Manufacturers expect to get more out of e-business

Although manufacturers are achieving a varied return on investment (ROI) from e-business projects, the best are doing extremely well. 23% have already seen some ROI, but the top 4% have seen more than 60% and 2%, over 90% return. That’s among top line findings from an e-business in manufacturing survey conducted by Benchmark Research for struggling supply chain software developer Manugistics, completed at the end of 2001. The survey also finds expectation of significant improvement beyond this very high. Online e-procurement, for example, showed average savings of 4.5% for direct production materials, and only marginally less for indirects, with 13% of the former and 11% of the latter being bought online. 5% of manufacturers have seen procurement savings of more than 10% for both. Indeed, the survey shows that 34% of firms now have e-procurement software and 44% of IT managers say they will install it by 2003 – compared with 13% in 1999. Other top line figures here include: 67% purchase via online catalogue, 55% use EDI over the Internet and 40% place online orders direct to suppliers’ ERP systems. Among companies procuring contract manufactured parts, 52% now do so using web technology, and 25% now manage contract suppliers online. 41% handle RFQs (requests for quotations) online and 49% source new suppliers partly or wholly online. 10% of manufacturing companies currently participate in electronic trading communities, with 2% currently piloting a scheme and 6% with plans to join a community. Manugistics European president Terry Austin says, “Recent additional research among our customers and prospects has shown that just over half (57%) are already involved in trading exchanges, marketplaces or B2B exchanges. On average they are involved in three marketplaces or exchanges and 61% are involved as both customer and supplier.” What’s holding it, and evidently also Manugistics, back is willingness to invest now, given the perceived ongoing economic climate for manufacturing in the West. Austin: “Speed of ROI is of increasing importance. In recent research we found that 45% agreed, when prompted, that ROI was one of the biggest challenges currently facing their business.” But it will come: the survey finds respondents agreeing that e-business is also enabling manufacturers to bring products to market faster, with 13% of design managers, for example, stating that they had seen significant advantage, and 29% saying they expected to see more. 84% expect web technologies to deliver improvements, and although the numbers are not that big (5% believe they have seen over 5% ROI), longer term the expectation is much greater. They also expect web-based collaboration with suppliers and customers to grow significantly in importance in the near future. More than 60% say collaborative working is critically important and warrants co-ordination of IT strategy. 55% of senior managers in manufacturing believe that although ‘e-collaboration’ is still in its infancy, it will deliver key benefits – more so than e-procurement. Of sales managers in larger companies, for example, 55% cite greater sharing of scheduling data with customers, and 32% mentioned gaining access to customers systems to check schedules. 35% felt that the ability to provide customers with online planning would help. As a footnote, however, the unsung big one remains internal communications. 43% of businesses say e-business has already improved internal communication, and 61% expected this to be a key benefit.