May 2001

Manufacturing in Internet times:

Manufacturing today faces many difficult challenges. With a never ending task of low cost high quality products, out source or in house manufacturing, e enabled supply chain management, streamlining of distribution network for faster and efficient deliveries etc. etc. Challenges are never ending. With rapid changes in technology and ways of doing business, the only way to successfully manage manufacturing in the time of Internet is to shake up old systems and wake upto the new and emerging realities.

Many or almost all manufacturing companies have large investments in factories, employees and distribution channels. All these are neither necessary nor required in the new scheme of things. At CISCO systems majority of its products arrive at the customer without ever having been touched or seen by a CISCO employee. If this is the way manufacturing company is going to function, naturally owners of all physical assets have to rethink their manufacturing and business strategies once again.

As per recent manufacturing Industry analysis in the US states: Five years down the line today's linear manufacturing chains will have broken down and will be replaced by networks of manufacturing specialists all cooperating an Internet speed to deliver products.

We all know by now that there will not be any business without e business couple of years down the line. Every business is looking the ways to formulate their e business strategy and those who are still carefree about this biggest happenings in the history of business, are sure to extinct in years to come sooner than later.

Question now for every business is not whether to respond to these changes but how to respond. Question is even not how to participate in this revolution but real question is where to fit in these changes. How to leverage these new technologies and ways of doing business. How to strengthen existing business with the use of new technologies and ways.

E business impacts every dimension of business, from customers to suppliers to intermediaries every aspect is covered. Transformation is the word we can use to describe such changes in each and every business. Palm top, web TV, extranet, Intranet, voicemail and cell phones are the ways and means of dong business. Customers can use any of the suitable devices to use company's services or to order products.

As per one market research online B 2 B transactions in Asia -Pacific region by the year 2003 will be worth US $ 270 billion around 20% of the world wide total. In Asia manufacturing activities dominates and direct goods contributes 80% of the total purchases as compared to 60 % in the US. Here in this region supply chain is also less efficient. On an average logistics, distribution contributes 12% of the FOB steel price as compared to 4% in Europe. We have many intermediaries between seller and buyers as compared to the US and Europe.

So looking at all these, Indian companies should ask following questions to decide appropriate e business strategy for themselves.

a) How will e business impact my business?

This is a very fundamental question every businessman must ask to himself. This is the starting point in deciding any strategy. Think and assess every aspect of business, which can be done online and which can not do done online. Like for example for a manufacturing unit order placement and procurements can be done online while delivery of goods has to go through regular channel of transport. In the case of service industry like travel agent ticket and hotel booking can be done online but travelling has to take place using train/bus or airplane. In the case of baking or finance company many or most of the activities can be done online. So, in which segment of the industry particular company is operating is very crucial.

In any particular company some of the activities can be better performed online while other activities needs offline working. Each company has to choose keeping in mind the budget & ROI, which of the activities it wishes to do online.

b) Strategic Option and Response?

There are many aspects of the business affected by e business and as many options available for companies to choose from. Say, companies have to respond to customers, products and value chain/suppliers. Each of these aspects will have various strategic options to deal with. Like, Company may do nothing in any of these areas and watch for leader to respond and then follow up. Eg. HLL may move first in the area of customer management and Nirma may take clue from this first mover and design suitable strategy. But here company has to keep in mind that there is some time first mover advantage and which may not be available to the follower. Second option could be enhancing company's internal capabilities and improving efficiencies with use of new technologies. Presently most of the companies are doing this. So this is doing the same business on the web. Alternatively, companies can extend their business through web. So what is not possible or difficult offline can be done online. So bookstore can provide book reviews and computer manufacture can accept customise order online from the customers. Stockbrokers can facilitate customers for trading online from their residence. So all these possibilities can be explored by each organization. Many companies can even create new business online. This could be B2B portal or finance portal by finance companies and auto portal by vehicle manufacturer. Even regional business can be expanded to global business. This option can provide additional revenue generating opportunity to the companies. Again, under these circumstances due to total overhaul in various industries, many of the existing businesses of the company need reconsideration. One may have to look at the option to even sale any particular business or form an alliance. Eg. AOL & Time Warner merger & Indian World and Sify deal.

C) Capability Requirements:

Considering the various options listed above companies have to develop certain capabilities. But as these changes are experimental one must keep in mind that there is no established standard to gauge the requirements. So learning and experimenting should be online. Innovation has a role to play here. Even many of the capabilities can be outsourced while other can be developed in-house.

d) Internal Changes in the Company:

New approach from brick and mortar to web enabled business require many internal cultural changes also. New people may join, financial management may require new model, and customer management approach requires complete transformation. With many such changes impact company, various human resource management issues may emerge. So new strategy for internal company management may take shape.

e) Time Strategy:

Though many of the initiatives may take long term to generate profit, companies have to decide well in advance funding requirements of the various initiatives. In the short run many of the businesses online may look unattractive, but sustaining power will decide the winner. So, managing shareholders prove to be a difficult task. Proper profitability timing and scale of operation needs careful assumptions and monitoring.

All the options and response require investments. Now it depends on the company how and to what extent it wishes to invest. More complex the business model more investment it requires. There will be man hurdles and many opportunities. Watchfulness and flexibility will decide the winners.

To conclude, E business is entirely a new opportunity and challenge too. In these times of constrained resources it really requires guts for any entrepreneurs /company to embrace this. Still there are no alternatives.