Picking your way to e-success

E-manufacturing is not an option for companies that are serious about what they do; it is a necessary part of a strategy to transform them into e-business enterprises. Why? Because e-manufacturing is about eliminating the information bottlenecks that exist between the plant floor and information systems. It’s also about providing direct, easily-configured information exchange between manufacturing, business (ERP) and customer relationship management (CRM) systems and, just as important, supply chain partner systems. The result is an agile, reconfigurable manufacturing and business capability that can respond fast to the changing demands and opportunities characteristic of the e-business world. But the risks of taking any e-business route are very real and manufacturers ignore them at their peril. “In my experience, the number one reason for disappointments and disasters in e-business initiatives is lack of clarity at the initial planning stage,” warns Les Mara, executive director at consultancy Cap Gemini Ernst & Young. “Companies do need to move quickly, but not at the expense of developing clear objectives and a clear strategy on how to achieve them. Too many manufacturing companies have rushed into interactive websites, with little real thought given to the impact on customers, trading partners and staff. “Getting the IT right is even more critical in the e-world than for traditional business, and failure to address issues of robustness, scalability and integration with existing systems is another reason why e-ventures go wrong. Many a managing director has watched aghast as e-systems that work fine at the start simply fall to pieces when the volume of transactions takes off.” So while there are huge opportunities to increase revenues and reduce costs, the devil is in the detail. Customer relationship management (CRM) is one of the key factors, and at Cap Gemini Ernst & Young a systematic approach to CRM is advocated, using its ‘know, target, sell, service’ disciplines. One firm that has done this to great advantage is tractor manufacturer CNH (Case New Holland). Cap Gemini helped CNH to move its 10,000 dealers world-wide onto a single e-service network and, as a result, the company now sees huge increases in customer satisfaction, significant reductions in problem resolution times and decreased customer service costs. But, “the issue isn’t just about getting the right systems in place,” stresses Mara, “it’s about keeping them up and running. Many manufacturers have been understandably deterred by the problems of skills shortages, 24x7 support and the sheer pace of technological innovation needed to stay leading edge. These are very real problems, and I think that any company looking at a serious e-initiative is going to have to consider long-term IT support and whether outsourcing might be the best – or indeed the only – way forward.” Mara’s recommendations would be: don’t move a muscle till your strategy is in place; fully consider issues of IT robustness, scalability and integration; and ensure you pick the right partner. Under pressure According to Nigel Montgomery (below left), research director at analyst AMR Research, although the decision to adopt an e-business strategy can evolve as part of a business process reorientation, for many it’s brought about by changes in commercial relationships with their major customers or partners. “Many large organisations are adopting private exchange (PTX) technology to interact with supply chain partners, but this requires their suppliers to communicate in a way which suits this on-line, highly-interactive model. Old-style EDI just doesn’t cut it,” he says. “Once engaged, these large companies – such as BP Amoco, Shell and the retail giants – can require suppliers to provide detailed electronic catalogue information, partake in on-line bidding exercises where accurate available-to-promise (ATP) becomes mandatory, plus provide increased levels of information for other partners in the chain. Many face an uphill struggle to introduce this level of technology, especially as it differs for each customer situation. “For one thing, the technology to satisfy all of these requirements does not exist within a single solution, so integration is needed. Also, each must be integrated to back-end systems – ERP and legacy systems.” But he adds: “The good news is that some of the integration work has been actioned by the vendors. It may not be comprehensive enough for everyone’s needs; at least it’s a start.” Be warned though, the greatest impact when going for on-line dealing with customers is that on internal departments, and the information flow between them (or lack of it). Quite simply, it exposes underlying inefficiencies that are usually hidden from view or couched in endless paper-based workarounds. As a result, although adopting e-business can be extremely beneficial, and will be the way to go, it does tend to force enormous change within the organisation. And there are other commercial issues. Montgomery: “Even allowing customers to see stock levels requires careful consideration and possibly a redefinition of the term ‘available stock’. Stock is often held in such a way as to allow allocation to customers at the last possible moment. How is this done when stock is visible to all?” Customer profiles are required for each customer, and that necessitates a change to credit analysis, often carried out manually, plus personalisation of the user interface so that each is serviced in line with their customer agreement. “They don’t call this ‘pervasive computing’ for nothing!” So how do you decide when to adopt e-business and which area to implement first? The lead-off activity of any e-business project should be a study of what is driving the adoption. Is it customer-driven, or is it part of growth, mergers and acquisitions, or perhaps consolidation? This alone can determine which processes should be approached first. The next step is to define the goal and ensure that key performance indicators (KPIs) are put in place throughout implementation to make it happen. As part of an AMR survey of European executives at the end of last year, respondents were asked what areas they were focusing on for their e-business. Of the 279 respondents, most included sales and marketing as key. Many saw the need for expanded customer/partner access via their websites, whilst a sizeable chunk settled for procurement and distribution. “Surprisingly few included production or R&D,” notes Montgomery. “This, perhaps, reflects a disconnect between IT and production – or, more likely, recognition of the complexity entailed in ‘collaborative manufacturing’.” Winners and also-rans Who, then, will be the real winners – the early adopters or those ultimately most efficient? “The pressure to react quickly to the opportunities of e-business is enormous,” says Phil Hanson, aerospace lead principal at IBM Global Services. “The word on the street is that anything can be achieved in three months. In a sense, that’s true, but more often than not the deliverable after three months will be a working proof-of-concept, rather than a robust process. The business benefits will usually come after the pilot is deployed across the enterprise. It is this scaling-up that is the hard work and which will take much longer.” Yet the impression is of a fast-track to e-business success. “Take the entry cost of starting an Internet initiative, for example. It is very low; so all sorts of unlikely people appear to be invading that space,” says Hanson. “Our employees are desperate to have real e-business credibility in their CVs. We need to be able to respond positively to our investors when they test our technological virility. When invited to join in to a collaborative portal, it takes great courage to say no.” But he continues: “What is clear is that, when 20% of orders received are coming via the Internet from customers with high expectations of service, we had better be up to delivering against that. The competition is just one click away; loyalty is a fragile concept. The Internet customer is likely to be extremely unforgiving if we don’t create business processes that match up to the promise.” And business customers are likely to be no more accommodating of service that doesn’t match up. The key to differentiation in a world where manufacturing cost, quality and delivery are givens must come from being able to respond fast to the customer’s unique requirements. “In this world, the ideas of mass customisation are no longer theory, but a practical imperative,” observes Hanson. Big Bang blunders He believes that the great benefit of being an early adopter is that you put your business into the pressure cooker of accelerated process improvement before your competitors. “You will lower the water level over the rocks before the others,” he enthuses. “The downside is that your customers will be the victims, as you progressively find and remove the rocks under the water line.” Clearly, there is no easy answer. To be an early adopter with existing business processes is to risk discarding a hard-won reputation that could take years to recover. Yet to put your head in the sand and ignore the biggest business discontinuity in our lifetimes is just as dangerous. “If there is an answer, it is to be even more aggressive about lean processes in an e-business world than you ever were before,” says Hanson. Remedy, a provider of IT service management and CRM, is very much an advocate of softly, softly. “The ‘Big Bang’ approach advocated by the ERP vendors of the ‘90s left a trail of failed or at least extremely long-winded implementations,” comments Graeme McKenzie, CRM business development manager at Remedy. “ERP was primarily a back-office activity which could be made invisible to the customer wherever possible, but pain was obviously felt both internally and externally. When we look at e-business and the implementation of CRM strategies, it is even more critical to deliver systems and process changes in a controlled and sensible manner. It only takes one bad experience to make a customer look elsewhere.” This vendor’s view is that manufacturers implementing e-business must be wary of the extent to which IT implementations become a complete overhaul of their business. Over process re-engineering, or for that matter poor consideration of the sequence of implementation, can cause chaos. Changing the sales processes by using sales configuration or automation tools, for example, should only be rolled out when links to the order entry system are fully bedded down. “Customer expectations of delivery of product will be missed if the ordering process is not to be trusted,” warns McKenzie. “Launching web-based e-commerce or e-procurement initiatives should only be done if the integrations to the ERP applications are complete. The demand and supply side needs to work smoothly to deliver the levels of service required to be competitive in today’s market.” Continued process improvement is always a hallmark of any successful manufacturing business, but now changes need to be reflected at the faster market speed in the e-business IT. This can only be achieved through the deployment of e-business applications based on a business process automation foundation, utilising modern configurable workflow technologies. Clearly, the question that should be foremost in any manufacturer’s mind is not ‘whether’ to embrace these solutions, but ‘when’.