Analysts anticipate that the global market for e-commerce will exceed one trillion dollars annually by 2002. The explosive growth of this field is imposing great demands at all levels in organisations. Progress, let alone survival, depends on finding ways of working and management processes that can adapt to the e-commerce revolution.
In light of this challenge, Warwick Manufacturing Group (WMG), the Warwick University spin-off company which pioneered research and consultancy in CAD, simulation and advanced manufacturing methods, last month announced plans to revamp itself as a leading specialist in e-manufacturing.
WMG will team up with Carnegie-Mellon University of Pittsburgh, acknowledged as a leader in the field, plus software providers and industrial partners under a project known as e2. This will see the creation of a $40m e2 Business Management Centre on the Warwick campus, sponsored by a consortium of design and IT companies led by Parametric Technology and Sun Microsystems. Talks are also taking place with BT, Oracle and others.
The centre will develop new technology demonstrations and applications with input from design, IT, telecommunications and manufacturing companies. It will examine the nature of a company’s information flows and proposed software architecture, and suggest a strategy for it to exploit the possibilities of e-commerce.
It aims to train 7,000 people a year by 2001, drawn mainly from middle management here and abroad, with an annual budget of £100m. Some training will be provided as distance learning packages over the internet. Marconi, the former GEC, has already signed up for the first programme, as part of its strategy of transforming itself into a high-tech telecoms firm.
As another part of the strategy, a European-funded initiative called Autoclear will develop an engineering internet gateway – or portal – linking a number of sites, to meet the needs of smaller companies in the automotive industry.
WMG’s link with Carnegie-Mellon is significant. Professor Kumar Bhattacharyya, director of WMG, is a key adviser to the Government on matters of industrial policy. And Raj Reddy at Carnegie-Mellon has Bill Clinton’s ear as co-chair of the President’s IT Advisory Committee, which is responsible for developing the next generation of internet architecture in the US.
Bhattacharyya argues that e-commerce is not merely an IT issue. `Workings behind the internet and web are completely unlike normal information architecture,’ he says. A new generation of systems is needed with the ability to link to older systems, integrate information from other sources, and deliver it to users who need to make business decisions.
This will demand new levels of `collaborative product commerce’, as e-commerce transforms the way a company can manage its interfaces and relationships with customers, suppliers and partners.
Bhattacharyya says: `The exciting feature of the e2 centre is that it will provide a collaborative environment where enterprises that have developed innovative ways of working can interact with enterprises facing challenges.’
Warwick senior fellow Nick Matthews adds: `The problem for IT managers and management generally is that they are all a bit punch-drunk with the sheer volume of software and hardware introduced in recent years. Many packages never developed the promise they appeared to offer. Now we want to take the fear out of the internet, because it changes the nature of managing business.’
He argues that the internet is bound to fulfil its potential, because it allows a company to draw information from existing systems and all levels of the organisation, suppliers and customers in realtime. Previous systems for monitoring management and process data often took months to analyse, and were mostly incompatible.
New e-commerce demonstrators at WMG will use the latest web-based `information engines’, such as Parametric Technology’s Windchill data management system and IBM’s Optegra financial management system. Windchill allows companies to perform data management tasks over a secure extranet using a standard web browser. This makes product data accessible throughout an organisation for business development, design engineering, sourcing and contracts.
Matthews considers that knowledge flow is generally under-utilised in organisations. Part of the e2 training process will be to develop `knowledge workers’ to work alongside other managers to address this problem.
Autoclear, meanwhile, is to be developed in collaboration with the IT department of Wolverhampton University and industry partners Unipart, GKN, Gedas (the systems subsidiary of Volkswagen), Sun Microsystems and BT. The aim is to create the infrastructure for an electronic market on the internet which will enable smaller companies to integrate into the process of supplying parts for first and second-tier automotive suppliers.
The European Regional Development Fund will provide £460,000 over the next three years to create a pilot. This is planned to start within six months, and 20 small and medium-sized component suppliers are being sought to collaborate in the new network initiative. `Training programmes will help smaller companies acquire collaborative skills to maximise the benefits of the internet,’ says Matthews.
Autoclear will have three functions. First, it will provide a low-cost, internet-enabled electronic data interchange (EDI) facility for small firms. Second, it will identify and store competency information, and link firms into a virtual organisation in response to requests from large manufacturers and first or second-tier suppliers. And third, it will create a virtual teaming facility to enable collaboration between small suppliers so they can bid for particular pieces of work.
Autoclear is modelled on a data clearing house in the US operated by Chicago Clearing House Association and data systems firm EDS, which enables small companies to trade electronically at low cost. A pilot scheme has also been run at Carnegie-Mellon which gives small firms access to the automotive market for a one-off fee of $30 for a listing.
Autoclear’s development has been driven by rapid changes in the automotive environment, which is characterised by intense international competition, fragmented markets with demanding customers, speedy technology development, increasing moves towards just-in-time and greater demand for flexible supply. As manufacturers have cut the number of first-tier suppliers, the remaining ones have been forced to offer a wider selection.
Small suppliers should be able to fill the gaps, producing parts and sub-assemblies, but surprisingly few are able to exploit the internet. `Though many first and second-tier suppliers are developing internet-based links with the big car makers, many smaller component suppliers are being left behind,’ claims Matthews. A 1998 survey by UK IT specialist Virtual Access found that 64% of small British companies didn’t even have internet access, but depended on traditional communication by fax, phone or mail.
In their proposal for the Autoclear project, WMG researchers suggested: `Smaller suppliers have an opportunity to retain a significant role in the automotive supply chain if they can gain competence in using the internet to win orders, carry out collaborative design and use EDI capability to deliver and service the products.’
Today’s EDI technology and ERP systems are criticised for being too expensive and inflexible for most small firms, while internet-based tools promise effective, low-cost solutions.
To get the benefits, small suppliers need to be integrated more effectively with first and second-tier suppliers, so they can bid for contracts, regardless of whether they do business on a continuous day-to-day basis. Virtual teaming will be encouraged using internet-based tools such as e-mail, audio and videoconferences and shared digital workspace, and concurrent engineering will play an important role during the product development process.
Matthews says: `The internet promises better supply chain integration, increased efficiencies, faster response to market changes, better design and manufacturing processes and improved productivity.’ Autoclear should be a pointer in the right direction.