European manufacturers are leading other business sectors as users of the Internet for information and e-mail, according to a MORI survey commissioned by international networking provider Cisco. But manufacturing still lags other sectors in exploiting the Net’s full business potential.
The Europe-wide survey asked 900 senior managers from manufacturing, transport and distribution, IT, finance and retail services in the UK, France, Germany, the Netherlands, Italy and Spain, how much they used the Internet.
The results showed that the Internet was considered a prime tool for finding information and for e-mail according to 84% of respondents in the manufacturing sector. However, the MORI report claims industry is below average for exploiting the Internet in other ways.
Only 43% of industry thinks the Web is a good marketing tool. But 72% of the IT respondents use the Web for marketing and distributing software online. Some 61% in the transport/distribution sector use the Web for marketing.
A total of 25% of manufacturers use the Internet for customer service compared to 55% in the IT sector. Only a small percentage of the customer enquiries turned into sales, say manufacturers. Only 2% of manufacturing orders in Internet-linked companies were taken electronically this year, compared to 8.2% in IT and 4.9% in retail.
But all sectors predicted this figure would rise during the next 12 months. More than a third of manufacturers believed they would make more money taking orders over the Net than by traditional means.
The competitive advantages of the Net were recognised: 55% of manufacturers are already on line and 61% of the rest plan to have Internet access within a year.
Some 50% of European manufacturers with Internet access claimed it delivered efficiency savings, dropping to 41% in the financial sector, 34% in retail and only 25% in transportation.
Perceived savings differed between sectors. Manufacturers claimed the Net saved 9% of business costs, retailers reported 12% savings and the financial sector only 2%. Time and productivity savings were seen as a big bonus by 77% of the IT sector, compared to 58% in manufacturing and only 40% of retailers.
European businesses have used the Net to communicate with staff, customers and suppliers via e-mail. The MORI study shows that 14% are using the Internet for online trading and 28% are using it to service clients. A total of 46% of Spanish companies claim to conduct e-commerce, compared to 33% in France, 20% in Germany and 19% in the UK.
France makes extensive use of Minitel, which has a government-backed infrastructure and dominates its electronic information highway. Though only 38% of French firms have Internet access the lowest in Europe they expect e-commerce revenues to increase by 42% in the next year while UK companies anticipate 34% growth.
The UK is second only to Spain for the provision of customer service via the Internet, with 31% in the UK using it this way, 38% in Spain, 24% France, 21% Germany and 24% Italy.
The report estimates that by the end of this year, 78% of the European companies surveyed will have Internet access.
In future, the manufacturing sector is likely to use the net more to communicate with suppliers and the market, following the example of automotive companies such as Ford (see box), GM, BMW and Rover, which are creating extensive Internet networks with suppliers.
Tony Morrish, operations director at Cisco Systems, believes such moves are essential. ‘Companies which embrace the Internet as a real business tool will be able to sustain a competitive advantage over time,’ he says. ‘However, companies which only perceive the Internet as a search engine and e-mail facilitator will be left behind.’
Cisco Systems provides software, switchers and routers for 80% of the world’s Internet traffic. Morrish is responsible for developing a number of key sectors in the UK, including manufacturing.
He reckons the Internet offers a distinct advantage for manufacturers wanting to enter global markets quickly and consolidate operations.
‘This is true from the experience of major automotive companies like Ford, BMW and GM as well as our own experience as a big manufacturer,’ he says. ‘Many car manufacturers are moving from using the Internet as a marketing tool and e-mail route to achieving real cost and productivity gains. Many are using the Internet to enhance collaborative working. With globalised businesses, companies like BMW, Rover and Ford are using the Internet to communicate between countries and collaborate on design projects.’
Morrish also points to advantages for supplier chain management. Leading automotive and aerospace companies have massive supply chains, ‘so by making information available electronically there are real cost savings and efficiency improvements’.
Manufacturing use of the Internet should be easier to control, as it is used for business-to-business communication, he says.
Morrish admits the Internet is a challenge for many companies, especially on the issue of security. ‘This technology calls for a leap of faith,’ he says. ‘Cisco is very open with its extranet and extensive supply chain management system. With the appropriate firewalls most companies could also manage business on the Internet. There are enormous advantages in terms of efficiency, cost savings and productivity.’
Of course, not all sectors have rushed to embrace the potential offered by the Internet. Mining, construction and manufacturing are among the most conservative, with IT companies, not surprisingly, being the furthest ahead.
Cisco is a case in point. It has grown from a $70m (£40m) company in 1990 to a $8.5bn operation. Using the Internet throughout the supply chain management, the company has scaled up using just 13,000 people worldwide, where a conventional company would have needed over 50,000.
Orders for $6.5bn of Cisco’s $8.5bn turnover are received electronically, then validated and transmitted to the supply base which triggers manufacturing and component assembly plants worldwide via the Internet. Customers can track their orders at any stage, and an extranet link to Fedex means the customer can track the order to his doorstep.