Less than a year ago, the buzz in the industry surrounding electronic commerce was nonstop. If you believed the talk, it seemed like everything in business was about to be utterly revolutionized by the Internet. Old Economy foundries would become New Economy experts. Industry suppliers would develop new systems based on emerging Internet technologies. And emarketplaces were poised to forever change the way foundries and suppliers built and managed relationships.
Today, however, what used to be such an enthusiastic industry buzz sounds more like a cautious murmur. The hush set in almost overnight, as the economy took a turn for the worse, dot.com startups in all kinds of industries started to fold, and tech stocks plummeted. Suddenly, foundries were scrambling to maintain their bottom line, shifting resources away from e-business. In April, MetalMaker.com, one of the most ambitious e-commerce visions in the foundry industry, was forced to close its doors.
Despite this apparent lag, however, the e-commerce race is by no means over. On the contrary, this could prove to be one of the most exciting times for e-commerce-and not just in metalcasting. Business is coming down from the hype, adjusting its vision, and preparing to work at a perhaps less thrilling but also more productive level. No longer blinded by the vision of rampant dot.com revolution, foundries and suppliers are taking a wiser, more realistic approach to e-business.
The new vision sees e-commerce as a useful business tool rather than an end in itself. It recognizes that a significant amount of thought and preparation is needed before foundries will be able to fully integrate the technology into their operations. And it realizes that the metalcasting industry is built upon real relationships between real people-something that e-commerce must enhance rather than replace.
The Story of MetalMaker
MetalMaker.com was an application service provider (ASP) that sought to give clients a common online marketplace for foundry goods and services. The vision also included providing contract and purchase order management, logistics, credit, transportation, energy and financial services, as well as content, reporting and analytics, technical research, industry news and benchmarking.
Officially, MetalMaker.com suspended operations due to a lack of funding. But behind this bare fact were a host of issues that can shed light on the challenges foundries face in implementing e-commerce initiatives.
According to Christine Mason, one of the company's co-founders, MetalMaker.com could not get funded partly because of the general economic climate, but also because investment companies were discovering it would take longer than they had initially expected to get the metalcasting industry involved in e-commerce at the level needed to land significant profits.
"The thing we found out," Mason says, "is that you can do a lot of very simple things online without spending a lot of money, but to build a whole supply chain system like MetalMaker takes a very heavy investment toll-up to $100 million."
The high cost of the venture was frustrated by foundry managers' caution about new ways of doing business. MetalMaker underestimated how unprepared the industry was for e-commerce. Ted Kostilnik, a former vice president of the company, explains that there is a deep skepticism among buyers and suppliers in the foundry industry as to the total savings of an e-commerce venture like MetalMaker. This may be because the cost advantage of ecommerce is a long-term process that evolves over time, rather than an up-front return on investment. Given the current economic climate, companies just aren't willing to wait to see profits.
But in Kostilnik 's opinion, MetalMaker's timing was just plain unlucky. "If we had launched one year earlier," he says, "we would have landed in the midst of the `dot.com revolution,' and we would have had more time to get established and prove our worth before the downturn. And if we had launched one year later, we might have found foundries more willing to take the e-commerce risk."
Phil Rankin, assistant controller with Griffin Pipe Products Co., Downers Grove, IL, a manufacturer of cast solutions for the water and sewer industry, agrees. "MetalMaker was definitely on the right track, but the industry just wasn't ready for it yet. We need to go at our own pace. We aren't about to sign onto a long-term e-procurement contract without being fully comfortable with the technology."
Lessons Learned
This is not to say that there is no room in the foundry industry for the kind of innovation that e-commerce can bring. In fact, manufacturers are more e-ready now than they ever have been. But there have been some lessons learned from the shakeout of last nine months.
"In the midst of all the dot.com hype," says Ryan Moore, member services manager at the Non-Ferrous Founders' Society (NFFS), "everyone jumped in the ecommerce pool, and then we all realized it was only halffull. Now we're learning what not to do when embarking on an e-commerce venture. We're in a perfection stage right now."
Some of the lessons being brought to bear on the metalcasting industry include:
"e" is for Integration. Integrating e-commerce into existing business practices is a critical component of success. It is also the most difficult-and expensive-piece of the puzzle.
In an e-business survey of manufacturers conducted by Industry Week magazine, more than 50% of respondents cited difficulties with integration as the biggest obstacle to e-business initiatives. Integration with manufacturing operations topped the list, while integration with back-office systems followed closely behind.
Planning is essential. Before implementing an e-commerce program, foundries need to give some thought to the way their business operates, what their overall business goals are, and how e-commerce can help them achieve those goals. They may have to consider changing their data management systems and rethinking their channels of distribution.
Planning also includes training employees. In an industry survey conducted last year by the NFFS's Electronic Commerce Intitiative for Metalcasters, lack of education was listed among the top barriers to implementation of e-commerce programs.
Be flexible. There is no single best way for every foundry to proceed when it comes to e-commerce. Dale Weeldreyer, vice president of engineering services at Grede Foundries Inc., Milwaukee, WI, says, "Providers need to be sensitive to the needs and business models of foundries, but recognize that no one manufacturing site will be compatible with all of these models. Foundries, on the other hand, need to accept there probably won't be the 'perfect' site."
Think long-term. E-commerce does not necessarily offer an immediate cost benefit. Companies need to be prepared to wait several months or more for substantial results.
Know your foundry. E-commerce is like any other business tool-it's only successful to the extent that it can be adapted to fit the unique business personality of an individual foundry. Knowledge of the customer base and its e-commerce expectations is also essential. A small iron foundry will not have the same e-business needs as a large aluminum Big Three supplier.
It's also been useful to note e-commerce's limits. There are some areas where e-commerce will come to play an essential role, and some areas it simply won't be able to go. Foundries may be more hesitant to buy a product that is critical to operations, like a furnace, online. The human component in equipment purchases is too important, as is trusted on-site technical support.
The focus should always be on business, not just "e." "E" by itself may be exciting, but it is also expendable. The focus must be on business, not on technology for technology's sake. Fortunately, most foundries never lost their sense that business comes first, no matter what. That's partly why they have proceeded with caution in moving forward with e-commerce.
The Evolving "e"
Despite the caution, however, the foundry industry is becoming more and more e-savvy. One thing MetalMaker accomplished was bringing the idea of e-commerce to the industry and educating foundries and suppliers about its possibilities. Mason says they saw a definite shift in industry attitudes over the last two years. "Foundries went from saying `What is e-commerce?' to 'I know we need e-commerce, but how do we go about implementing it?' I think that's a positive sign for the industry."
Currently, foundries are making a variety of e-commerce efforts. Most foundries now have Internet access and many have a Web site. At Grede Foundries, according to Weeldreyer, customers can use the Web site to access information relevant to their orders, and the company plans to expand this service. Griffin Pipe also has a Web site that includes technical sheets on many of its products. Both foundries are working on developing online purchasing systems. Both foundries also indicate that the sell side is not quite ready for e-commerce just yet.
"We have participated in customer auctions," says Weeldreyer, "but we have reservations that this process can handle the complexity of casting purchasing adequately."
Foundries and suppliers recognize that inefficiencies in business, especially in sales and procurement, can be addressed by e-commerce. Consortiums-online hubs comprised of several foundries pooling resources together through major contracts that benefit each party-- will likely
increase as foundries discover the advantages of combining their buying power. Consortiums have an added benefit of keeping individual foundries' costs down and creatine a stronger voice for the industry. Another probable area for e-commerce to have a significant impact, according to Rankin, is in making communication more efficient. It is already making external communication between foundries and suppliers, as well as internal communication within an enterprise, easier. Rankin expects that it will soon bring greater ease and efficiency to the ways in which foundries communicate with customers.
Currently, many foundry managers are dealing with immediately pressing industry issues than e-commerce implementation-reduced sales, increased product costs, OSHA, environmental regulations. But as the cost of the technology continues to go down, and it proves to be a useful and cost-effective business tool, more foundries will use it for more operations.
And e-commerce will most likely cause some major changes in the way foundries and suppliers do business, although they may not be quite as sweeping as was once thought. "The industry could use a bit of a shakeup," says Rankin. "It's Darwin: in the process of evolving, inefficiencies will be squeezed out of any industry, and the best practices will win. E-commerce can help our industry with that."
On the other hand, foundries should hold onto some things too. E-commerce will gain a stronghold in the industry as long as it doesn't threaten the relationships that have already built with time and plain human effort. "People have a definite value," says Kostilnik, "and no amount of technology can replace that. What it can do is take ten complicated manual steps and reduce them to one simple on-line transaction."
|
