Everyone wants to be a millionaire these days. We even have game shows where celebrity talk show hosts drill us with trivia questions. The lucky person to answer all of them correctly wins the million. Not to mention the show where 16 total strangers voluntarily strand themselves on a desert island and are forced to eat beetle larvae and rats to survive. Last person on the island wins--another million dollars!
Now, retailers may also see millions come their way--and there is nothing trivial or distasteful about it! In today's technology-driven economy, retailers are becoming aware of new solutions that have an immediate impact on their bottom lines. Rather than saving pennies, retailers can literally save millions by effectively integrating today's technology with advanced networking capabilities.
E-business processes and advanced supply-chain management are the driving forces behind these e-marketplaces, the new term for on-line marketplaces or portals. Think of how your orders are handled today; there's probably a lot of
paper involved. You don't always know where products are in the supply chain between manufacturer, distribution center and customer. You may have too many items on backorder, which results in lost sales. Your bar coding system problably doesn't match that of your manufacturers, so extra data entry time is required. And your administrative staff spends a lot of extra time handling faxed invoices from business partners, re-keying the information into your various business systems.
These inefficiencies are a reality for most retailers today, and many are beginning to question how to improve their systems. A recent survey of retailers showed fewer than 25% of transactions are electronic, but this is expected to rise to more than 50% within two years. The changes going on now in retailing are as far-reaching and obvious as the change from black and white to color TVs in the 1960s.
E-business processes are a way for retailers to automate the supply chain--including ordering, processing, shipping, and accounts receivable and payable. When retailers employ these new software tools, the results can be dramatic.
Let me give you a concrete example. An internal study showed a large home improvement retailer handled 62,000 purchase orders last year from vendors and suppliers and wrote out 11,500 checks. The company estimated staff time costs at about $535,000. By switching to electronic processing, the company will cut that cost in half, to about $260,000. Cost to install the e-business solution? Less than $25,000. The electronic process paid for itself within the first six weeks it was utilized.
That's not all. Back-end integration can track products in real time. This way clerks, shippers and manufacturers know what products are available, where they are in the supply chain and what products are selling the best on any particular day. This information can translate into daily reports on best-selling products, opportunities for cross-selling or upselling of merchandise, or targeting bottlenecks for elimination.
As retailers grasp the savings available, the decision to switch to electronic processes becomes an easy one. Eventually, e-business will become the norm.
The world is heading toward e-marketplaces because they are the most efficient model for multiple buyers and sellers. They offer cost advantages and allow all business partners to participate. These marketplaces establish user communities on the Web to dynamically exchange goods and services, share information and streamline the commerce process.
By 2003, Dataquest estimates e-marketplaces will move $1.25 trillion in goods and services. Bear Stearns and Co. predicts those who participate in on-line marketplaces will save $60 billion by reducing costs.
For retailers used to saving a few pennies per product by switching suppliers or shippers, these kinds of cost savings are significant. Overall, the benefits of e-business processes are increased efficiency, better customer service, increased market share and enhanced competitiveness. And yes, Regis, that is my final answer.
