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December 13, 1999

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E-Transformation
The Net Helps Overhaul Manufacturing
E-business becomes pervasive across divisions

By Alorie Gilbert

Illustration by James O'Brien mong manufacturing companies, E-business involves fine- tuning some parts of the business--and overhauling others. Electronic data interchange, for example, continues to be an important transaction medium among manufacturers and their partners. And for a glimpse at the future, witness the ambitious plans for market exchanges unveiled last month by Ford Motor Co. and General Motors Corp.

E-business is becoming pervasive across multiple divisions of manufacturing companies, driven largely by manufacturers' need to reduce costs and build more-efficient supply chains. According to InformationWeek Research's E-Business Agenda Study, 45% of non-computer manufacturers say E-business is already widely used in their companies, and 34% say it will catch on by this time next year.

Web-only business divisions are growing. Nearly half the respondents say they'll have one in a year. Online vertical-industry consortiums--virtual groups where businesses can bid on supplies and broker services--are also gaining in popularity: While only 16% of manufacturing sites participate, another 34% plan to come online in the next year.

The automotive industry may be further along in its use of the Internet to smooth out kinks and redundancies in the supply chain. With an excess of manufacturing capacity in the automotive industry, there aren't enough buyers to absorb the costs of unnecessary capital investments, such as surplus inventory, says Pete Janak, CIO of Delphi Automotive Systems Corp. in Troy, Mich.

Delphi participates in an online automotive industry auction called Free Market Online to bid for the best prices from its suppliers. "We're being driven to respond to market conditions much faster," Janak says.

At clothing maker Liz Claiborne Inc., the Internet is helping to streamline business processes. A Web site--LizLink--will supplement EDI communications, giving retailers the ability to place orders online, check the status of orders, and make earlier buying commitments. The Web site will also help Liz Claiborne predict sales for its product lines and adjust manufacturing accordingly.

chart But emerging Internet transaction standards such as the Extensible Markup Language won't replace EDI in the near term as Liz Claiborne's primary technology for communication with retailers, says Kevin Fogarty, director of application development at Liz Claiborne. "XML isn't readily accepted around the world," Fogarty says.

Knoll Pharmaceuticals Co. in Mount Olive, N.J., is taking a conservative approach to augmenting its systems using the Web. It has launched a Web site on which consumers and pharmacists can look up information about its drugs. On the business-to-business front, Knoll is dependent on its EDI legacy, which is how it gets 80% of its orders.

Ric Jones, director of systems and technology at Knoll, is considering providing Internet access for tracking orders, but many of its large wholesale customers are requesting more EDI services. "We don't want to add things that vendors don't really want," Jones says.

Consumer electronics manufacturer Panasonic is under pressure to step up customer service, as well as react more quickly to market changes. Its Business Link site is used by channel partners such as Best Buy to look up the status of orders. The company has implemented business forecasting and planning software from SAP and i2 Technologies Inc., which has allowed for a more efficient production process.

"Differentiation used to come through our products," says Panasonic CIO Bob Schwartz. "Now it's about adding value through service and responsiveness."

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