E-business or ex-business

Exploiting the internet may be the key to many firms’ survival, reports Brian Davis

Manufacturing industry faces a frantic race to get to grips with e-commerce, according to the software suppliers and analysts who will lock horns in five Net Vision debates at CIM ’99.

`Within five years, if you’re not an e-manufacturer then you’ll be an ex-manufacturer,’ says Andy Makeham, marketing manager at Kewill Systems.

Manufacturing lags behind retailing, where take-up of e-commerce is over 80%; the figure for manufacturing is just 5%. Such statistics will fuel fierce debate at CIM ’99 between vendors such as Cisco, IBM and Sage Tetra, industry analysts from Cambashi, KPMG, Fletcher Research, and e-commerce pioneers including Ford. This will not be a comfortable ride for senior executives.

Chris Read, KPMG’s principal e-commerce consultant, who will speak at CIM ’99’s first seminar session for captains of industry (Oct 22, noon), says: `Just-in-time is just-too-late in the e-business economy: it needs to be real time. This means real-time manufacturing, distribution and customer fulfilment, which has to be web-enabled.’

This idealistic sounding approach would mean having minimal stocks held in the supply chain. Read suggests the internet will provide a frictionless flow of information and product content as more projects become digitised.

Companies will have to question their core activities, he believes. `As more production is outsourced, there will be more `dark factories’ managed remotely over the web. These will be multi-purpose remote-controlled plants, distributed globally, serving big names like Ford, who can concentrate on being customer service organisations and brand managers.’

Manufacturing will have to take its lead from the computer industry, which has been fast to exploit the benefits of the internet. Cisco, the world’s leading supplier of business-to-business networks, sells 70% of its products through its website.

Cisco vice-president Chris Dedicoat estimates that e-commerce volume quadrupled between 1994 and 1998 while raising operating costs just 18%. Customer satisfaction was also far higher through the web than using a call centre for queries, and the internet model of business saves the company $550m (£331m) a year.

Dave Hazel, UK managing director of chip maker Intel says: `Manufacturing has to get up with the times using the internet, as everything is moving faster. The web offers total transparency of internal operations within a company and to suppliers and customers.’

Intel has implemented web-based order processing and supply line management with its customers and can manage their inventory for them.

Hazel envisages representing the total supply-chain as a three dimensional knowledge tree, `like a 3-D video game, so senior managers can visualise problems as they arise – and in advance.’

`The web looks set to revolutionise more traditional forms of supply chain management, such as electronic data interchange [EDI],’ says William Reve, head of internet practice at Fletcher Research, who will be speaking in a CIM ’99 seminar on the internet’s implications for the supply chain (Oct 27, 10.30am).

This point is also taken up by Andrew Yuille, vice-president of corporate marketing at Sage Tetra, a speaker in a seminar covering small businesses’ use of e-commerce (Oct 27, noon). `Procurement over the web will become a lot easier as standards like XML (extensible mark-up language) emerge,’ he says. `This will enable users to search electronic catalogues, order parts and pull details straight into their purchasing system.’

This contrasts with conventional EDI systems, which require users to be part of a private network, with specialist software and very defined standards.

Kewill’s Andy Makeham suggests: `Tomorrow’s winners will be the people who layer e-commerce supply chain management over their ERP systems. The supply chain must become completely transparent. In this brave new world, unless you’re an efficient manufacturer, you won’t be in business. It requires a fresh mindset, but there are no cost or technology barriers. ‘

In another CIM ’99 seminar, Bob Axford of Ford UK will examine the issue of simultaneous data access between geographically disparate design communities (Oct 28, 10.30). He will describe how Ford uses the web to publish plant layout information worldwide, so plant engineers can view best practice.

Ford has a bigger e-business story, having teamed up with Microsoft and Trilogy Software to develop the first on-line build-to-order system. It will link consumer orders directly with automotive manufacturers’ suppliers and delivery systems, using MSN’s CarPoint and Ford’s DealerConnection, BuyerConnection and OwnerConnection sites. Manufacturers and dealers will get simultaneous on-line views of the order until the car is received by the consumer.

In the final seminar session (Oct 28, noon), speakers from IBM, ICS and ARC will discuss the impact of a new generation of enterprise resource planning systems. These will shift tasks like customer relationship management and business intelligence software onto the web and integrate them with ERP systems, to reach the dream of a unified enterprise-wide computing system.

The internet is set to be the glue binding industries and suppliers together. In the retail sector, the big players insisted on e-commerce links with suppliers – they fell in line or fell aside. Manufacturing industry suppliers face similar pressures today.