Many midsized manufacturers are introduced to electronic commerce technology under such high-pressured circumstances from major customers. Often, these manufacturers must choose between finding and implementing an electronic commerce solution quickly or losing a customer that might generate 30 percent of their business. The latter choice is usually not an option.

Depending on the electronic commerce capabilities required, a midsized manufacturer could invest between $10,000 to $100,000 in an electronic commerce solution to satisfy one or two major customers. However, by simply examining how electronic commerce fits into an overall business strategy, ensuring that the technology is flexible and can be integrated into existing systems, and planning to make moderate additional investments, a midsized manufacturer cannot only satisfy a major customer, but also leverage its electronic commerce investment to generate significant bottom-line benefits.


Integrating an Electronic Commerce Solution
When a midsized manufacturer is faced with an "accept electronic transactions or lose my business" ultimatum, the company may buy and implement the first electronic data interchange (EDI) software package it can find. At the bare minimum, such a software package may allow a manufacturer to accept electronic purchase orders and print them out; but then they must be rekeyed into an existing enterprise resource planning (ERP) system.

While such a solution, which tends to resemble a very expensive fax machine, may meet the customer's request for accepting electronic purchase orders, it will generate additional costs for the manufacturer. In addition to executing all the existing steps required to process an order, the manufacturer must now invest in an EDI software package, pay employees to rekey printed orders into the ERP system, and incur costs that result from keying errors.

Instead of simply purchasing EDI software that meets only the immediate need, a manufacturer should consider a solution that can automate the purchasing process as much as possible. A company may want to check with its ERP vendor to see if it offers an interface that allows the manufacturer to accept EDI documents directly into an existing ERP system. At a minimum, such an interface should be able to handle purchase orders, invoices, order acknowledgments and shipping notices. This interface must be coupled with a flexible EDI translator that can handle multiple standards and documents.

Such an electronic commerce solution may require a higher initial investment, but manufacturers often find that they can increase operating efficiencies significantly, including saving time and money, reducing errors and increasing accuracy, minimizing paper use and storage, shrinking mailing costs and maximizing human resources.

Besides the fact that a midsized manufacturer satisfies a major customer's request to conduct business electronically, the manufacturer also promotes cooperation, inspires customer loyalty, eliminates deadline penalties and builds a foundation for future growth with this major customer.


Market Technology to Current Customers
Although one or two major customers may be demanding that a midsized manufacturer implement an electronic commerce solution, other customers may see the company's ability to process transactions electronically as an added value of working with that manufacturer.

After a manufacturer successfully keeps its largest customer by implementing an electronic commerce solution, it may want to take a close look at its remaining customer base and see which other customers would appreciate the new technology.

If a manufacturer regularly contacts its customer base through a newsletter, direct mail campaign or customer satisfaction survey, this can be accomplished by requesting that customers who are interested in electronic commerce capabilities call a key person or return a response card. A manufacturer's sales force can also be educated on the new electronic commerce technology and be responsible for identifying customers who might want to exchange information electronically.

By expanding the view of electronic commerce technology from a band-aid solution to keep a major customer, to a value-added capability appreciated by many customers, a manufacturer can increase its return on investment. Customer service is often improved through better order fulfillment, smarter cash flow, an optimal inventory level, smarter decision-making and better responsiveness.


Pursue Prospects Who Value Electronic Commerce
Manufacturers should re-examine their marketing strategies and plans from time to time, and doing so after implementing an electronic commerce solution may be appropriate. Offering an electronic commerce solution may not only satisfy current customers, but may be an attractive, and perhaps rare, capability to other prospects within the marketplace.

First, a midsized manufacturer may want to review lost customer reports to identify any customers who might have taken their business elsewhere because the company could not transfer electronic documents in the past.

Perhaps the manufacturer had previously considered electronic commerce solutions, but at the time opted to lose a few small customers rather than make the significant investment in technology. This might be an appropriate time for a manufacturer to conduct a direct mail campaign or call on former customers to share its new electronic commerce capabilities.

Second, a manufacturer may want to accelerate its sales and marketing activities with prospects who are similar to existing customers using electronic commerce. Local or regional electronic commerce associations are good places for manufacturers to find others who use EDI. Companies within particular industries are often at similar stages of implementing EDI technology, and marketing electronic commerce solutions to such companies puts the manufacturer in the right place at the right time.

As a manufacturer markets its electronic commerce solutions to prospects, it can more easily spot trends, level the playing field and increase overall profitability.


Build Image As Technology Leader
Like most technologies, electronic commerce capabilities can generate significant return on investment if leveraged properly. After a basic electronic commerce system is in place, a midsized manufacturer may begin looking for ways to measure bottom-line results, such as reviewing cost or time savings. And, once a company's information systems department becomes familiar with the technology, it may find unique ways to apply that technology to its business.

Many trade publications, both in the electronic commerce area and within individual industries, regularly seek technology success stories.

Midsized manufactures that can illustrate how they applied technology such as EDI software and share bottom-line results have an opportunity to submit their stories as examples for others in the industry. Such industry coverage can help establish a manufacturer's corporate image as an industry leader.


Apply Technology to the Supply Side
Most midsized manufacturers apply electronic commerce solutions to only the "demand-side" — or to satisfy major customers. However, all the electronic transactions occurring on the customer side also occur on the supplier and vendor sides. For example, a major customer demands that a midsized manufacturer accept purchase orders and issue invoices electronically. The same technology that allows a manufacturer to meet this customer's request can be used to electronically process suppliers' purchase orders and invoices as well.

Although few organizations have the clout that major companies such as the Big Three automakers have in demanding that suppliers and vendors adopt electronic commerce technology, manufacturers can offer some simple incentives to encourage as many suppliers and vendors as possible to implement electronic commerce solutions. Consider this seven-step plan:

1. Poll your current vendors and suppliers to determine who already has EDI or Web commerce capabilities.
2. Based on this information, determine what will be the minimum requirement for doing business with your company.
3. Establish electronic commerce guidelines and requirements, including which documents will be converted to electronic formats first. Typically, companies start with purchase orders and invoices.
4. Set up a timeline and plan for moving your suppliers and vendors to the electronic commerce solution.
5. Select two or three large vendors to conduct a pilot program and initial testing.
6. Refine the electronic commerce system based on pilot program results.
7. Phase in small groups of other vendors to the electronic commerce system.

• Small organizations can use Web forms to interface directly with a major company's EDI translation package, allowing any company with a modem, browser and PC to conduct electronic commerce.
• By combining EDI and Web technology, a vendor may be able to check a manufacturer's inventory level directly, and a customer may be able to access real-time order status updates.
• An EDI system could generate a bill of materials as soon as an order is received from an existing customer.
• Electronic commerce can allow manufacturers to accept and generate payments automatically to banks and other financial institutions.
• Generating automatic requests for quotes to suppliers once a customer order is entered may be possible.

Electronic commerce technology has been successfully implemented in major corporations throughout the country. As the technology becomes easier and less expensive to use and is integrated in more and more business applications, midsized manufacturers will find electronic commerce becoming commonplace in their everyday business transactions.

Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.

Web Site © Copyright 2020 by Lionheart Publishing, Inc.
All rights reserved.


Lionheart Publishing, Inc.
2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA
Phone: +44 23 8110 3411 |
E-mail:
Web: www.lionheartpub.com


Web Design by Premier Web Designs
E-mail: [email protected]