Case Examples: eManufacturing Benefits

 

United Technologies is a large US manufacturing company operating in several areas, including elevators and aerospace. United is using electronic auctions to buy from its suppliers component such as electronic circuit boards. The company uses the Internet to request suppliers to make bids for the supply of a component. Selected suppliers submit bids during a predefined time interval, say one hour, and the winner is the one that comes up with the lowest price. The bidding process has been in operation since 1997 and is used with pre-qualified suppliers for commodity products, including motors, wire, plastic fabrications and electronic parts. Typically purchases of such items account for about one quarter of the amount United Technologies spends each year on all bought-in goods and services.

Over several years, United has made savings of US$181 million through on-line auctions, achieving 25% price reductions on average.

General Electric (GE) is another example of an industrial company reporting benefits from use of the Internet. GE expects savings from its efforts to total US$1.6 billion pre-tax in 2001. Savings will come from conducting nearly US$14 billion in web-based auctions and from digitising GE work processes. In addition to these cost savings, GE expects sales over the Internet to accelerate to more than US$15 billion in 2001. GE has identified 20 to 30 per cent cost-out opportunities by e-enabling its manufacturing operations.

GE expects e-business to contribute 10 cents in earnings-per-share growth in 2001. In 2001, GE also expects to realise US$1 billion in operating margin as a result of its e-business efforts.

The above demonstrate that tangible benefits can be derived from application of e-business technologies, but the key issue is identifying the areas where benefits can be achieved. As with all investments this means undertaking a cost-benefit analysis and preparing a business case for investment. This matter is addressed in the publication "E-business Strategy: Case Studies, Benefits and Implementation".

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