making sense of ebusiness in the forest products industry · 2007-09-19 · making sense of...
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Making Sense of eBusiness inthe Forest Products Industry
Richard Vlosky, Ph.D.Associate Professor- Forest Products Marketing
Louisiana State University
Southern Forest Products Association Annual Meeting
July 2001
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What am I Going to Talk About?
• eBusiness and Business PracticesWhats Going on Here Anyway?? •
Some Final Thoughts•Strategies•
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Most Important Market Forces Affecting Business
(Ernst &Young 1999)
Pressure to reduce overall supply chain costs 59%
Pressure to compress total time tomarket/cycle time 41%
Pressure to collaborate more effectivelywith trading partners 33%
Unstable/unpredictable demand forproducts/services 23%
Movement toward a more global marketplace 22%
Proliferation of the Internet 21%
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Internet Growth
– No slow down in sight
the U.S.– Growing faster outside
– 115 million people in U.S. are on-line
(Bakker 1999)
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In Three Years:
• Two-thirds of the world's Internet users will be outside the United States.
• 36 percent of all Internet users will not want to use English. (And they are up to 400 percent more likely to buy online from sites that support their language of choice).
• Western Europe and Japan together will account for about 47 percent of the world's e-commerce revenue. In 1999, they accounted for 28 percent.
(Steve Ulfelder, CIO Magazine October 2000)
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Top 10 Computer-Using Countries in 2000
RANK COUNTRY
COMPUTERS (MILLIONS) % SHARE
1 UNITED STATES
164.1 28.32
2 JAPAN 49.9 8.623 GERMANY 30.6 5.284 UNITED
KINGDOM26.0 4.49
5 FRANCE 21.8 3.776 ITALY 17.5 3.027 CANADA 16.0 2.768 CHINA 15.9 2.759 AUSTRALIA 10.6 1.82
10 SOUTH KOREA 10.6 1.82
(Marketer Global Report)
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ENIAC ENIAC(TM)-on-a-Chip
•Its thirty separate units, plus power supply and forced-air cooling, weighed over thirty tons.
•19,000 vacuum tubes, 1,500 relays, and hundreds of thousands of resistors, capacitors, and inductors.
•consumed almost 200 kilowatts of electrical power
The chip has a size of 7.44mm by 5.29mm and contains about 174,569 transistors.
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Date Book • Address Book • To Do List • Memo Pad • Calculator • Web Clipping Application • iMessenger® Application • Expense, E-Mail* • HotSync® Manager • Security • Games • Communications: • Juno Air™ •Rovenet P-7-fax • ThinAirMail • Yahoo! MailFinancial: • CBS MarketWatch.com • E*Trade • Fidelity Investments • Prudential • USABancShares.com News & Sports: • ABCNEWS.com • ESPN.com • Real Cities • USAToday.com • The Wall Street Journal (Interactive Edition)References & Directories: • AskJeeves • BarPoint Shopper™ • Brittanica.com • Excite Mobile • Mirriam-Webster • MyInfo Powered byYodlee • Palm, Inc. • Switchboard Yellow Pages • Yahoo! People SearchShopping: • Amazon.com • Barnes & Noble.com • Buy.com • SNAZ.com • VicinityBrandfinder • Palm, Inc. Travel & Entertainment: • American Airlines • Continental Airlines • Delta Airlines • Etak Traffic Touch • MapBlast! •MapQuest.com • Moviefone.com • TicketMaster •TravelerSOS • Travelocity.com • United Airlines • Weather.com
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CPU: 66 MHz 486-SX
Main Memory: 16 MB SDRAM
Video: 512K VRAM
SVGA Resolution (800x600), 256 colors
XVGA Resolution (1024x768), 16 colors
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What is eBusiness?
eBusiness is the application of Internet-based technologies for conducting business.
It includes eCommerce, the actual transaction activities as well as other business oriented applications such as logistics, order entry, information sharing and transmission of information between exchange partners.
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What is eBusiness?What is eBusiness?
First and foremost about business, not technology.Technology facilitates eBusiness.Challenge is managing the changes in business strategies and internal corporate processes.Can include intra-company networks (intranets) and Internet linkages with customers or suppliers (extranets).
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An Intranet Network
Sales
Procurement
ProductionInventory
R&DHuman Resources
(From Michael & Punches 2000)
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An Extranet
Your Customer or SupplierYour Customer or Supplier
Your CompanyYour Company
(From Michael & Punches 2000)
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What is it?
Access
Users
Information
INTERNET
The information superhighway.
Open
Public
General
INTRANETS
The use of Internet
technology within a company or organization.
Private
Organization members
Proprietary
EXTRANETS
A network that uses the Internet to link company
Intranets in order to enhance business-to-
business relationships.
By agreement only
Business partners
Selective
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Market ResearchFinanceDistributionInformation Systems
Company Activities
eBusiness Can Impact the Whole Company
Back OfficeHuman Resource ManagementTechnology DevelopmentProcurement
Pre-SaleActivities Operations Outbound
Logistics
Marketingand
SalesPost-Sale Service
Value Chain Activities
eBusiness Can Impact the Whole Value Chain
InboundMaterialsLogistics
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eBusiness inInternational Marketsspans differences in:
International eBusiness
spans differences in:
GeographyLanguage EconomiesEconomies Politics/Law
Politics/Law
Cultures Cultures Cultures Technology
Infrastructure MarketsMarkets
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SlopeSlopeofof
EnlightenmentEnlightenment
PlateauPlateauofof
ProfitabilityProfitability
TroughTroughofof
DisillusionmentDisillusionment
Peak ofPeak ofInflatedInflated
ExpectationsExpectations
TechnologyTechnologyTriggerTrigger
“e“e--Business”Business”endsends
The Life Cycle of The Life Cycle of eBusinesseBusiness(Forrester Group, 1999)(Forrester Group, 1999)
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Forest-Based Industries
are Business-to-Business (B2B)
As opposed to
Business-to-Consumer (B2C)
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Business-to-business eCommerce will grow tremendously in the next several years, bringing significant change to most industries.
Increasing competition and globalization are two factors fueling business-to-business eCommerce growth.
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eCommerceeCommerce
• Comprised 0.8% of U.S. GDP in 1999
• Will comprise 8.9% of GDP in 2003
• B2B comprises 90% of online sales
• 12% of all manufacturing shipments were sold online in 1999
eMarketer 2000US Census 2001
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B2B eCommerce: The iceberg below the tip!
0200400600800
1998 1999 2000 2001 2002 2003Year
Reve
nues
($
billi
on)
B2C e-CommerceB2B e-CommerceSource: Forrester Research
1,4001,2001,000
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What’s Going On Here Anyway???
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The Traditional Forest Products Value Chain
Raw Materials-Timberland- Stumpage
Harvesting- Timbering- Transport- Loggingcontractor
Primary Processing- Pulpwood- Saw timber- Logs
Merchandising- Marketing- Sales
Information Interfaces
Secondary Processing- Remans- Treaters- Industrial- etc
SecondaryDistribution- Channels- Transport
Consumer-Builder-Remodeler-Retail
Merchandising- Marketing- Sales
Distribution- Channels- Transport
(Terry Aaron-TALPX 2000)
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Time
Develop-ment
Introduction Growth Maturity Whatnext?
AdoptionIndustry in General
Forest Products Sector
Where is the Forest Products Industry inWhere is the Forest Products Industry ineBusinesseBusiness Adoption?Adoption?
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eCommerce% Sector
Ship. Value
($ Billion)(% of
Shipments)
1 Transportation Equip.
$675 20.8%
2 Electrical Equip., Appliances
$120 19.8%
3 Leather and Allied Products
$10 18.3%
4 Apparel $63 18.1%
5 Textile Products $33 15.0%
14 Paper $157 8.5%
LAST Wood Products $98 3.5%
Where is the Forest Products Industry ineBusiness Adoption?
US Census March 7, 2001
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Why?Information Technology Reactive industry
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Who is where in eBusiness ImplementationIn North America?
Industries in General > Forest Products Industry
Canada Forest Products > U.S. Forest Products Industry
Pulp & Paper Industry > Solid Wood Products Industry
Composites (MDF, Particleboard) > Softwood Lumber
Softwood Lumber > Hardwood Lumber
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Is There a Place for My Company at the Table?
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Reasons for Pursuing Reasons for Pursuing eCommerceeCommerce
1) Keep up with competitors—74%2) Seek new revenues--- 60%3) Reinvent Industry--- 40%
Andersen Consulting 2000
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Typical Internet Business ApplicationsBeing Used by the Forest Products Industry
Relative Frequency
Customer ContactsBasic WEB Publishing
MarketingVendor Contacts
Product PromotionProduct/Price Inquiry
Sales to CustomersPurchases from Suppliers
Internet EDIOrder Status
Shipping NoticesOrder Tracking
Inventory ManagementLogistics
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Options1. Go it yourself2. Use an Exchange
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Your Customer or SupplierYour Customer or Supplier
(From Michael & Punches 2000)
Your CompanyYour Company
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eMarketplaces
• Integrated marketplace eIntermediaries– Business Exchange-Industry Sector, Value Chain Space– Virtual Trade Show– Product Showcase– Auction
• eMarketplace services- Tools ( Web,Catalog,Buy/Sell,Offers,Discovery, Credit)
• Additional Marketplace Support Services– Industry Information, Links, News– Research, Dynamic Pricing
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What are Their Value Propositions?• Improve Business Performance
– Opening of New Markets– Creation of Operational Efficiencies
• Enhance Service Value to Customers– Streamlined Transactions– Deeper Relationship
(Terry Aaron-TALPX 2000)
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Yet They Can Be Threatening• Fear they will Restructure the Value
Chain– Force Businesses “out of business”– Realign the existing Balance of Power
• Concern that they will Destroy Existing Customer Relationships– Remove the Personal Touch– 100% Focus on Cost Competitiveness
• Expected to Threaten Peoples Jobs– Machines will Replace People
(Terry Aaron-TALPX 2000)
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Marketplace Proliferation
(Computer Science Corp, 2000)
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Forest Industry Exchanges
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U.S. Wood Products Industry
Impediments to Implementing Internet Capabilities
Lack of skilled IT staff
Lack of an understanding of benefits
Expense of development
Expense of hardware and software
Impedes MOST
Inadequate application tools
Lack of technology infrastructure (TCP/IP, networks, firewalls, security)
Customer resistanceImpedes LEAST
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#1 Concerns about Using the Internet
SecurityCustomer re
lationships will suffer
Security
U.S. Wood Products Industry
20001995
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Internet Influences on Buyer/Supplier Relationships
Time
RelationshipStrength
(Vlosky and Wilson, 1993,1999)
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Trust is an Essential Lubricant in eRelationships
Trus
t
SellerBuyer
(Adapted from: John Kador, eAI Journal, 2000)
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Where’s the beef???
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Where’s the Value?
• We shifted 70% of order status phone calls to real-time Website extranets (electronic equipment OEM).
• Order transaction costs (IBM/Keen Consulting): – Telephone: $25-$50– EDI: $1.25– Internet: $0.30
• Incoming error rates dropped from 6% to <1% (IBM).
• Manual entry results in 100% more errors than Internet (Healthcare Products Mart).
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U.S. Wood Products Industry
Where’s the Value?
Faster response to customer inquiries.
Obtain new customers through Web promotion.
Customers can look up order and shipment status on-line reducing phone calls to reps and freeing them up to handle orders rather than inquiries.
Generate far more sales than could have been generated without the Internet.
Faster, easier purchase of needed items from vendors.
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U.S. Wood Products Industry
Where’s the Value?
Inventory reduction by broadcasting available stock to customers via the Internet.
Better inventory control because of better information on inbound product locations and ETAs.
Increased market share in large accounts by managing customer inventories on-line.
Track all rail and truck orders for all customers and make the information accessible on a Website.
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Some Thoughts on eBusiness Strategy
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U.S. Wood Products Industry
Internet Implementation Schedule and Benefits
Is your companywhere it wants to be in
Internet implementation?
37%
63%No
Yes
Has your company received the desired benefits?
31%
69%No
Yes
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eBusiness Strategy Characteristics
Fit Market Environment
Fits OverallCo. Strategies Realistic
DistinctiveCompetencies Specific
Characteristicsof Good eBusiness
Strategies
MarketOriented
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eBusiness Competitive Differentiation
eProducteProduct eServiceeService
Areas for CompetitiveDifferentiation
eApproacheApproach
Areas for CompetitiveDifferentiation
ePersonnelePersonnel
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eBusiness Strategic Planning Process
• involves developing an overall eBusiness company strategy for long-run positioning.
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eBusiness Strategic Planning Process
• involves developing an overall eBusiness company strategy for long-run positioning.
• This process involves:– Defining an eBusiness Mission: Statement of purpose.
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eBusiness Strategic Planning Process
• involves developing an overall eBusiness company strategy for long-run positioning.
• This process involves:– Defining an eBusiness Mission: Statement of purpose.– Setting Company Objectives: Supporting goals and
objectives to guide the entire company in its eBusiness efforts.
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eBusiness Strategic Planning Process
• involves developing an overall eBusiness company strategy for long-run positioning.
• This process involves:– Defining an eBusiness Mission: Statement of purpose.– Setting Company Objectives: Supporting goals and
objectives to guide the entire company in its eBusiness efforts.
– Designing a Structural Plan: Overall plan including functions impacted.
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eBusiness Strategic Planning Process
• involves developing an overall eBusiness company strategy for long-run positioning.
• This process involves:– Defining an eBusiness Mission: Statement of purpose.– Setting Company Objectives: Supporting goals and
objectives to guide the entire company in its eBusiness efforts.
– Designing a Structural Plan: Overall plan including functions impacted.
– Planning Functional Strategies: Detailed planning for each eBusiness activity to accomplish strategic objectives.
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eBusiness Building Blocks
Implementation
StrategicDirection
TechnologyTools
Top Management Vision
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eBusiness Gap Analysis
Conduct Internal, Customer and Supplier Audits and Determine What is
Desired, Needed, and Feasible to Implement
Conduct Internal, Customer and Supplier Audits and Determine
the Current IT Infrastructure
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Assessing eBusiness Needs
Examine Cost/ Benefit of Desired
Activities
Examine Cost/ Benefit of Desired
Activities
Rank/PrioritizeeBusinessActivities
Rank/PrioritizeeBusinessActivities
Pool of Possible eBusiness Initiatives
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Getting StartedGetting Started
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Getting Started
• Think strategically
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• Think strategically• Embrace fundamental changes
Getting Started
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• Think strategically• Embrace fundamental changes • Secure top management support
Getting Started
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• Think strategically• Embrace fundamental changes • Secure top management support• Get educated
Getting Started
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• Think strategically• Embrace fundamental changes • Secure top management support• Get educated • Choose technology partners carefully
Getting Started
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• Think strategically• Embrace fundamental changes • Secure top management support• Get educated • Choose technology partners carefully• Sell concept to suppliers and
customers
Getting Started
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• Think strategically• Embrace fundamental changes • Secure top management support• Get educated • Choose technology partners carefully• Sell concept to suppliers and
customers• Just do it!
Getting Started
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What's the Bottom Line?
The emergence of cyberspace is a fundamentalforce that is transforming business and society.
Internet-based technologies offer revolutionary tools for business development and management.
eBusiness is one means for developingcompetitive advantage.
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eBusiness can...
e~Commerce...
…using a digitally connected marketplace
Change the way we go to
market...Optimizing position in the value chain...
Fundamentally rethinking business models...
Leverage core
processes...
Link customers, markets,
partners and suppliers...
Open new markets with an outside in perspective...
(Poirier 2000)
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eBusiness Implementation/Success MatrixeBusiness Implementation/Success Matrix
- sheep in IS clothing- premature- inefficient- anxious- impulsive- inordinate costs- IS at risk- e-trust loss
- match between IS and strategic adoption
- optimal combination for success
- dinosaurs- traditionalists- survival at risk- resistant to change- denial
- untapped resource- high potential to lose
corporate IS e-expertise
High
eAdoption(complexity
depth,strategic)
LowLow HigheKnowledge
(depth, breadth) (Vlosky 2000)
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Live long and prosper…..
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[email protected](225) 578-4527