Manufacturing enterprises everywhere are under growing pressure to take the ‘e’ leap. And the claimed benefits are legion. But how do you build a winning e-business strategy? Brian Wall takes up the challenge.
Slowly, but irresistibly, e-business is transforming the world of manufacturing. Everywhere, information is beginning to empower the customer, who in turn is now demanding new levels of service, personalisation and responsiveness from vendors and partners.
It’s not going to go away. To succeed in this increasingly customer-driven world, manufacturers will have to pay even greater attention to the front-end sales and back-end processes and systems responsible for fulfilling e-generated orders. According to Patricia Hewitt, Minister for Small Business and e-Commerce, although businesses may think they are seizing the opportunities the information revolution presents, they need to do more than just get connected. “The challenge now is to become a fully e-enabled business, increasing efficiency and expanding business opportunities with both customers and suppliers.”
The Department of Trade and Industry (DTI) and CBI are tackling the task of persuading business to do this with unstinting zeal. Yet, as Digby Jones, director general of the CBI, concedes: “While there are many companies that have rightly adopted a comprehensive approach to e-business, there is still a significant number that have yet to grasp fully its potential benefits. It is essential these companies act now to ensure they make the most of e-business and really make it deliver.”
The sentiment is the right one, but the challenge is daunting. How do you make the business case for e-manufacturing? The truth is that there isn’t a universal blueprint. However, there are a number of key drivers, caveats and imperatives in the implementation process that should lie at the heart of any e-business strategy: enough to provide most enterprises with a route map that smoothes the path — although there may still be boulders along the way.
1. Define the business essence and objectives. Assuming there is full buy-in and support at boardroom level, a useful starting point for any enterprise embarking on an e-business strategy is to define in detail its business essence: core products and services, business model, market, supply chain, customers and employees. Then the company must ask itself what it is seeking to achieve. This means deciding exactly what is wanted for the business – and then seeing how the new technologies can help it to reach those goals. If the existing business processes aren’t working well, the company must decide what it needs to change. There is no substitute for best practice and best process.
2. Examine the relationship with suppliers. Equally important is deciding how the relationship with suppliers can be improved by implementing technology solutions around, for example (but certainly not only), e-procurement. Increasingly, the e-business customer wants products to be highly customised, backed up by fast delivery schedules and instant access to order status. Doing business on the web has pushed customer expectation to unparalleled heights and those needs have to be satisfied – quickly, effectively and transparently – within the e-solution. So you need to get your suppliers properly on board, working with you – and working well.
3. Produce the pilot scheme. A pilot can be prepared in three months – and rolled out straight away. But, remember, it is only the first rung on the e-ladder. Arriving at a solution that integrates all of your processes with those of your customers, suppliers and partners may well take years. There are a number of skilled e-incubators who, for a fixed price, will prove the pilot for your business, so it can then be taken to the board. Use them.
4. Go for staged winning implementations. This includes evaluating the core processes and deciding which ones should be implemented first, based on what is going to have the highest and fastest impact on the bottom line. In other words look for the quick and the longer term wins in terms of increased sales, higher customer satisfaction and e-improved supply chain management.
While most commentators accept that making the business case for implementing an e-manufacturing strategy is part careful planning and part journey of discovery, Phil Hanson, aerospace lead principal, IBM Global Services, believes some manufacturers are starting down the wrong road.
“They are trying to translate their existing capital expenditure process into an e-business world, the result of which will be some kind of return on investment or payback period. However, the difficulty with e-business is that there isn’t the degree of certainty of outcome that you might have, for instance, if you were buying a new piece of plant or equipment, where you can do some tidy arithmetic and know its capacity, speed and the equipment it is replacing.
“If you are doing something much more amorphous, such as putting EDI on to the Internet, you don’t know what the take-up is going to be, the reaction of the suppliers or how quickly they are going to come on board. You don’t know what effect this is going to have on transaction flows. So there isn’t the clear and obvious mechanical precedent.
“Also, in making the business case, you need to be very careful that you have taken into account the true costs and time span of scalability. The chief executive may think the business will have that solution ready in a matter of months, but that is not the reality.”
And he adds: “One factor that should not be underestimated is how much pressure chief executives are under to demonstrate their virility in the e-business space. Much of the urgency around the e-business evaluation process is not coming from the managers demanding to know what their company is doing about e-business – rather, it is pressure from the top downwards. In many cases, the board is stipulating that it wants a solution – not just a pilot – in three months’ time, fuelling unrealistic expectations.”
Success and failure
David Atkinson, UK electronic commerce strategist with Sun Microsystems, specialising in the manufacturing sector, points to many successful e-business implementations, but he has also seen the other side of the coin. “If you get it wrong, you can besmirch your name and potentially damage your brand globally,” he warns. “The other thing is that you need to work with partners if you are going to make it work at all. There is no company on this planet big enough and clever enough to do it all. There are some very skilled integrators out there who can go into a manufacturing company and knit together all of a business’ systems. They shouldn’t be ignored.”
Marion Schooler, campaign manager for the ‘Fit for the Future’ initiative launched by the CBI and DTI to promote best practice within and between businesses, believes there is a tendency for companies to get hung up on some of the more horrendous statistics surrounding web sites that have been launched, but which aren’t generating any sales revenue yet. “We have to get away from that whole level of thinking,” she says. It’s not just a new revenue generating opportunity. “It is a whole new strategy and way of doing business.”
David Froome is director general of the not-for-profit UK Council for Electronic Business (UKCeB), which promotes B2B e-business for the manufacturing and engineering industries. He believes manufacturers have to decide what would be an ideal way of running their business. “From that will flow a need to make some changes to the process, which is something electronic tools will support. In other words, first pay attention to business process and then look for those aspects of e-business which will give the greatest support. We would not advocate wall-to-wall electronic business. You probably don’t need it anyway. Certainly, in terms of implementation that’s the route to disaster.”
UKCeB, which is also part of the CBI-DTI ‘Fit for the Future’ campaign, advocates an assessment process – known as e-BAT – which is designed to take businesses through 18 core e-business activities as part of a third party facilitated process. e-BAT looks at the manufacturing sector that the business operates in – from mass-production of cheap throwaway items to the high-risk, high-tech, end – and then where that business sits in the supply chain.
“That will govern what the e-business objectives are,” says Froome. “Then it looks at the business drivers, namely the key issues that the business is dealing with, and the e-business competencies – what the business already has. Often people don’t realise that they’ve got some jewels tucked away within their own organisations. e-BAT assesses all of these factors and then highlights those key areas where competencies need to be improved and by how much, in order to meet the business objectives.”
e-BAT provides a short-term e-business strategy – something that is achievable in about six months – while implementation depends very much on which elements of the e-solution have been identified and which competences or skills the company needs to improve on. Those that don’t already exist in-house need to be sourced and brought in. The e-BAT process can be used across the supply chain to help an organisation and its partners/suppliers to:
l Pinpoint the aspects of business performance you wish to improve;
l Establish how well you are applying e-business methods, compared with ‘best practice’;
l Determine which e-business methods to focus on to support the required improvements in business and supply chain performance;
l Create a first-cut plan for e-business strategy implementation, highlighting issues and constraints.
It is, of course, not necessary to put all aspects of e-business in place at once. Companies naturally wish to build on existing investments in their information systems. Consultancy KPMG’s e-business advisory services team suggests a four step e-business roadmap.
“At a basic level, a website may be used as a promotional tool, with the publication of corporate information,” suggests KPMG. “One step on from this is the facility to provide customer services on-line, followed by a progression to on-line trading, with the buying and selling of goods and services. The most developed stage, ‘enact’, provides for a community of interest, with selective membership and a knowledge exchange.
The final word on e-manufacturing goes to Michael Roberts, Rolls-Royce director of business process improvement. For him, focusing on customers and finding new approaches to the fundamentals of how the company does business were the first essentials in moving forward with e-business.
“You have to review every aspect of what you do in the light of what the new technologies can enable and the barriers it can pull down. It should be regarded as an enabler and framework for business enhancement – not an end in itself.”
18 Key e-business elements
UKCeB identifies 18 key e-business elements within e-BAT which, the director general says, should be part of the chemistry of any fully-fledged e-manufacturing solution:
1.Electronic technical and commercial systems
2. Systems and applications for sharing information
3. Protected and secure systems
4. Infrastructure for sharing information
5. Customer and supplier communications
6. Information to agreed standards
7. Managed, shared information and knowledge
8.Electronic ‘through life’ information
9. Information to support management decisions
10.Clear total business process model
11.Documented processes supported by procedures
13. Secure processes
14. Concurrent engineering
15. An e-business vision
17.Effective team working
Who can help?
Confederation of British Industry http://www.cbi.org.uk
Department of Trade and Industry http://www.dti.gov.uk
Fit for the Future http://www.fitforthefuture.org.uk
UK Council for eBusiness http://www.ukceb.org
UK online for business http://www.ukonlineforbusiness.gov.uk
Author: Brian Wall