Profiles in IT: The Business of IT
Making the CIO a full partner in the business side—and stressing the business importance of IT.
"In a commodity-type business, if you're not trying to add value, it's a pure price war, and we don't like to play that way," says Darell Zerbe, vice president and CIO of Ryerson Tull, a metals processor and distributor headquartered in Chicago. "We like to say we're selling cost reduction at a discount, not metal at a markup. IT is one of the ways we add value."
Ryerson Tull operates between 70 and 80 distribution centers and processing plants in North America with sales of $2.8 billion. The sites are organized into divisions and tied together by a common communications backbone. About two-thirds of the company runs on one set of home-grown distribution applications; the other third runs on one of two other systems. The technical issues involved in getting the different systems to work together are challenging, Zerbe says, but even more challenging are the business issues that have come with expansion and acquisitions.
"Cultures have to be merged, business models have to be rationalized. Trying to overlay a technology component on top of that is really much more a business issue than it is a pure technology issue." Zerbe is tackling the technology side by introducing common voice and data communications systems, standardized network components and standard office software across all Ryerson Tull locations. He's currently at the proof-of-concept stage for an ERP implementation. "We're working with two of the key ERP vendors to decide whether or not it's affordable and justifiable to put the entire company on one integrated ERP system," he says.
The groundwork that made even considering a single ERP system possible came out of business decisions that have largely unified the way the company's different sites go to market. And that, Zerbe says, illustrates an important aspect of Ryerson Tull's approach to technology. "Business issues really drive this," he comments. "The CIO has to be a full partner in the business side of things." Sure, the technology is important, but only if it supports the business.
Before hiring Zerbe in 1996, company CEO Neil Novich told headhunters to look for CIO prospects who understood business. "He was primarily looking for somebody who had the ability to interface with the business people here," Zerbe says. "He wasn't necessarily looking for technical expertise. You have to have a certain amount of that, but without the business piece it would be brutal."
Zerbe got into IT indirectly. He holds a Ph.D. in industrial engineering and spent a decade with Procter & Gamble, where work in systems and operations research gave him heavy exposure to IT. After a brief stint with Baxter International, he joined Dr. Pepper as head of the IT department. From there he went to PepsiCo, then Venture Stores—a now-defunct discount retailer—and finally Ryerson Tull.
Over the past several years, Zerbe has been moving his company into e-commerce, with online services for customers, participation in an industry marketplace and some supply chain initiatives. Ryerson Tull's customers include both large contract buyers and transaction buyers—call-in customers not on a contract price schedule. For four years, the company has operated a service called RyTEC for its large contract buyers. RyTEC, Zerbe explains, covers a variety of transaction options, including ANSI EDI and enhanced EDI ordering, as well as a browser-based ordering system introduced last year.
For transaction customers, the company put its popular Ryerson Red Book catalog online last year and recently added a service called e-RFQ. This lets customers put together a basket of products from the Red Book and submit it to the company for a bid by phone or e-mail. The Red Book, Zerbe says, is used widely in the metal products industry, even by Ryerson Tull competitors, and the e-RFQ feature helps the firm translate an important intellectual property into sales.
On the supply side, the company has pared its key vendors down to about 100, and negotiated long-term contracts with them. It's also working to automate the information flow with those suppliers, with a view to driving some of the errors and acquisition costs out of the process. "The next step is to work with [them] to implement vendor-managed inventory approaches and other programs that take delays and noise out of the replenishment process," Zerbe says.
"A lot of these things companies in other industries have been doing for quite awhile," he admits. "But it's a little bit tougher in this industry because the supply process from the heavy steel mills has been an inexact science. It still amazes me that a supplier can get you an order three to eight weeks from the time you placed it, sometime during the week—plus or minus three or four days—and still consider that on time. If the shipment is plus or minus 10 percent of what you ordered, that's considered complete for many products we purchase. There are extra challenges in this industry."
Bob Mueller is a writer and magazine publishing consultant based in the Chicago area, covering technology and management subjects.