| Spring 2005 |
Manufacturing/Distribution Advisor
|
 |
E-Commerce Strengthens Sales and Supply Chains
According to a recent National Association of Manufacturers (NAM)
survey, 80 percent of the 2,500 companies surveyed maintain Web sites,
and 43 percent use an online catalog for customer service.
One-third of the respondents use electronic commerce for business-to-business
transactions, and half of these create new sales channels via the Web. But fewer
than 10 percent use e-commerce to manage logistics, raw materials or
supply-chains.
Beneath these figures, the report concludes, lies the challenge manufacturers
face in establishing coherent lines of command for E-commerce. At present,
responsibility is shouldered at different companies by CEOs, IT staff, marketing
and sales departments - or no one at all.
B2C: SELLING TO THE CONSUMER
It was ten years ago that a Pennsylvania college student keyed a credit card
number into his computer, bought a compact disc for $12.48 and launched the era
of online shopping. This year, online retail shoppers in the U.S. will spend
$144 billion, 27 percent more than last year - and nearly seven percent of all
retail spending.
The growth in online shopping has cast light on several trends. Retailers,
for instance, have found it easier to sell some items over the Web than others.
The buyer who orders a book a week from Amazon, for example, might not consider
buying clothes online.
This reluctance stems from buyers' innate trust in sensory experience. To
address this need, new "touch and feel' software is emerging with enhanced
graphic and display capabilities that provide visual clues to such qualities as
softness, fullness, thickness, elasticity and others.
But no matter how realistic a piece of furniture can be made to look on a
screen, many online shoppers will still window shop online - and buy down the
street.
These "catalog browsers" pose challenges to both kinds of retailers -
old-style bricks-and-mortar operations and modern "clicks-and-mortar"
enterprises trying to sell their commodities online. A classic example, familiar
to the front-line marketers on the sales floor, are the buyers who arrive fully
armed with information they gathered at far-flung Internet sites. They use this
new knowledge to negotiate a lower price - or happily walk across the street to
do likewise.
Clicks-and-mortar sites have learned some tricks, though. They're also
getting better at site design, making navigation not just more user-friendly but
more buyer-friendly as well. Some have discovered, for example, that the online
shopping cart is only that - and that items can be easily taken out before they
reach the virtual cash register by customers who are simultaneously inspecting a
competitor's wares. Smart e-tailers add links to items in the cart, so the
prospect can go back and view the items again. In the same vein, some have
borrowed other point-of-purchase tactics - offering "impulse items" at checkout,
like last-chance offers or service enhancements.
Security is a high concern, and brand-name security guarantees - VeriSign and
EnTrust are the best known - carry more weight with shoppers than unknowns, even
if they cost more. And under the lash of competition, online retailers are also
introducing greater transparency - showing one complete "out-the-door" price,
for example, rather than relegating shipping and handling costs to fine print.
B2B: SELLING TO BUSINESSES
The other side of e-commerce is business-to-business transactions. The label
can be confusing - your office supply company may process your online orders as
it does those from consumers, but it may buy from its suppliers using a more
sophisticated and elaborate B2B system.
The first B2B system - electronic data interchange, or EDI - is still going
strong. But new standards, most notably XML, are better able to exchange
information between disparate systems.
Electronic commerce modules are standard in most enterprise resource planning
(ERP) systems. In fact, B2B extends a key ERP functionality - automatic,
real-time coordination of inventories - outside a company's gates and into its
supply chain. An aftermarket sale in Portland, for example, sends out a ripple,
and a Tennessee vendor's production schedule changes minutely.
Thus, operations can be streamlined and resources used more productively. One
caveat, though: B2B systems can be expensive, although the growing availability
of off-the-shelf software should bring prices down over time.
E-commerce offers advantages, including new sales channels and cost
reductions, to many manufacturing and distribution firms.
Editor's Note: Bober, Markey, Fedorovich
& Company frequently works with clients on matters such as
this. Please call your partner / manager contact if you would like assistance in this area.
Manufacturing/Distribution Advisor is produced quarterly by Bober, Markey, Fedorovich & Company's
Manufacturing/Distribution
Services Team. If you would like additional information about the services that we can provide to manufacturers and wholesale distributors, please call or email our team leader, James E. Merklin, CPA, M.Acc. at (330) 762-9785 or
jimm@bobermarkey.com.
|
