A government report due this month will show British business lagging behind the competition, especially the US, in exploiting the commercial opportunities of electronic commerce. Prime Minister Tony Blair is expected to personally back the aim of making the UK the world’s leading environment for internet commerce.
But although it may seem like bookshops and pornographers are the only businesses making money on the internet, recent research suggests manufacturers are starting to wake up to the many benefits of going online.
These can be summed up as better communication at lower cost.
Most manufacturers are using e-mail to communicate with suppliers and customers, and electronically sending documents that previously had to be printed and faxed. And extranets – external networks based on internet technology – are improving the information flow between companies in the same supply chain. The web can also help in improving communication with potential customers.
Liz Amos, director of the Institute for Manufacturing’s Centre for Economic and Manufacturing Policy says: `It allows smaller manufacturers to raise their visibility. And if you are not there, other companies will come into your market and sell.’
A recent survey by the Institute for Manufacturing found 94% of manufacturers use e-mail and the internet. The net is used most commonly to find information (93%), then for communication with customers (66%) and suppliers (47%).
But beyond this level, the report found internet use to be patchy. Just 36% of manufacturers sold their products over the internet, and only 8% used it for payment transactions.
Amos, one of the report’s co-authors, says: `There is still a long way to go. Firms in other European countries have a more strategic approach and tend to look for long-term results.’
Within manufacturing, the automotive sector is ahead in the newer area of internet payment transactions. And in the US, things are moving even faster. In 1998, automotive suppliers traded $3.7bn (£2.3m) using internet technology. This is expected to grow to $9.3bn this year as original equipment manufacturers ask more of their suppliers to become `internet-ready’.
The main barriers to going online are security concerns and a lack of executive knowledge. According to the report, security risks are more perceived than real. The main problem is a lack of direction from the top. `Going on-line requires people who understand the way the whole business works,’ says Amos.
Most companies already have the right equipment, such as personal computers and modems. A benchmarking study by the Department of Trade and Industry found that UK business had `all but closed the gap’ with the US in information communications technology.
It also showed the UK ahead of most European competitors – except Germany.
But another survey, for the Institute of Directors, showed the UK to be well behind the US and the rest of Europe in recognising competition from companies selling online. Just 2% of UK firms saw the internet as a competitive threat, compared with 14% in the US and 17% in Germany.
The IoD also found that firms were slow to recognise the internet’s potential for cost cutting, preferring to see it as a tool for finding new customers.
To get the maximum benefit from the net, manufacturers need to move on from regarding their website as an online brochure. Internet business consultancy Wired Sussex recommends looking at good e-commerce sites from around the world. Examples of these can be found at sites such as www.strikingitrich.com, which link to `23 successful sites you’ve never heard of’. The next step is to compare your competitors’ websites.
Once the research has been done, an in-house site development team should be set up, or a web development agency employed.
The time to start is now, says Amos. `So far, this has not been a priority because companies have been busy dealing with the millennium bug. Now that’s nearly over, it’s the ideal time to deal with e-manufacturing.’
Flymo flies ahead
Flymo initially used the internet to improve its service to dealers. Establishing an extranet meant dealers could place orders 24 hours a day, seven days a week.
To join the extranet, dealers and distributors pay £200 a year for an IBM global network connection. Using the internet with a firewall to prevent unauthorised access would have been cheaper, but the company felt this method wasn’t secure enough.
Flymo’s extranet is also used for warranty claims. The company can receive up to 40,000 faxed forms a year, and having some sent electronically saves administrative time.
The next step will be using the internet to increase supply chain flexibility. Rather than Flymo sending schedules to suppliers, suppliers will check inventory levels themselves.
This will give greater stocking accuracy and improve delivery, as the supplier will be able to monitor consumption of their components,’ says systems manager Richard Orme.
However, there is a limit to Flymo’s use of the net – the company is unwilling to upset retailers by selling direct to the consumer.
Copyright: Centaur Communications Limited