Tonernow - e-fulfilment in the office supplies industry

01. septembre 2001



Tonernow produces and markets toner as well as accessories for printers, copiers, and fax machines over the Internet. To deliver its products, Tonernow hires an external transport company (FedEx). The methods of payment are also processed through a business partner (Paymentech). This case study describes the internal transaction process from the order up to payment.


1. The company

Tonernow produces and markets toner and accessories. The company’s headquarters is in Englewood, New Jersey.


Background
Tonernow is the e-commerce department of IQ Computers, a company that was founded in 1993 by two young entrepreneurs. In 2000, IQ Computers' turnover was approximately USD 5 million. The website Tonernow.com went online in December 1999.


Industry Sector
Tonernow deals in toners, therefore it operates in a sector of the office supplies industry. In 1999 the entire volume of this market was estimated to be USD 30 billion. Competitors in this market sector include original manufacturers, wholesale dealers, retail dealers, mail-order dealers and manufacturers of no-name products.

Toner refers to the powder-form ink found in the colour cartridges of printers, copiers and fax machines. It is applied to paper. Toner is composed of a bonding resin (that causes the toner to adhere to the paper), a colouring agent, a charge control agent (which keeps the electrostatic charge constant), a separating agent, and an agent to improve the flow properties.

The toner is combined with a bonding agent, which acts as a carrier substance and transfers the toner to the development unit. The contact between the toner and the carrier substance causes electrons from the bonding agent to be transferred to the toner, so that a negative charge is formed on the toner and a positive charge is formed on the carrier substance.

Tonernow also offers dealers and customers from the industry the following special services:

  1. individually designed order recommendations and inventory information
  2. simplified payment methods and delivery conditions
  3. individually designed shipping options
  4. individual offers
  5. regular delivery according to need
  6. order confirmation by email

2. e-business Vision and e-business Strategy

Tonernow plans to conquer the technical market with quality and dependability.


Strategy
The Tonernow website and database have been completely redesigned so that no customers are stolen from the parent company.


The Supplier’s e-business Concept
Tonernow’s concept is to market its products via the Internet and to continuously rework the product selection in a unique way by only taking the best products from contractual partners.


Scope of Services
Tonernow’s customer service is not only to market the products via e-commerce but also to hire an external transport company to make the deliveries.


Partners
Business partners
The business partners of Tonernow are Paymentech for the payment systems and Federal Express (FedEx) for the deliveries.

Internet Solution Provider
Tonernow works with the Internet company, Intershop Communications AG. Intershop provides solutions for globally operating companies. It offers platform-independent, comprehensive solutions for a number of B2C and B2B business models on the sales side of the business in the e-commerce sector.

Choice of Business Partners
When choosing a supplier, Tonernow also pays attention to its reputation. The final decision is made by the founders of Tonernow.


3. Implementation

Processes / Redesign
Tonernow prepares and packages the goods at the New Jersey location. FedEx provides the logistics and Paymentech handles the payments.


The Fulfilment Partner’s Solution
All transactions by Tonernow use SSL encryption. This system protects against hackers and prevents undesired access to information.

Tonernow participates in the Secure Site program from VerSign, which makes it possible for customers to check the authenticity of the website and to communicate securely. For this purpose, a server ID from VerSign is installed in the server to support the Tonernow website.

Paymentech is responsible for all processes involving cashless, electronic payments. This includes the services of a bank, or alternatively for a bank with a dealer, such as the authorisation of credit cards (Master Card and Visa), clearing accounts in bank transactions, depot and account control, auditing, and reporting on the activities in the accounts.

Paymentech is the second largest administrator of transactions involving credit cards in the USA and is the market leader in the area of payment transactions on the Internet. Tonernow uses the Payment Management Solution from Paymentech, a system with which you can authorise, update address lists and execute batch operations online.

The authorisation process guarantees that credit cards have enough funds to cover an invoice. The client’s credit card address is compared to the P.O. box, address and postal code on the order. The batch operation allows dealers to request and immediately receive an authorisation confirmation. This is usually carried out at the end of the workday when all orders of the day are processed and the merchandise would be packed.

The ordering process on the Internet begins with a function enabling the customer to create a hit-list using one of the search words, keywords, brands or product types. Then, he clicks on the product or the “buy now” option and thereby arrives at another page where more detailed information awaits. There, he must once again click the "buy now" option. This causes the chosen product to be added to an electronic shopping cart; furthermore, the amount and price are shown (Fig. 3.1). At most sites, a minimum of five clicks are required to place an order. Fewer clicks are necessary with Tonernow, which is a clear competitive edge. The Tonernow site is “more user-friendly”.

Figure 3.1: Online Ordering

Figure 3.1: Online Ordering


There are three ways to place an order on the Internet:
Option 1: A store (or information) manager takes care of incoming orders and customer accounts. Order forms and delivery notes are used for this ordering method. (Fig. 3.2).

Figure 3.2: The internal process from the order to the delivery.
Figure 3.2: The internal process from the order to the delivery.


As soon as an email order arrives, it is printed so that it can be easily read during further processing. The clerk responsible for processing proceeds as follows:

  1. log into the password-protected Store Manager back-end of Tonernow.com on a specific PC,
  2. enter the data that is read from the printed order
  3. if available, check the customer’s previous order history
  4. create a packing list in the customer’s file
  5. create a delivery note


Option 2: Orders are created from statistics and preferences (Fig. 3.3).

Figure 3.3: The internal transaction process
Figure 3.3: The internal transaction process


First, the responsible clerk marks the order to indicate that Tonernow has started processing the order. The marked transaction is automatically forwarded to a stack of earlier orders, which will be processed later by the clerk for payment systems.

The first clerk confirms the solvency of the customer. The credit card authorisation means that the owner agrees that a dealer or bank may perform a transaction. Furthermore, it also confirms that the order is within the limits of the credit card.

Then, the customer orders clerk compares the invoice address with the address on the order and the address of the credit card. For this, the payment clerk’s results are checked and the address of the ordering party is compared with the address of the company responsible for the payment systems.

Finally, the order processing clerk generates an order confirmation. The packing slip and the order confirmation are passed to the warehouse either by the clerk bringing it there in person or by the warehouse manager picking it up in person. This transport route is completely trouble-free since the warehouse and the customer service centre are right next to each other.

Option 3: The accounting department records the customer’s invoices over a specific time (Fig. 3.4).

Figure 3.4: The accounting process
Figure 3.4: The accounting process


The customer service clerk puts information about the customer into the accounting database. This also includes putting the order into the back-end database and generating an electronic delivery note for the company's internal accounting. In this way, Tonernow's customer files are brought up to date.

As soon as the warehouse receives an order, the warehouse manager enters it into a workstation that is directly connected to the network of the shipping company FedEx. At the same time, a shipping number is generated and sent to the customer by email so that he can follow the status of the order in the Internet.

The information for FedEx contains the delivery address, order number, and method of shipment. The methods of shipment include 24-hour delivery, delivery the next morning, delivery on Saturday, delivery on the same day, or delivery on the following day. The FedEx carrier receives all orders before he enters Tonernow’s warehouse in order to be able to check the orders later. Then, the carrier takes possession of all the merchandise in the warehouse in order to be able to deliver it immediately.


Costs
The entire project, including development of the database and website took approximately six months and cost approximately USD 200,000.


4. Technical Implementation

Processes / Redesign
The website and database from Tonernow.com were developed as an independent company in order to not poach any customers who buy from IQ Computers in the traditional way. In order to plan and develop Tonernow.com and launch it in the market, a specialist for public relations, a freelance media consultant, and a web designer were hired.


Software Solution / Programming
The employees of IQ Computers developed a relational database for the Tonernow.com website, which made it possible for customers to get to the virtual department store using the brand, product types, and product numbers options. The development team created relational links for all 3000 products. In addition, a “compare and save” feature was integrated. This helps each customer to compare the prices of the products form Tonernow with those of other manufacturers.


Technical Platform
Tonernow works with a UNIX platform and with Ultra-5 servers from Sun Microsystems.


5. Operation

Maintenance
The support of the database applications and website were outsourced by Tonernow for USD 600 per month. Paymentech is responsible for the maintenance and functionality of the software. The warehouse workstation is the responsibility of the warehouse manager. It belongs to FedEx and is also maintained by that company.


Profitability
When the Tonernow website was put into the Internet in December 1999, there was only a few thousand dollars of turnover. In January 2000, it increased by 115%, in February by 209%, and in March by an additional 118%. By 2001, the outlays of Tonernow had been amortised and the company has operated at a profit ever since.


6. Success Factors

Tonernow’s success factors are:

  1. the ability to apply extensive expertise and experience to a website,
  2. concentration on the requirements of customers and on their knowledge of the Internet,
  3. the major commitment of the company owners during the entire e-business development process.



Specialities of the Solution
The internally developed relational database makes Tonernow into a unique company. There is no comparable database in the entire industry.


Unique Selling Proposition
Tonernow asserts its unique sales position by means of user-friendly, customer-orientated functionality.


Changes
Tonernow has increased its sales, multiplied its sales channels, and expanded its customer base.


Lessons Learned
Tonernow created a database that is unique in this sector. In the meantime, companies around the world have shown interest in Tonernow’s technology.

Comment by the Author
The most important factor for Tonernow’s success in e-business is the ability to combine an entire series of web-based applications from various sources into a comprehensive total solution for processing and shipping orders. Tonernow has a great deal of background knowledge and practices a strategy, which only takes the best elements from various technologies. So far, no other company has successfully created a relational database that benefits both the customers and the company.

The most important conditions for Tonernow’s success in e-business are:

  1. comprehensive technical expertise in the Tonernow products that are distributed worldwide,
  2. strongly defined business ethics and concentration on the experience of customers, on brand identification, and a strategically favourable market position,
  3. the active role of management in the development and implementation of the information technology as well as the transactions.

Exploitant(s)

tonernow.com
Secteur: Commerce de gros et de détail
Taille de l'entreprise: Moyen entreprisetonernow.com

Auteur(s) de l'Ă©tude de cas

Jean-Pierre Jeannet, Dhruv Greval, W. Caleb McCann, Martha Lanning
Babson College

01. septembre 2001
Jeannet; Jean-Pierre und McCann; W. Caleb (2001): Tonernow case study; in: Dettling; Walter; Schubert; Petra; Wölfle; Ralf (Ed.; Fulfilment in e-business – practical concepts by innovative companies; pp. 227-237; Munich; Vienna: Hanser Verlag; 2001.

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