Fifty to 60 per cent of about US$2.2 trillion worth of total business revenue each year in Canada is done through e-commerce either over the Internet or by electronic data interchange (EDI), based on estimates by Forrester Research Inc. Forrester research analyst Andrew Bartels suggests that manufacturers are involved in about two-thirds of e-commerce sales and 30 per cent of e-commerce purchases.
EDI-based commerce transactions currently slightly exceed Internet-based e-commerce by about 25 per cent, but the latter is growing around 10 to 15 per cent annually, just a bit faster than the overall growth in total business spending, he adds.
With manufacturing playing such a massive part of e-commerce and the volume expected to continue to grow for some time, chances are that your company is heading toward e-commerce over the Internet either directly or through the progress of your suppliers or customers. The proposition can be a relatively simple click, pick and ship Web site, but in the manufacturing context it is more likely to be a complex collaboration requiring back end integration with an ERP system.
Developing the capability that allows customers to interact efficiently and effectively does not have to be an expensive proposition, but it needs to be well thought through so that a future investment can be made efficiently without having to rebuild your first steps, advises David Parkinson, president of Toronto-based e-business solutions provider Nexvision Inc.
Parkinson says a company can acquire a robust e-commerce capability on its Web site for $20,000 to $30,000, depending on the nature of the business and the number of products involved.
“We find companies building e-business are still somewhat intimidated about the Internet and how to effectively harness the medium to put their business functions online. The approach we take is if they want an e-business solution but don’t yet want e-commerce, and we have a number of clients that way, we would build their e-business platform in anticipation of being able to latch onto e-commerce down the road without having to totally rebuild their core e-business solution.”
One manufacturing customer of Nexvision who requested anonymity says its ultimate goal is to use technology “to be a bit of a hook for our customers, offering them information about their accounts, orders and potentially their invoices and payments online.” The manufacturer’s first step is its current Web presence, which the company’s marketing manager describes as basically an online brochure with an online order form for inquiries from prospects and first-time customers. He says the next step requires a significant investment on an intangible with an unknown ROI. Not ready to take what clearly feels like a leap, he adds: “We’re way further ahead than any of our competitors.”
For a different opinion, talk to Henry Banman, executive vice-president of Edmonton-based All Weather Windows, the largest Canadian-owned window and door manufacturer in the country. “If you suddenly stop on a racetrack, all the cars pass you,” he says. “I have no desire for that to happen. That’s why I’m still driving further ahead.” All Weather Windows adopted a paperless, online, just-in-time manufacturing model two years ago but continues to look for opportunities to grow and boost sales.
This privately owned manufacturer with more than $100 million in annual revenue may have Canada’s best example of a complex e-commerce application. Some 80,000 choices of designs, sizes and materials mean every window or door is custom-built.
Dealers submit their orders electronically with purchase orders attached. This information is never re-entered. Instead it is converted to orders and invoices through a front-end gateway created by EdgeNet Media (formerly Made To Order) of Nashville, Tenn., along with WTS Paradigm, a developer of software for the window industry with an office in Calgary. That gateway runs a configurator that kicks out the bill of materials that flows straight through the factory via Oracle order management and Oracle flow manufacturing. All Weather also uses Oracle financials and Oracle procurement and materials management. Once the product is delivered, electronic invoices go out and an acknowledgement is received back from the customer.
Beyond shopping carts
These are not shopping cart items, Banman stresses. “The customer creates these items with all the details that drive all the bill of materials and details and routing so this can be custom-built and shipped start-to-finish without us intervening.”
Providing the online ordering has cut down on merchandise returns because customers configure their orders themselves, see an image of what they have created and then get what they ordered. “The orders flow through the interface and they are always in the system the next day,” Banman says. “With human intervention, if somebody’s sick, orders don’t go through. Even on a day with $1 million worth of orders, they all go through. This wonderful technology just moves it into the next phase. Everybody in the organization that needs to can see it and plan accordingly.”
The company has increased sales every year and is perhaps six percentage points ahead of its budgeted 14 per cent increase in sales this year. “That’s because we can handle it,” Banman explains. “We can give visibility to our suppliers that feed us product and we’ve gone down to $3 million in raw material sitting on the floor instead of $8 million.”
He reports that All Weather’s business with those customers who took the product and online ordering training increased by 58 per cent from January to the end of July. “Is it advantageous to them? Absolutely! Consequently, we get more of their business.” Combined with other ERP advantages, “soon” the company will have realized a full return on the investment in the system, he says.
The All Weather application is an integrated cluster architected to share master files and data intuitively throughout the process, says Rob Raponi, senior practice director, Oracle Consulting in Canada. He adds that it is bi-directional in the sense that while orders come all the way down to execution and scheduling, it provides available-to-promise (ATP) feedback based on material and facilities constraints. “It’s really the power of an integrated solution on a modern technology stack.”
However, the absence of such an integrated technology infrastructure through to manufacture and execution and the inability to adequately create a business case based on revenue growth have stunted the adoption of more e-commerce and e-business applications in the manufacturing sector, he adds.
“It’s not simply come to the Web site, click here and I’ll send you a gross of widgets. Where the rubber hits the road is with the collaborative process, the incremental design and the integration of supply chain, just-in-time inventory, vendor managed inventory. These represent e-commerce in manufacturing rather than traditional shopping from a Web site. By its very nature, it is more complex and as a result, I think a lot of manufacturers have struggled with the ability to do this and are struggling with technical infrastructures that have not kept pace.
“It is one thing to integrate a Web site that does this collaboration; it is another to integrate it to a legacy manufacturing environment,” he continues. “It makes it very challenging to put this new technology that requires real-time information from inventory, manufacturing schedules types of things to do things like available-to-promise. It is much more complex than a Web front end or a store. I think you see manufacturers slow to adopt it because of these broader issues of infrastructure and the ability to build a viable business case.”
Judging the business case Even if your company is not — and may never be — engaged in actual transactions online, how important are e-business capabilities? Is there a worthwhile ROI?
Brahim Hoosein, CIO of Belvedere International Inc., attributes easy maintenance, high performance and fingertip access to necessary information to e-business capabilities of ERP systems. Last August, a 14-module “big bang” vanilla implementation of PeopleSoft went live at the Mississauga, Ont., headquarters of this Canadian-owned manufacturer in the consumer health and beauty industry.
Promoted earlier this year to the CIO suite even before the successful “go live,” Hoosein estimates the company saved a half million dollars by defying the wisdom of the typical phased approach. In fact, he found the greatest hurdle was the insistence by the first implementation consulting firm that this approach was impossible. Once that company was replaced with Toronto-based CustomerOne Inc., the implementation proceeded according to the original game plan. “All we did was turn off our old system,” says Hoosein of the go live. “There were no real critical issues that would have us stop production.”
Belvedere’s new system consists of financial modules — namely billing, deduction management, general ledger, payables, receivables — and supply chain management modules — bills and routings, cost management, demand planning, inventory, order management, production management, production planning, promotions management and purchasing.
Hoosein seems to have been mostly sold on the system for its promotions and deductions modules which eliminate multiple external Access databases for Belvedere’s promotions, order management and deductions functions. Now the majority of those reports are within the ERP system, so users can more readily get the information they need themselves without IT support.
But Hoosein adds that the Web-based capability of the new ERP system is like thick icing on the cake. That Web capability “has made us move into this decade.” He says it’s questionable whether Belvedere could have fingertip access to information without the e-business functionality the firm now enjoys. He also cites the following e-business advantages of the Internet architecture:
+ Reduced maintenance costs from running the application on three servers with no code on client workstations. “Everyone already has a browser on their workstation and that’s it. You give them a log in, send them a URL in the e-mail and they’re connected to the network.”
+ Simply, and thus economically, allowing some internal users to access data externally without creating a portal and a link to an ERP package. “I can’t put a value on that. It reduces the amount of work I have to do in my department and the amount of hardware or software I have to purchase to get the functionality outside of the company.” A salesperson with Internet access on the road can get specific sales data. Brokers across Canada can have access to invoice information and customer claims relating to them, saving the cost of sending them the information by courier, fax or mail. Hoosein says it will be just as easy to create secure access in the future so customers like Shopper’s Drug Mart, Wal-Mart and Zellers can have available-to-promise information or see where their orders are in the system.
+ Easy to use. “If it was an installed client software, we’d have to teach them all the navigation. Everyone knows how to use a browser so there’s less of a training curve.”
+ Lower cost performance. “Instead of installing a client piece of software, with the browser, there’s very little hard drive space, little memory required to run a browser and the workstation doesn’t have to be a top-of-the-line workstation.”
Given that Hoosein expects to realize within two or three years an ROI close to 75 per cent, the overall advantage he sees is significant. “It gives the application a longer life.”
— Maclean, freelance writer/editor, covers a wide range of IT applications. She is based in Guelph, Ont. and can be reached at www.sumac.net.
