Where's The Money In e-Business? Yes, You can make and save money Through EBusiness. "Where?" 15 the $64,000 Question that individual companies and on-line Marketplaces are struggling with. Here are some Clues about that Location - Industry Overview

Automotive Design & Production, Dec, 2001 by Lawrence S. Gould

We know that eBusiness' easy access to customers worldwide helps both buyers and sellers easily identify new business opportunities, availability, and pricing. This, according to researchers, typically increases revenues 5% to 10%, while reducing sales and marketing expenses 2% to 10%.

We also know that eBusiness' automated approval processes greatly limit unauthorized purchasing ("rogue buying"). This is significant because rogue buying can constitute as much as 45% of indirect corporate spending; limiting such buying can increase revenues by 20% to 35% for approved suppliers. For component and commodity suppliers, on-line automated purchasing systems can slash the cost to process purchase orders (PO) by 90% or more, as well as halve average order cycle times.

Shortening the order-to-delivery process in and of itself can lead to reduced inventory in support of customer demand. Considering that about $50 billion worth of new cars--60 days of inventory--are sitting on lots in North America alone, says Ernest Miller, head of the Adaptive Manufacturing/operations Solution of Cap Gemini Ernst Young U.S. (Cleveland, OH), reducing that inventory by 25% would free up significant money throughout the supply chain.

However, the real money to be made in eBusiness might be as much from "soft" return on investment (ROI) measures as the hard, quantitative measures, admits John Moore, vice president and general manager of Automation Research Corp. (Dedham, MA). And one of those soft measures is better quality automotive designs--"something that connects better with the public and that is cheaper to build," says Moore. "Remember, a lot of costs are determined in the design phase."

The following are some other business-to-business (B2B) areas providing monetary savings. Warning: Not all of these areas are necessarily good for all automotive participants.

The money in auctions

eBay brought on-line, real-time auctions to the masses. Many people who follow this activity estimate that B2B auction sales will be a sizable chunk of overall B2B eCommerce. Why? On-line auctions generally reduce the time spent in purchasing negotiations, and they open the market for both buyers and sellers. Also, the real-time pricing in B2B auctions nicely replaces conventional buying/selling at fixed, pre-determined prices. This one capability--dynamically pricing goods based on the market's immediate supply and demand--lets both buyers and sellers increase profits and improve margins; sellers, in particular, can liquidate obsolete and excess inventory.

Two types of on-line auctions predominate: forward auctions, where suppliers auction excess inventory and receive market price for surplus and reverse auctions, where buyers electronic requests for quotation (eRFQ) for goods and 'services, and suppliers bid for, business on-line.

On-line auctions and their benefits are enticing. In actuality, key suppliers with established relationships are not about to go away because of them, though. Nor will the Internet and on-line auctions stop new business relationships from developing. In fact, auction or not, Moore points out that the amount of "strategic" goods bought over the Internet is "surprisingly pretty small." That's not true when buying indirect, commodity-type items

Reverse auctions can become a vicious exercise in diminishing returns. Reverse auctions can capture some savings not available during conventional negotiations and bidding, "but you quickly get to where you've auctioned away any excess 'profit,"' admits Miller.

The Money In Collaboration

The Internet's ability to exchange information and documents will yield--and has yielded--large dollar savings through collaborative product design (CPD). CPD thrives on the monetary savings that come from reducing the number of engineering hours required to create a new product. This involves sharing data more effectively to eliminate the rework associated with re-entering data, redrawing drawings, and doing work multiple times when it crosses boundaries (whether between internal departments or entire companies). The ideal result: A reduction in the overall cost of a project, especially one that comprises several suppliers.

Time is the obvious savings here, but two other variables factor into the measure of productivity, explains Miller. "One is directly reducing the quantity of whatever is going into the processes. Second is reducing the skill level required to do those processes--going from professionals to craftsman to workers." Collaboration, he notes, affects both of those variables. (Proof: As CAD/CAM systems improved with such features as embedded intelligence, companies are able to do some of their work with less-expert engineers.)

CPD over the Internet can in fact pay for itself in one fell swoop, thereby justifying an entire eBusiness operation. It can help minimize tooling mistakes resulting from awarding a tooling contract based on an old version of a product design. "A mistake like that can cost millions of dollars," points out Randy Barba, partner at the Automotive Industry Group for Accenture.