As e-commerce continues to change the business environment, manufacturers are increasingly questioning how they should transform their traditional brick-and-mortar business operations into e-businesses.

Market pressures, competition, the degree to which technology is readily adaptable, and other issues are affecting how organizations within different segments of the manufacturing industry are developing and implementing e-commerce objectives and strategies, and achieving results.

To measure the pace at which the manufacturing industry is transforming itself, the National Association of Manufacturers (NAM), The Manufacturing Institute, and Ernst & Young jointly developed the "e-Commerce Trends Index," which examines trends in manufacturing overall, as well as in industry segments.

Dan Akman, the NAM assistant vice president of e-business and marketing, sees four key functions of e-commerce that are already impacting the way corporations do business today and will in the future: keeping the client happy, shortening the approval time, creating value through integration, and company collaboration in product development.

Keeping the client happy

Client Relationship Management (CRM) offers companies the opportunity, on the demand side, to better serve their customers by gathering information from the various interaction points they have with their clients. This information allows manufacturers to better understand their customers.

"This way everyone in your organization knows what is going on with a particular customer," said Akman.

With CRM, a firm gets to know its best customers better, and then can put its resources into serving them.

"It makes sure you give attention to the 20 percent of your customers that give you 80 percent of your business," said Akman. "Then you can use alternative strategies to help serve the other 80 percent of your customers who give you 20 percent of your business and cause you to spend the bulk of your money to service them."

Despite the many software packages that enable e-commerce transactions, the best "package" is plain old Internet e-mail, according to Akman.

"E-Mail is the number one business tool out there," he said. "These packages take e-commerce to the next level, but by using e-mail, your company can accomplish things for starters. Just by having your products online, for example, it is easier for your customers to get answers 24 hours a day."

Akman points out that larger companies are taking their supply chains online.

"They have a vision of an end-to-end communication. They are starting to set rules that indicate from what vendors they want to buy online. Those vendors who are e-enabled are going to stand out."

Companies are also able to sell internationally and reach small- and medium-sized companies that they previously could not afford to contact.

"The amount of business these small firms generated was too small to justify the cost of the sales call," added Akman. "With the Internet, you can serve all of those customers."

Shortening the approval time

Procurement is another area where companies can take advantage of e-commerce. Thanks to the Internet and software packages, companies both large and small can readily speed up and streamline the approval process.

"Up until recently, e-commerce has only met a company's ability to use the Internet to buy materials, such as supplies," said Akman. "Yet, one of the biggest culprits for wasting money was the issuing of purchase orders for office supplies and maintenance repairs. If a company can find these things online, they can save money and cut a better deal with a few partners."

Many companies today are starting to use the Internet for the direct purchase of goods.

"Some of these companies are buying commodity products via the Internet on free market auctions. There are some individual industry sectors that are doing their own reverse auctions," said Akman.

Travel service is becoming another area where companies can save money by going online.

"While most companies, both large and small, have been buying and selling over the Internet for several years, this type of activity still makes up a small amount of what they are doing," said Akman. "Most are gearing up to do much more."

Creating value through integration

Ultimately, all this is leading to what people refer to as a "value-network" or "value-net."

Where companies once would forecast demand, order goods that matched the forecast, and then push these products through distribution and the customer, just the opposite is happening.

"Companies are gauging their demand from the customer and distributor as quickly as possible," said Akman.

Companies collaborate in product development

While using the Internet as a way to handle business transactions is a great idea, the Web is also bringing companies together in the development of products.

"Instead of just looking at the Internet as a tool for purely transactions, companies are now using it as a way to collaborate in product development," said Akman. "They have found that its use goes across international boundaries. People can put together projects and product designs quicker."

For instance, by using the Internet, an original equipment manufacturer can more easily involve its customer in the beginning of product design. By getting initial input, the end result is a better product that will be easier to manufacture.