Riding The Wave: Leveraging The Back-End Power Of The Net

Forget the hype. Driven by massive media spending, avid press coverage and never-ending tales of the neighbor who made millions overnight, it is easy to believe that business-to-consumer (B2C) transactions are the ultimate use of the Internet. However, the Internet was created as a means of communication and transaction, and it is ideally suited for business-to-business (B2B) applications. The real action over the next decade will be in B2B. The use of the Internet for B2B functions is projected to outpace consumer applications for several years, bringing about a tidal wave of new approaches to commerce and causing a fundamental shift in the way business is transacted. Leveraging the power of the Internet to transform your supply chain and equip yourself, your suppliers and your customers to move at consumer speed will be critical to your companyís success.
RISING EXPECTATIONS
The power of the Netóthe speed, access and control parameters it providesóis a driving force in rising consumer expectations. And there are two fundamental forces driving the e-commerce power wave. One is the emergence of new business models in B2B e-commerce, the ìdot comsî of the B2B world. These are networks, auctions and exchanges that bring together fragmented customers and suppliers. They leverage economies of scale across a number of small players, diminish costs and accelerate the speed of transactions in those networks.
The second key driver is the ìripple effect.î Jack Welch at GE has said that the Internet is priority number one, two, three and four for his business. GE already does more than one billion dollars in business a year with its suppliers and customers through the Internet.
Today, the sporting goods industry is on the threshold of experiencing a massive ripple effect, which will power a hyper-growth in B2B e-commerce applications. We will see a critical mass of new business models and supply chain transformation. Sporting goods companies will face a completely new set of expectations across the entire industry.
According to Kurt Salmon Associatesí e-commerce survey, which questioned a cross-section of consumer products suppliers, marketers and retailers, 57 percent of respondents are using e-commerce to support their business processes today. Of that 57 percent, two-thirds are supporting both B2C and B2B processes. The survey further indicates that many more businesses are planning to catch the wave.
CATCHING THE WAVE
E-business supply chain evolution is occurring in three stages: adoption, adaptation and synchronization.
In the first phase, the Internet is viewed predominantly as a read-only marketing medium. Organizations focus on the re-deployment of existing systems and processes onto the Web. There are few challenges to the traditional models of serial relationships in the supply chain, functional/silo orientation and total internal focus.
As the challenge shifts to establishing presence and market share, organizations move from a state of adoption to adaptation. The new focus is on building appropriate and unique business models, with emphasis on redesigning existing processes and systems. Successful organizations are acquiring and integrating new skill sets, and collaborating up and down the supply chain. Companies are beginning to re-examine their value propositions, determine their core competencies, and practice creative destruction by eliminating incremental extensions and delivering radically different consumer-focused products and services. Traditional relationships are blurring as organizations form temporary, strategic and project-based relationships around tasks, capabilities and infrastructure.
The greatest benefits of e-business are not achieved, however, until companies synchronize across all channels. That is, until they sell to and service consumers across distribution channels; integrate content and commerce to truly sell product contextually; and collaborate with suppliers to drive reduced cycle times and costs. In this stage, relationships across the supply complex are networked. Business is transacted in real time, with fewer infrastructure requirements. Even companies previously considered competitors work together in new ways. Established manufacturing and wholesaling organizations focus on reinvention and external intra-enterprise optimization.
NAVIGATING THE SWELLS
Initially, companies should work with customers and suppliers to understand where friction points in the supply chain exist, and then discover how e-commerce can help ease those friction pointsótypically found in product development, inventory and sourcing. A great example of Internet-based sourcing is Wolverine Worldwide, which has a tracking system for all production and sourcing, with visibility across the supply chain to keep the company informed about where things are in the pipeline.
One of the challenges for many smaller brands is trying to match the inventory management capabilities of the mega-brands in vendor-managed inventory, tailored assortments and flexible replenishment. These companies might research ways to apply Internet capabilities to help provide those types of services at the mega-brand level.
Riding the Internet wave places demands on a companyís most important resourceópeople. The second step, therefore, is to define an appropriate organizational structure and corresponding job descriptions. The new organization should be designed to negotiate new ways of doing business with retail customers and trading partners, create cross-channel rewards systems, and integrate traditional retail skills into a Web-enabled world.
Companies will waste a lot of energy if everyone is not moving with the current of change. They must, therefore, focus and align resources as they search for solutions. A key imperative is to get people working on the same team, in the same room, on the same page.
Another consideration is the amount of commitment being brought to the effort. Many sporting goods companies have made a full-time commitment to the front endóbringing in and dedicating resources to the consumer connection aspects of the business, such as Web site design or consumer interaction management. But the same companies are only making a part-time commitment to the supply chain or back-end elements of e-commerce.
WAXING YOUR BOARD
The third step is to build the information technology infrastructure necessary to support these relationships. There is no question that technology is at the core of the trend toward e-businessóit is the enabler. With the growing list of hardware, software and design vendors entering the e-commerce space, the available options are changing daily. Before companies can drop down the face of the wave, they must make sure their boards are waxed and ready to go.
Before Wolverine could develop its Internet-based sourcing tracking tool, it established a fundamental backbone across its enterprise that enabled visibility and information sharing with trading partners.
Supply chain planning and execution systems, specific point solutions, product development, and warehouse management must be examined and implemented as a foundation to enable collaboration across organizations.
HANG TEN
Utilizing the power of the Internet will lead to innovative and modern solutions for businesses willing to invest the necessary resources. Companies should enlist customers and suppliers to discuss any opportunities for change. They must then decide which e-commerce applications will assist in their efforts and ìbury the inside rail.î With focused and aligned resources, and strong IT backbones, companies will be able to execute in a collaborative environment.
The surf is up. You can either catch and ride the Internet wave into the future, or you can be caught by it and dashed on the rocks.
Colin Mcgranahan is a manager in Kurt Salmon Associates' Strategy Group and is the marketing dirctor for KSA's Athletic Leisure practice. He is a contributor to various industry journals and is a speaker at major industry events.