I am often asked by packaging industry executives how they can exploit the Internet as a source of revenue generation because, when they present a case for integrating Internet in their business process, this is the first question that is asked of them. There is no simple answer to this question because it depends on such factors as type of business/products/customers that a company has, typical order size, degree of customization required, and nature of relationships with customers.
Since most companies in the packaging industry have not made e-commerce a significant part of their business activities yet, it is difficult to say what the potential savings can be and how much of their business can be moved online. There is still too little information available to us. However, there is some learning to be had from companies in other industries that have taken a more aggressive approach to making the Internet a tool to find new customers, improve customer relationships, and reduce the cost of transactions.
Some of the companies in other industries that have realized huge savings by exploiting the Internet in their core business are Cisco Systems, Oracle, General Electric, and Dana Corporation. Some of these companies actually do a lot more customization than we do in the packaging industry. Most of them also have long-term relationships with their customers and have to regularly worry about proprietary information. Thus, these companies have quite a few similarities with us.
Why not the packaging industry?
The key question that packaging industry executives should ask is, “If other industries like ours can take this approach, then what is stopping us from doing it?” My discussions so far lead me to believe that the delay in implementing these initiatives is being caused by both packaging industry executives and providers of IT solutions. For instance, one of the areas with potential for cost reduction is package design and taking it to manufacturing. With the number of teams and steps involved in the process, some of which may not be in the same physical location, the Internet provides a perfect opportunity to move these functions online so that different participants in the process can work remotely.
The problem is that packaging industry has a process in place for doing this today, and there is resistance to change it, as there is for any change. The problem gets compounded by the fact that there is no simple IT solution available today for us to do it. Until the day such solutions become as simple as entering your user ID and password to access the design system, companies will not be receptive to investing thousands of dollars in developing proprietary systems.
Why do some companies still think it is wise to make huge investments and develop proprietary systems? In my opinion, this has been prompted by three considerations: these companies recognize that inefficiencies in business processes can be minimized by use of new tools; secondly, they believe in using information technology as a competitive weapon; and finally, they want to keep pace with the changes in business environment.
While I have talked about these issues in my previous columns, let me reemphasize why proactively driving inefficiencies out of the business processes should be every executive’s priority. For centuries our economic system was built on making profits simply because somebody else could not find information fast enough – for instance, information on who the suppliers are, what prices are they willing to offer, does someone have excess inventory to unload, and how soon is it possible to get a large enough number of suppliers to compete for a piece of business to receive a lower price? The rate at which information flows today (and this is just the beginning) has made it so much easier to get these tasks done within a matter of hours at practically no cost.
Our goal of using the net should not be limited to revenue generation. It should actually encompass higher sales, lower costs, and better relationships (which eventually translate into higher sales and lower costs).