The Internet is more than an add-on
By Kirtland Mead -- Manufacturing Business Technology, 6/1/2001 6:00:00 AM
Many manufacturers want to believe that the Internet is "just another channel" to be managed in concert with existing call centers and sales channels. Yes, a growing number of manufacturers are moving beyond provision of marketing and product data via the Web—the "brochure-ware" stage of Internet use. However, even with those enterprises pursuing a more ambitious service on the Internet, very often their motive is simply to reduce the cost of taking orders and providing catalog information to the customer. They see the Web as an add-on to an existing operation.
In fact, moving to e-commerce will transform traditional business approaches. One of the most important effects will be the need to formalize business processes around standard operating procedures (SOP). These SOPs will help enterprises respond efficiently and correctly to the demands of e-Business. With the Internet raising customers expectations and information access to new levels, internal transformation increasingly will be customer-driven.
Customer-driven transformation
Put simply, the Web is the Trojan Horse through which the customer will force manufacturers to formalize their operations.
Especially for Web-savvy customers, the expectation will be to have direct access to basic information concerning factors such as product availability, status of current shipments, and delivery dates. Then, over time, customers will want to conduct transactions and reach further into your organization.
Customers will first want to place orders for standard products and access order status; then they will wish to configure and order customized products, working collaboratively with the supplier. Eventually customers will want direct access to a company's intellectual capital, design tools, and other expertise. Moreover, customers will gravitate toward personalized service that recognizes their unique situations and needs.
Increasingly, customers will want service over the Internet. They will not wait to be called back, and will have little patience with suppliers that want to use expediting calls as a pretext for developing relationships.
If manufacturers are to let their customers "see" into internal operations in this direct way, they must first put their internal houses in order. Enterprises must integrate essential information and gain control of it before they can allow customers to see it. This calls for SOPs to manage access to information and difficult situations such as allocation of products during shortages.
With advanced usage of the Internet, business operations will be much more formalized, structured, and clear. In short, e-Businesses must become like the airlines, which have very formal rules regarding who may get seats on which flight, who gets upgraded, and so forth. Few manufacturers have such rules in place today.
Supply chain management
With e-commerce, manufacturers will be forced to gain control of their supply and value chains. They must know what is on-hand and what is planned, before they can grant customers access to the same information. Advanced, 'Net-oriented forms of supply chain management such as collaborative planning, forecasting, and replenishment (CPFR) will become much more common.
Supply chain management will become more challenging as suppliers outsource more of their operations to third parties. Again, enterprises will need SOPs to govern complex operations reaching across many partners, and rules engines that determine which information may be seen by which party.
Cost management vital
Today, most manufacturers are serving all customers at the same service level. But in the future, the best customers will demand a premium service that manufacturers can't afford to give to everyone. Customer-specific service, already well established in financial services and airlines, will become the norm in manufacturing. Service levels and SOPs should be decided based on customer value or contribution level, not just on revenue levels. Estimating customer value will require manufacturers to understand and allocate their costs with more precision.
Time for clarity
Customers, acting through the Internet, will force manufacturers to formalize and gain control of their operations, including internal inventory and planning data, customer contribution, and profitability. As a basis for these decisions, managers must decide how they want to run their businesses, what they want to offer to the market, and who their most important customers are.
