development and sales, types the customer’s request into a program on his laptop that configures the dimensions, floor plan, and furnishings and displays the layout in three dimensions. An order list is automatically created, the price calculated, and the order zapped via the Web to the factory. There, a manufacturing date is scheduled, and space is reserved on the truck that will deliver it.

"It gives us a competitive advantage because this is a better selling tool," Thom Klingman says. "I haven’t seen any of our competitors thinking on this level."

In Detroit, where car companies’ giant purchasing organizations beat up suppliers to save every last penny, executives have been all over the Internet’s possibilities for generating efficiencies.

In December, General Motors formed a joint venture with Vector SCM (www.vectorscm.com), a division of CNF Inc. (www.cnf.com). Using Web-based software, Vector will stitch together a host of GM supply-chain partners now using proprietary systems. If things go as expected, the time it takes to ship cars across the country will shrink from an average of 13 days to eight. The time it takes to go from ordering a car to receiving it will be reduced from more than 60 days to an average of 15 to 20 days.

That should not just save GM from having to finance an enormous amount of parts and finished inventory. The compression of the ordering process could also effect a fundamental change in the car business by persuading more customers to order customized cars, rather than buy off dealer lots. Various studies have suggested that, although customers generally want the instant gratification of buying a car off a lot, many would wait and get the exact car they want if it would arrive in two to four weeks.

Even though GM likely wouldn’t be able to circumvent dealers and sell di- rectly to customers—dealers have, so far, stymied all such attempts—the company would still benefit in a host of ways. It would be hearing directly from customers and would learn more than it does from dealers. GM could offer fewer rebate programs because it wouldn’t just be guessing what customers want. GM wouldn’t have to help dealers cover the cost of their inventory as it sat on their lots. GM might also have more loyal customers if they didn’t feel they had to compromise and accept the black leather interior, rather than the beige, because that was all the dealer had available.

If anything, DaimlerChrysler is doing even more online than GM. Last summer, DaimlerChrysler launched a Web-based initiative that links all aspects of its vehicle design, production, and marketing operations. The project, called FastCar, will provide tighter communication among external partners and every internal department. In the old system, one part of a process had to be finished before the next group would take it up. Suppliers’ knowledge about, say, a new car design often lagged months behind reality. Because FastCar lets everyone communicate easily and constantly, the auto maker hopes to cut vehicle production costs by as much as 20% and to notify suppliers of production design changes three months earlier.

DaimlerChrysler’s use of the Internet to extend its supply chain to suppliers of parts, glass, and metal has speeded up the introduction of new models. The efforts have reduced the time it takes to design and produce a new car from about five years to a little more than two.

Pharmaceutical companies have been slower than other industries when it comes to buying and selling online, partly because of strict regulatory guidelines. Still, Bristol-Myers Squibb has found ways to use Web technology to connect to its suppliers and integrate its supply chain.

Bristol-Myers Squibb installed Web-based interfaces to make production information more readily available to all concerned during the manufacturing process. The company also created Web links to improve connections between manufacturing and sales. Today, about two-thirds of its suppliers of raw materials and packaging products do business with the company through its Web portal. As a result of these initiatives, Bristol-Myers Squibb knows so much about where everything stands in its manufacturing process that it has been able to cut way back on its finished inventory, which used to total four to six months of supply.

The pharmaceutical giant also has streamlined the way it buys office supplies and other equipment by deploying online-procurement software developed by Ariba Inc. (www.ariba.com). Bristol-Myers Squibb estimates it has saved $100 million since 1998 by cutting paperwork and ensuring that everyone follows standard purchasing procedures.

Bristol-Myers Squibb is also exploring ways to use the Internet for research and development efforts, including looking at how digital technology might assist in the compilation and submission of data to regulatory agencies. Because the demand can be so high for new drugs, and because patent protection has a fixed life, every single day that is shaved off the approval process can be worth millions of dollars.

Of course, using Web-based processes correctly can sometimes be harder than it looks. During the 1999 holiday season, for instance, e-tailers found themselves unable to deliver a high percentage of the toys they sold. This didn’t just irritate customers; it also brought the government down on offenders. Seven online retailers, including Toysrus.com, were fined last July by the U.S. Federal Trade Commission for failing to meet promised delivery dates. (They were much better in 2000.)

Problems cropped up largely because the dot-coms did a bad job of managing their supply chains. The e-tailers didn’t spot problems in time because, while they could see what was happening with the orders being taken online, they hadn’t integrated all aspects of the supply chain. They lacked real-time information on supplies and delivery capacity.

Even when innovations in online logistics are pursued more carefully, problems can still crop up, says Karen Peterson, an analyst with information-technology research company Gartner Group Inc. (www3.gartner.com). "Trust is one of the big challenges," she says. "We’re used to holding everything in our own enterprise, and we fear that, if we give information away, competitors could take advantage."

Coordinating among dozens of companies across several industries is no small task. Even getting companies to agree on a standard form for each type of data can be prohibitively complex.

Although industry-wide exchanges have cropped up on the Web to give everyone a standard means for conducting business, the exchanges typically focus on one-time transactions; they don’t help companies develop long-term relationships with suppliers or buyers that they find reliable. Because companies value secure relationships, many still rely on their own systems for dealing with partners.

Still, for those companies that have slogged through the complexities and have found a way to use the Web to collaborate with partners, the benefits are palpable. It’s called sharing the wealth.

Newsome is a free-lance writer in Matthews, N.C. She is still looking for a way to run her own office more efficiently. She can be reached at melbatoast@carolina.rr.com.