E-business is no longer something manufacturing can afford to ignore. Dean Palmer talks to some key e-business vendors, who believe that a strategy based around e-procurement, supply chain collaboration and Customer Relationship Management is the route to competitive advantage.
The emergence of Internet technologies and the shift to global sourcing have dramatically changed the manufacturing landscape. Business is occurring at breakneck speed, outsourced manufacturing is increasing, and the challenges of managing extended enterprises continue to mount. The winners in this emerging era will be those manufacturers that become virtually integrated with suppliers, trading exchanges, partners and customers around the world.
But this is easier said than done. The challenge facing manufacturers today is to develop an appropriate e-business strategy which brings true benefits to the business. And despite the recent well-publicised failures of many dot-coms in the business-to-consumer (B2C) market, business-to-business (B2B) Internet trade seems to be thriving. For manufacturing, one of the key areas that can provide a competitive advantage is in e-procurement or joining a Trading Exchange.
Patrick Meyer, director of corporate communications at CommerceOne, an online marketplace solutions provider, states that manufacturers are already benefiting from joining e-marketplaces: “By creating a trading exchange, manufacturers are extending their reach and taking advantage of new ways to buy and sell. Offers from many suppliers are aggregated, or buyers and sellers can be matched in an exchange or auction.”
Meyer continues: “It’s no longer about just cutting costs. It’s about generating revenue through transaction fees, advertising and new services. On the supplier side, suppliers can release their content to every participating buyer at once. Trading partners can share information and collaborate with their peers, learning about new industry developments, events and standards.”
Nick Earle, president EMEA at Ariba, another big e-marketplace vendor, warns manufacturers that there are other issues, apart from the technology itself, which businesses should be aware of before plunging into the e-business market: “Overhauling a company’s culture is the number one requirement for implementing a successful e-business strategy. And the strategy will require the backing and commitment from senior management.” Ariba should know – worldwide, there are now over 3.4 million desktops with the Ariba icon, and the company is responsible for $700 billion worth of transactions across its B2B network. Very impressive, considering the company was only established four years ago.
So what else should manufacturers be focussing on when developing an e-business strategy? JD Edwards, although originally an ERP (Enterprise Resource Planning) vendor, is now focussing its effort on the supply chain and collaborative commerce e-business market. Nick Rawls, e-business evangelist for the company, travels the globe educating both internal JD Edwards employees, and potential customers, in the benefits of developing a clear and focussed e-business strategy.
Rawls believes that, “open architecture and collaboration with the supply chain are the two key issues today which face companies considering an e-business strategy.”
He continues: “Assuming a manufacturer has e-procurement of indirect materials in place, and has a web storefront with some level of integration with back-office applications, I would concentrate on the supplier side of e-business.”
Rawls explains further: “Although relatively quick and easy gains can be made with e-procurement of indirect/ MRO (Maintenance Repair and Operations) items, manufacturers are principally concerned with direct materials or MRP items. This is where collaborating with your suppliers comes in,” says Rawls.
But collaborating with suppliers does not necessarily mean external suppliers. Manufacturers with several global sites should start by collaborating internally, perhaps by using some kind of internal Trading Exchange or business Portal. Once this is in place, the company can then begin to focus on external suppliers and the customer.
Robert Claren, product manager for Intentia’s Enterprise Business Portal product, has a great deal of experience implementing such systems for manufacturers: “You have to focus on your partners and internal collaboration first. You must also have a very clear understanding of the underlying business logic and processes, and these must harmonise with best-of-breed software.”
Claren recommends that manufacturers use a business model approach to improve workflow and eliminate waste throughout the company – but split the model into smaller, more manageable areas/ processes. But he warns: “It is important to identify where the critical business information flows are. Do not attempt to tackle the entire business model at once – you will undoubtedly fail, or it will take far too much time. Also, don’t try to standardise on solutions.”
Nick Rawls of JD Edwards believes that manufacturers must look externally beyond the enterprise, in order to achieve real business value: “ROI is a key requirement for most CEOs. Customers need to be able to translate what they are doing in their supply chain to tangible expected value in measurable terms.”
In fact, JD Edwards use a TVM (Total Value Management) approach to ROI. This analysis measures the overall state of the customer’s market based on published financial results, then compares them to the industry average, then best-in-class, and shows future opportunity areas. This helps JDE to win contracts since many clients have not even performed this kind of ‘health check’ on themselves yet.
But how much input will the e-business strategy require from internal departments and from customers?
Claren believes that most of the effort has to come from within the business itself: “Companies must quickly (within 6 to 8 weeks) set up a dedicated ‘e-direction’ team that includes a politically-strong senior manager. This team must be dedicated from day one and the tasks should not simply be an add-on to their existing jobs – the idea is that the team operates as if it were a completely separate company within a company. Top management commitment is crucial.”
Moving on from trading exchanges and supply chains, customer-facing solutions also need to be part of your e-business strategy. Coupled with the advent of the Internet, CRM (Customer Relationship Management) solutions can deliver a decisive competitive advantage to manufacturing businesses. Put simply, a good analytical CRM solution can help a company understand its existing customer groupings. But then goes further by matching customer profiles to prospective customers. Even a small-scale CRM solution can be successful, if focussed in the right area.
But, as with most software implementations, manufacturers must also be aware of the cultural issues. As Ian Maclachlan of Accurate Business Solutions, advises: “Often the greatest hurdle of all isn’t technology – it’s cultural resistance. In large companies, different departments can be very territorial about their data or even claim ownership over particular customer groups. Your people need to be persuaded that CRM will benefit them and the company so much it outweighs any reservations.”
The potential benefits of analytical CRM solutions are clear. Maclachlan agrees: “It is estimated that at many businesses, the top 30% of customers generate 130% of the profits, with the remainder being marginal or loss-making customers…if you can find out who those ultra-valuable customers are and what makes them tick, just think what intelligent CRM could do for your company’s future.”
Finally, as far as consultancy is concerned, for any software implementation, Claren warns: “Consultancy is necessary, but it must be used intelligently. In other words, do the business modelling yourself first, then choose a platform and software solution which fits the model. But what is really critical, is that the consultant actually understands your own business model and processes before they help you choose the right software.”
Sounds like common sense to me.
Author: Dean Palmer