New trading systemcoming on line

Specifically, a buyer or seller has to "discover the market" each time he needs product to buy from/sell to a particular location. Today, this is done with a seriesofphone calls to the usual suspects. The numbers of calls vary greatly. Many times you may get an automated attendant or voice mail and possibly a returned phone call. This is only the beginning. If you change locations or need to buy again later that day, the same process must be re-initiated. So, information is repetitiously gathered, used and discarded throughout the day.

A UGUST 19 marks the launch of a new -fa,- comp ute r- based tadin g syste m fo r fo rest products buyers and sellers.

Already joining are some of the industry's largest retailers (Ace, ABS, BMC West, Carolina Holdings, Copeland, Lanoga, TruServ) and suppliers (Cedar Creek Wholesale, DixiePly, Great Southern Wood Preserving, Hanel Lumber Hixson htmber Sales, J.M. Huber MacMillan Bloedel, Martco, NorPac, Potlatch, Stringfellow Lumber Vleyerhaueser, Willamette Industries).

What is this new system called fpix all about? Co-fotrnder Joluuty Ainsworth reveals to The Merchant Magazine how the new systent works.

MencnaNr If I understand correctly, fpix is an improved system for communication between buyers and sellers of forest products. What shortcomings of the current way of doing business does fpix aim to improve upon?

fpix First, there are many points of origin of material and many more destination points ofusage. Secondly, due to the nature of processing round logs into lumber or panels, there is an element of unpredictability and capability dictated by log availability and quality, mill design, capabilities, and run schedules. Thirdly, there is the issue of time; the need to match requirements on both the buy and sell side within the time constraints of functional inventory management. And, finally, this information is constantly being regurgitated within a marketplace that is extremely volatile.

But in regard to shortcomings of current practices, this is only the tip of the iceberg. The real issue is that once this information is gathered and used to process an order, it is recorded in two separate accounting systems. Changes to existing orders, order tracking, invoice/order verifications all require redundant actions on both parties in two separate systems inevitably with hard copy (paper) verification. This is a huge expense and a waste of time and resources for both trading partners.

MnncnaNr How is tradine conducted on fpix?

fpix First and foremost, a trading relationship has to be established between two companies before either can access the other's information. Then the seller establishes a pricing and ofTering environment for his established customers. The seller then provides inventory and a pricing mechanism to answer the appropriate inquiries his customers will ask of him. The buyer establishes whom he is willing to buy from, then builds inquiries for product. Upon discovering the market for a particular product to a particular location at a particular time, he may immediately buy that order or establish a counter bid to his selected vendor(s).

Assuming sufficient credit is available to process the transaction (an interactive credit matrix is provided within the system), a transaction lock is established providing both buyer and seller the opportunity to record their corresponding purchase order and sales order number for electronic updates to their respective legacy accounting systems. Inventories on both buyer and seller screens are reduced real time to prevent duplicate orders. Order changes, follow-ups, shipment notifications provide instant updates to everyone involved in that transaction without duplicated efforts.

Since everything must match up on line before a transaction will take place, the buyer and seller confirmations must match. This means that the invoice can now be matched electronically to the existing order in the system without manually verifying each and every invoice. Additional advantages to electronic invoice processing are quicker credit relief and control and electronic payment to avoid the costly process of printing, stamping, mailing and recording checks.

Mnncnanr In what areas will cost savings come? Time savings?

fpix Certainly, telephone charges will be affected, although not eliminated, as phones are still needed to talk with your trading partners. The real savings will be time and allocation of a company's resources. For instance, a study by an independent accounting firm showed that it cost $50 in manhour time to process a single invoice and paper check by mail. That is only the beginning. In today's world, both buyer and seller have to separately record each order and order change in their respective systems, manually cover the phones every hour to give or receive mission critical information in order to make a single buying or selling decision. This process is repeated hundreds of times a day, every single business day.

Another independent study concluded that a business which logs 100 phone calls a day with just 15 seconds of hold time per call will clock over fpix There is a one-time setup fee of $2,500 that applies the cost of connection to the wide area network, hubs and routers. This is a reduced introductory fee. Then there is a monthly charge for that dedicated connection as this is not Internet at this time. That charge varies by bandwidth requirements and starts at $900 per month. Then there is the base charge per transaction. A company can easily get this fee down to less than 500 per M on most products.

150 hours of hold time each year! Sharing information with your trading partners allows both of you to win by reducing the repetitious order entry problem and market discovery process of redundant phone calls. This frees up people and resources that can be productive in many other areas. The fpix solution is really a win-win opportunity for trading partners.

MnncneNT What are the costs associated with joining and using the system? And needed training?

Early on we understood the importance of training and knew that we did not have the internal expertise to undertake such an important element alone. We engaged the services of Atwork!, a prominent Dallas training and marketing firm, to design and implement the support, content and training applications associated with the launch and subsequent use of fpix. The first evidence of that being the right decision was in the June 4 and 5 fpix advisory board meeting in Dallas. The result of that meeting is that we met all six of our pre-established objectives. We are now proceeding with the pre-launch trade conference in Dallas August 13 and 14. While this is proving to be a major investment for us, our members can be assured that they will have a complete understanding of how and why the system works for them and how to gain the most benefit from the system for their company.

MnncrHxt What types and sizes of businesses is it intended for?

fpix Those engaged in the buying, manufacturing/selling, re-selling of forest products as a substantial part of their core business. This is a huge productivity tool and will benefit those companies whose core business is processing orders for building products. As this is a private network solution instead of Internet, there are only so many companies that can be connected at once. Therefore, we have focused our efforts on key producers and facilitators along with the top 60 or so retailers. fpix To date, we've had 43 companies sign a letter of intent. This was used only to measure interest. We do not count these companies as having really signed until they convert to signing the membership agreement, currently in process and going well. fpix fpix is part of the larger picture, the forest products commodity market. It does not stand on its own or operate in a vacuum. As adoption takes place based on the merits of this solution, migration from the telephone process to the fpix solution occurs within the confines of that same forest products commodity marketplace. In other words, it is not the process that defines a marketplace, but the action of its participants within that marketplace. It has less to do with the number of buyers or sellers and more to do with the action the buyers or sellers take. fpix Absolutely, and the numbers are climbing rapidly. However, none ofthe ones being used or that are under development solve a logistics problem as great as that of this industry. Examples include a private network between energy companies for crude oil deliveries, one for bundling and reselling mortgages, the on-line booking and reservation systems for air travel such as Sabre. etc. fpix It will not initially. That is due to the issue of stability and speed. The information that we are processing is critical for the users of the system. We want to make certain that the speed and stability of the system is there when our members need it. There are modules of the system under development that are Internet destined and designed to be so. As a matter of fact, the system is built with Internet capabilities so as the Internet evolves into a commercial capable network, we can move the solution over at tremendous cost savings to the members. fpix Our product group as oftoday has over 500,000 part numbers or srus. Those part numbers are descriptions of lumber, plywood, and panels manufactured in North America. Certainly, there are other products that can be processed over this network such as particleboard, MDF, engineered wood products, wood chips, paper, gypsum, roofing, etc. fpix First, there are time-proven technology authentication and encryption tools that are being employed at various levels throughout the system. In terms of electronic funds transfer, that is being handled through the Federal Reserve. Tens of billions of dollars a day are processed via the Fed's Automated Clearing House without a single loss! Finally, we provide a third-party compliance audit to each member regarding every aspect of the company and the operating solution. This SAS 70 is an industry-accepted audio report. It covers everything from how the system operates to our hiring practices and ventilation access to the server room. fpix We will be ready for the first release before August 19, although our focus at present is getting connections completed and finalizing the August Trading Conference. While August 19 is clearly important to us, it is only the beginning.

MBncuenr How manv users have signed up so far?

Mnncnexr Do you foresee that more traders joining fpix will affect selling prices? For example, might participation of more sellers mean lower prices or participation of more buyers mean higher prices?

Mnncuenr Are there other industries that use similar systems to fpix?

Mnncn^l,nr Does the World Wide Web play a part in the system?

Mencnenr How does fpix alleviate security concerns regarding financial accounts or other proprietary information?

Mrncnc,r.{r What products will be offered initially? What other types of products do you see eventually being offered?

MrRcHlNr Is everything ready for August l9?

INLAND LUMBER Producers Association head (right) (1) Jim Scharnhorst, with wife Linda at group's 1Sth annual golf and tennis tournament July 13-14 at the Coeur d'Alene Resort, Coeur d'Alene, ld. (2) Carla & Bruce Christofferson. (3) Linda & Stephen Lambert, Leesa Wanen. (4) Mike Christman, Frank & Auni Peaslee. (5) Mark & Susan Herms, Sharon Woodcock, Terry Burkholder, (6) Bob Gruhlke, Kenneth & Janet Ford. (7) lsabella Flynn, Kevin & Vicki Conrad. (8) Steve Eadie, Allan Hoblitt. (9) Cindy Gruhlke, Cindy Wood, Tammy Crossland. (10)

16 TnB Mrncruxr Mlc.czrNr Aue usr 1998

Ron Linn, Elaine Kazakoff, Vernon Massey. (11) Patty &Steve Baugh. (12) Jim Wanen, Herb Janhsen. (13) Leianne Stinton, Cal & Doris Pulis. (14) Roger Hughes. (15) Dick & Debbie Frazier,Larry Williams. (16)Alice & Scott Gascho. (17) Stacy Fisher, Marjie &Gunnar Brinck, Gordon

Foster. (18) Don & Brette Regan. (19) Rich Mergel, Dave Engelhard, (20)

Charlotte & Walt Wirfs. (21) Laurie & Lee Scott, Brett Johnson, Michelle Penner. (22) Darrel Garoutle, Steve Colosimo, Jim Wallace. (23) Kit & Jan Dimke, VickiJahns.