Seals manufacturer AES Engineering says there’s more to e-business than simply getting transactions moving over the web. Brian Davis reports.
Developing an e-business strategy is not simply about optimising transactions: the Internet and web technologies can provide the infrastructure for much more powerful exchange – of knowledge between companies and their customers, suppliers and the distribution network. It’s about forming a global community, and building better collaboration for the benefit of all.
Sounds good? OK, but setting up an integrated e-business with this level of data exchange is bound to pose significant challenges – and £25 million turnover Rotherham-based AES Engineering, a multi-national firm specialising in the design and manufacture of mechanical seals and support systems, has some valuable experience to share.
AES is primarily a build-to-order manufacturer, and its experience is interesting not least because aspects of its operations are similar to many in discrete manufacturing. Jonathan Wilkinson, head of IT, says: “At a strategic level we see the Internet as simply another medium for delivering information on a global basis.” But, he adds, “we’ve created a virtual private network (VPN) which now plays a vital role for operations with dealers and agents in 24 locations world-wide.”
Over the last six months the company has set up a bespoke configuration for Internet-based transactions, based on its existing Sage Tetra CS/3 enterprise (ERP) software, but with new IOTA (Internet Order Taking) software on top – both provided by enterprise solutions firm Lynx Commercial Systems. And the result is customised web pages for business-to-business (B2B) operations that link right into AES’ ERP and also its Unigraphics CAD/CAM systems and web-enabled product data management (PDM) system.
However, AES considered the main demand from its customers was less for swapping transactions, and more for gaining knowledge of its product range. Says Wilkinson: “Our products are relatively difficult to specify because we sell into every industry where liquid has to be moved – from chemical processing to water treatment.” So the company majored on developing its Oracle database – with more than 20 years’ accumulated knowledge – to allow customers to specify products using a Visual Basic front-end on top.
In fact its IT strategy was designed to meet several key objectives. First, Internet tools had to be used to make geography irrelevant to business. Second, a global knowledge-based system was needed for corporate publishing and management. Third, the database had to be available to all strategic business partners. Fourth, product development had to become feasible over the Internet so that customers themselves could configure finished drawings on the web (actually achieved via AES’ bespoke application which uses Coldfusion and Microsoft Active Server Pages). And fifth, e-commerce had to reduce the cost of the communications infrastructure.
So far, it’s a qualified ‘looking good’. AES now estimates that communication costs will halve over the next five years. And it considers the £150,000 spent on building its e-business infrastructure – much of which was the installation of the IOTA toolset – was relatively low for that return on investment.
However, as for web transactions, Wilkinson recognises there is still a lot of work to be done in terms of unifying standards for the web-based ordering system, compared to well established, though costly EDI systems. Nevertheless, he considers that AES is slightly ahead of most B2B companies of its size.
Meanwhile, although product development has also been considerably accelerated, that’s almost entirely the result of AES’ PDM and 3D CAD investments, not the e-commerce initiative as such. Indeed, Wilkinson expresses some scepticism about the potential for e-collaboration across the supply chain. “We are desperately trying to avoid doing anybody else’s administration. There’s a lot of talk but not much action,” he says.
Returning to the knowledge management and web information dissemination aspect, he maintains, “The real strategic IT decision is at the database level, where we standardised across the group on Oracle.” However, on a telling note he says that although customers come onto the website ostensibly to make enquiries about seal systems via the database, “most are more interested in the anticipated delivery date, than drilling down to raw material data.”
Lynx director Ian Robertson can draw strength from this. He maintains that customer self-service is the key driver towards e-business. “Driving new business hasn’t been a huge theme, but customer retention is considered to be a major factor for embarking on an e-business initiative,” he says.
He suggests that many B2B operations “simply offer customers a different channel for trading which they may prefer. But the web may also offer a more profitable route to market for lower margin products.” And he insists that, whatever, any company’s e-business system must be fully integrated with ERP, otherwise orders entered on the web by customers will have to be re-keyed in to the back office order processing system.
Robertson suggests a number of key issues must be considered when creating an e-business. First, there must be an over-riding business case for developing an e-business site. There’s no point throwing up a few web pages with an ISP and anticipating loads of business. Second, target your audience: articulate your strategy with them and embrace them in the e-business process. Most customers are somewhere down the supply chain, so if they take an e-business initiative without informing their upside or downside it could be less effective.
Third, review all business processes likely to be affected. This is a new form of taking orders. Will it hit your back office system? Will the system acknowledge orders taken in a different format? Fourth, make sure the e-commerce initiative is run as a business, not as a sideshow!
Back at AES, extensions of its e-business strategic model are envisaged as new technologies emerge. Says Wilkinson: “The Internet is not the holy grail. The e-business transactional infrastructure is only part of the story, but we’re well down the path of delivering a knowledge-based system.”
Author: Dean Palmer