How Much E-Business Does Your Business Really Need?

April 20, 2001
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When you introduce new technology, take time to think about what your business needs really are, and in this case, how the Internet can help meet them.

A company’s business needs are defined by:

  • Its core business processes: Which one or two processes or functions are most important to the continued success of the business?

  • Its structure: Centralized or dispersed?

  • What it sells to whom: Specialty goods to a few customers or mass-market items to consumers?

  • Its relationships with its partners, i.e., customers and suppliers: How much information does it have to share and how quickly?

When we talk about the Internet, we often treat it as if it is a single thing — what we see when we “surf the Net” through the World Wide Web via our browsers. The Internet, however, is a multifaceted communications tool that can be used for many different purposes depending on our needs.

Just as every company needs a telephone and business cards to do business, every company today needs a presence on the World Wide Web, if only to provide basic information to stakeholders, such as employees, vendors, customers and investors. But not every company needs to conduct a buyer’s auction, process credit card payments or enable live chats with customer service representatives through its Web site. Nor should every company change the way it does business for the sake of a new, gee-whiz Web technology, unless there is a demonstrable benefit.

Understand Your Business Processes

Before a company changes how it does business to accommodate the Internet, it should make sure that it understands its business processes. Traditionally, organizations have been divided into departments that perform specific functions. Most of the important activity in a business, however, occurs in processes that spill over functional boundaries. For example, filling an order can entail actions by Sales, Customer Service, Warehousing, Traffic and Manufacturing.

An essential step in understanding business processes is evaluating the systems that support those processes. These systems include back-office systems that handle order management, production scheduling, inventory control, purchasing, logistics and accounting. Whether you call your back-office system MRP, ERP, SCM, DRP or something else, if you can’t efficiently fill orders, send accurate invoices and quickly process payments, the Internet won’t help you. It will only aggravate your problems.

Once you understand the processes that define your business, you can determine which ones can be performed more efficiently via the Internet.

There are four approaches a company can take to using the Internet, depending on its structure, products and partners. These approaches are: B2U, Extended B2U, B2B and B2C.

B2U

B2U stands for “business to yourself” — providing your employees with the means to perform all the processes needed to run your business, such as taking orders, buying materials and performing quality control. These days, most companies do B2U at its most basic level on a client/server system with graphical user interfaces (GUIs) that run on desktop PCs. A company centralized at a single site, buying from a relatively small number of suppliers and selling a specialized product to a relatively small number of customers can benefit most from a B2U approach.

Extended B2U

Companies whose organizational structures are more complex and geographically dispersed can gain efficiency from moving to an extended B2U through an Intranet. An Intranet is an in-house Web site that only your employees can access. Although parts of your Intranet may link to the Internet, an Intranet is not accessible to the general public. Using an Intranet, employees at any location can connect to the system through an Internet service provider and interact with it not via GUIs, but through a Web browser. It doesn’t matter where they are. Local and remote employees, production planners and CFOs on vacation have access to the same functions and can perform the same processes as if they were on-site (if they have authority to do so), but what they see on their screens looks a little different.

An Extended B2U brings more than gains in the efficiency with which a business can process transactions. Depending on the company, switching from dial-up modem access in a remote client/server environment to using the Web to enter transactions and access the main server could rather quickly save enough time and money to justify the cost of setting up the Intranet.

B2B

The B2B (business to business) Internet approach makes some of your business processes available to people who are not part of your company — to chosen partners. B2B happens over an Extranet — a Web site that both your employees and partners, but not the general public, can access. An Extranet uses the public Internet as its transmission system, but requires passwords to gain entrance. It works well for companies buying (or selling) commodity-like products sourced on the basis of price or delivery time.

B2B is particularly effective when supply-chain integration is vital, such as when a company shares information with partners to expedite the exchange of goods and money. An Extranet can provide partners with any information you let them access, like current inventories, pricing information and internal databases. Vendors can access Request for Proposals and submit quotes through an Extranet. A distributor can put a link on its Web site directly to your online product catalog. Customers can track their shipments themselves, reducing call traffic to your customer-service center.

Who is in control of the relationship governs how an Extranet is used. If you’re a small company that sells taillight lenses exclusively to Ford, you’re probably going to need to connect to Ford’s Extranet instead of operating your own. On the other hand, if you buy large quantities of sheet metal from a variety of small suppliers strictly on the basis of price and delivery time, or if you supply aftermarket auto parts to thousands of repair shops nationwide, it makes sense to provide these partners with a connection to your Extranet and treat them like branch offices.

B2C

Companies whose primary sales target is the consumer are candidates for a B2C Internet presence. A B2C company makes certain pages of its Web site available to the general public via the Internet so that they can learn about products and, perhaps, place orders, ask questions and find out the status of their purchases. These consumer-oriented pages should have the attractive look and feel of a retail mail order catalog and be easy to access. Buying something on a B2C Internet site should be as close to a real “bricks and mortar” experience as possible for a consumer. A customer should be able to quickly find answers to questions such as “Is it in stock?” and “When is it going to be delivered and by whom?”

Analyze Your Back-Office Needs

What all these approaches to using the Internet have in common is the need for a back-office “e-backbone” to execute all the functions from recording a sale to filling an order to processing payments automatically. One of the reasons that electronic data interchange (EDI) did not fulfill its promise as a business enabler was that many companies accepted orders via EDI and then re-keyed them into their back-office systems. The same thing can happen in a B2B environment unless a company’s back-office systems can receive orders directly from the Internet and process them in the same way that they would an order entered manually. These systems should be able to take an Internet order and automatically trigger actions to determine vital information:

  • Does the order pass the credit-limit check?

  • Is there enough inventory to automatically allocate to this order?

  • If there is, is it necessary to automatically generate a picking document in the warehouse so that the order can be shipped immediately?

  • If there isn’t, is it necessary to automatically generate a production order in the plant to manufacture the items?

  • What status should be assigned to the order if an exception to normal workflow occurs?

    Any company preparing to do e-business should make sure that its back-office systems handle incoming orders with equal efficiency and accuracy, regardless of how they arrive.

    Not all back-office systems that claim to be e-business-enabled offer the same flexibility when it comes to extending your business processes to the Internet. Successfully moving your business processes to the Internet requires systems that are inherently Web Native and Open. A Web Native system has these attributes:

  • Its core architecture is designed to be deployed on the World Wide Web.

  • Any part of the system can run in Web browser mode, i.e., on Internet Explorer or Netscape.

  • The system supports internal communications in some standard fashion, most typically using XML (extensible markup language).

    If a system is Web Native, it is much easier for a company to run its business on both an Intranet and Extranet. There may be little more to do than to set some display and security parameters and push a button to generate a Web version of essential business information such as Stock Status Inquiry. A Web Native back-office system eliminates development and implementation delays and substantially lowers maintenance and operating costs compared to one that is not.

    Web Native also means that you can outsource some of your business processes, perhaps logistics or customer service, to a strategic partner or application service provider, which will significantly reduce your investment in hardware and software.

    A system is Open if its developer has published its application-programming interface (API), the method to be used to interact with that system. Using a system’s API, a programmer can write short programs that can enable that system to readily share information and functions with other systems.

    In an Open system:

  • Your business partners can more easily connect their Web sites and systems to yours.

  • Companies can quickly send order information back and forth, as they were supposed to be able to do by electronic data interchange.

  • You can link your system to a B2C Web site and do much more than just take orders. For example, you can show accurate stocking information, delivery times and carrier-tracking information.

    With a closed system, these capabilities are much more difficult to provide in any reasonable, cost-effective and timely way.

    After you have analyzed your business processes and needs and evaluated your back-office systems, the next step is to develop a plan to move onto the Web. You might start with an Intranet B2U connection for your own personnel, moving outward to provide some of those capabilities to business partners (B2B). Eventually, if you have something to sell to consumers, you can move to a full-service, public B2C site.

    To do this well means selecting a system that is Web-capable at its core, inherently built that way from the ground up, so that you can have your choice of a GUI or browser as you see fit. To make it easily connect with whomever you choose, it needs to be open, so that you can link it to other Web sites and systems and fully exploit the potential inherent in the World Wide Web to handle your business more efficiently and increase your revenues and profits.

For more information on e-business, contact Dr. Allen Pinkus at 2200 Georgetowne Dr., Sewickley, PA 15143; phone 724-933-1300; fax 724-933-1379; e-mail al.pinkus@adonix.com; or visit www.adonix.com.

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