From CBIA News, June 2001

The power of e-business

Tap it for commerce, customization and information sharing

By Chris Amorosino

Free-lance writer in Unionville

Although many businesses are focusing on e-commerce, there are other types of e-business that small companies are finding beneficial. Businesses often confuse e-commerce and e-business, according to Terri C. Albert, Ph.D., assistant professor at the University of Hartford’s Barney School of Business. E-commerce, a subset of e-business, is buying and selling over the Internet. E-business is the broader term meaning conducting any business functions or processes over the Internet. 

A seamless supply chain

Mark Nemeth, president of Jonal Laboratories in Meriden, a job shop and manufacturer that serves “original equipment manufacturers” (OEMs) in the aerospace industry, is most excited about e-business’s great potential for customization and increased information sharing between customer and supplier.

For example, suppose a customer needs your materials on their shop floor. Under the old business model, the customer’s shop floor communicates to its purchasing department, not only describing the current need, but also forecasting years into the future. The purchasing department takes only a limited amount of that information and transmits it to you, the materials provider. 

Under the new e-business model, the shop floor might link directly to you and the purchasing department via the Inter-net. You become much more informed and in tune with your customer’s future needs. The entire supply chain becomes more efficient, costs are cut, and lead time decreases dramatically. 

“Using the Internet this way makes suppliers and customers full partners. A seamless supply chain would reduce costs for everybody,” Nemeth says.

A daily e-auction

Chip Simplicio, a manager of e-business for East Hartford’s Pratt & Whitney, says his company uses the Internet to create a better linkage with qualified suppliers. In a program called Aero-offer, Pratt & Whitney conducts a daily reverse auction. Four hours each day the company electronically provides screened vendors access to a list of parts the company wants to buy. Vendors log on to learn how many parts are needed, what condition the parts must be in, when they’re needed, and other essential information. Vendors with parts to sell supply the pedigree (paperwork that documents the parts’ history) and the asking price. 

“It’s a way for us to connect with the smaller brokers and suppliers. It allows us to meet our customer’s requirements in a very efficient manner. And, it allows a small business to work with a large corporation that they might not normally get to work with,” Simplicio says.

Another Pratt & Whitney Web-based initiative, E-spares, allows brokers and vendors to purchase new and used materials from the Pratt & Whitney warehouse. Every aspect of E-spares and Aero-offer, including the actual sale, happens on the Internet. 

“The beautiful thing is that we don’t care how big you are. We don’t care if you’re United or Bob’s Airlines or Bob’s Fix-it Shop. It’s a free and open market,” says Simplicio.

Buyer — and seller — beware

As with any type of business transaction, you need to consider all of the ramifications as well as the costs of entering into an e-business agreement. 

Tom Guerra, CBIA’s director of product development, points out that while online reverse auctions have saved some businesses money, they may not be right for everyone. He advises carefully looking at all aspects of the purchase or sale. 

Purchasers, for example, should take into account the costs of transporting the item and incorporating it into their own production processes, as well as the trust associated with long-time vendor relationships. When you add up all those things, he says, “the cost of the reverse-auction process may actually exceed the present cost of doing business.” 

“Suppliers,” he says, “should accurately determine the unit cost of the item they’re selling, including the cost of any retooling that might be needed and their absolute, bottom-line sales price, prior to an auction, to prevent committing to a losing business proposition.”

Guerra adds that there is certainly value in looking into e-business. “E-business is here to stay. And under the right circumstances, it does offer a lot of potential.” 

sidebar: B2B e-commerce checklist

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