By Edward G. Enquist, Kenton C. Toomey, and Richard Artes
The title is not a mistake. Yes, all the talk today is about companies moving from “bricks” to “clicks,” and the high investment returns being posted by dot coms. The reality, though, is that there needs to be a manufacturing and distribution infrastructure in place to deliver the goods against orders generated by e-commerce. This often forgotten step is the clicks-to-bricks bridge that must be successfully deployed.
The dot-com proposition
A business does its work on two legs. One leg is built of information such as sales leads, orders, production planning, procurement orders, work schedules, cash receiving, and accounting review and feedback. The other leg is built of the bricks and mortar every product-oriented business needs to have in place—whether it owns it or outsources it—to build and deliver the goods according to the requirements provided in the information process. The critical issue facing manufacturers is the ability to synchronize the two legs so that they work together.
Regardless of what you call it—dot com, e-commerce, e-business, B2B—it’s all about moving and translating information faster, cheaper, and better with 100 percent accuracy through communication channels and networks with incredible accessibility for everyone, including all employees, suppliers, and customers. This has done much to change the landscape for information management and control, giving rise to the “virtual” company. However, if this faster and better information is not translated into better customer service and response, its value will be diminished.
Welcome to the virtual company
Now a “company” of people can exist wherever the people and their information ports reside. Consequently, people can generate useable, decision-oriented information much faster because they can be where the action is, whether at a customer’s office, at a field installation, or in an aisle of a retail store. Since the common productivity drivers—speed, cost, and quality—apply equally to information flow as well as to goods production, the investment market has rewarded the information-producing leg exceedingly well.
The availability of “bandwidth”—the width of the information highway—is increasing at a rate of 300 percent per year while the cost of bandwidth continues to drop steadily. Businesses that are not taking advantage of this information gathering, processing, and distributing capability are quickly slipping behind.
Key questions to consider when evaluating internal business processes
- What if we improve the speed and value of business information, but do not enhance the capabilities of your internal business system (sometimes called ERP)?
- What if we implement a new internal business system but do not enhance your business and manufacturing processes?
- What if we do not reengineer your people skills and performance system to adjust to your new capabilities potential?
Faster time to market
The objective is not better and faster information but rather better, faster, higher-value products and services to customers. Fix this problem, and the e-commerce solution provides the promised payback. Adjust your business and manufacturing planning processes to work with better and faster information through a business process improvement project that works in concert with the new economy.
“Virtual” is only relevant to the location of the people using the information. The job of translating, combining, sorting, and using information still takes place in a manufacturing plant where real people are still making the tangible, real products that customers want. What happens when the manufacturing plant cannot process the ordering information, for instance, at the speed of the communication network? Everything slows down to the throughput capacity of the constraint—in this case the manufacturing plant—resulting in under-utilization of expensive information gathering capability, dissatisfied managers, stressed employees, and, most importantly, unhappy customers who have not had their expectations met. There is no value or promise of great improvements from e-commerce or B2B processes if the systems’ constraints, more efficient manufacturing, related business processes, and distribution, are not part of the solutions equation.
Speed of available information outpaces manufacturing capability
Information management has accelerated at a pace much faster than manufacturing throughput capability. Besides all the efforts toward lean manufacturing using continuous or demand flow models, this fact remains: Information networks are exceedingly faster than people’s ability to use the information to make products. And, as we said earlier, a business runs on two legs. If the human leg cannot keep up with the other “bionic” one, the expensive leg is forced to slow down. This is the basis behind so much discontent with the return on investment from ERP systems today!
Real-life examples of this discontent? Hershey Foods claims the company lost significant market share when it couldn’t fulfill customer orders fast enough during the 1999 holiday season. Levi Strauss scrapped its electronic online fit-and-manufacture-to-order business because the factory couldn’t respond to demand that the information system enabled. (Notice we don’t say the demand “created” by the new system. The demand was always there. It was the online communication capability that “enabled” the company to gather orders so quickly.)
Edward G. Enquist has 15 years of manufacturing, engineering, and supply chain management experience.
Kenton C. Toomey has over 30 years of manufacturing and supply chain management experience.
Richard Artes has over 25 years of business and manufacturing management experience.