ebusiness in the forest products industry opportunities ...ebusiness in the forest products industry...
TRANSCRIPT
eBusiness in the Forest Products IndustryOpportunities and Realities
Richard Vlosky Director & Professor
Louisiana Forest Products Development CenterSchool of Renewable Natural Resources
Louisiana State University Agricultural CenterBaton Rouge, Louisiana USA
May 3, 2006
Forestry On The Grow Conference and Expo
What am I Going to Talk About?
• Internet Structures
How Companies Can Get Involved•
Some Final Thoughts•
eBusiness in the Forest Sector•• eBusiness and eCommerce
Top 10 Countries-Internet Users (2006)
60.7%618.2Top 10 Countries2.2%15.5%22.3Russia2.5%42.3%25.6France2.8%49.3%28.9Italy3.2%65.2%32.6South Korea3.7%63.1%37.8United Kingdom3.9%3.6%39.2India4.6%57.0%47.1Germany7.7%60.9%78.1Japan
10.1%7.9%103.0China20.0%68.7%203.6United States
Percent ofWorld Users
Percent ofPopulation
Users(Million)Country
Broad Internet Applications
• eCommunications (inter/intra)
• Sales and purchases (eCommerce)
• eBusiness (operations)
• Information source
eBusiness & eCommerce
eBusiness is the application of Internet-based technologies for conducting business.
It includes eCommerce, the actual transaction activities as well as other business oriented applications such as logistics, order entry, information sharing and transmission of information between exchange partners.
What is eBusiness?
First and foremost about business, not technology.
Technology facilitates eBusiness.
Challenge is managing the changes in business strategies and internal corporate processes.
Can include intra-company networks (intranets) and Internet linkages with customers or suppliers (extranets).
What is eBusiness?
eBusiness Technologies/Applications
SupplierSupplierSupplier CustomerCustomerCustomer
IT S
ophi
stic
atio
n
Point-to-Point (EDI, XML)
Extranets
eIntermedaries
Corporate web-sites
Phone/fax
eBusiness Timeline
• Changed the way of doing business
• InnovativeBusiness Models
“Commercial-ization” ofthe Internet
~1990
3rd party eMarket-places
~1993
Dot.comboom &
IPOs
~1998
Brick & Mortar
Industry owned
~1999
Dot.com“CRASH”
~2000
eBusiness rebounds
~2003
(Kallioranta & Vlosky 2005)(Kallioranta & Vlosky 2005)
~2005
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
SlopeSlopeofof
EnlightenmentEnlightenment
PlateauPlateauofof
ProfitabilityProfitability
““ee--BusinessBusiness””endsends
The Life Cycle of eBusinessThe Life Cycle of eBusiness
TroughTroughofof
DisillusionmentDisillusionment
Peak ofPeak ofInflatedInflated
ExpectationsExpectations
TechnologyTechnologyTriggerTrigger
(Forrester Group)(Forrester Group)
eCommerce Spending
• Business to Business (B2B) is 80% of total eCommerce• 2% of B2B transactions conducted on-line• Estimated worldwide B2B eCommerce:
$6.3$3.7Forrester Research
$3.2$2.1Goldman Sachs
$2.4$1.4eMarketer20042003
ALL AGREE ON CONTINUED GROWTH !
$Trillion US
Worldwide eCommerce Growth
2000 2001 2002 2003 20040
1
2
3
4
5
6
7
8
$US
Tril
lion
Asia Pacific
Latin America
Western Europe
North America
(Forrester Group, 2005)(Forrester Group, 2005)
Important Market Forces Affecting Business
• Pressure to reduce overall supply chain costs
• Pressure to compress total time to market/ cycle time
• Pressure to collaborate more effectivelywith trading partners
• Unstable/unpredictable demand for products /services
• Movement toward a more global marketplace
eBus
ines
s C
an R
educ
e Th
ese
Pres
sure
s
eBusiness Can ImpactAll Company Functions
Market ResearchFinanceDistributionInformation Systems
Back OfficeHuman Resource ManagementTechnology DevelopmentProcurement
Pre-SaleActivities Operations Outbound
Logistics
Marketingand
Sales
Post-Sale Service
InboundMaterialsLogistics
Key eBusiness Benefits• Lower inventory levels• Reduced uncertainty• Enhanced response to customer demands• Shortened product-to-market cycles• Optimized use of materials and processes
Intranets:Internalizing The Internet
Sales
Procurement
Production
R&D
MaintenanceHuman Resources
An Intranet
Inventory
Intranet-Internet Connectivity
CorporateHeadquarters
Intranets can host...
• product price lists• product specifications• customer databases• inventory records• supplier databases
• employee databases• employee newsletters• performance records• maintenance records• marketing schedules
Intranets can facilitate...• production scheduling• sales coordination• project management• regulatory compliance• ISO 9000 qualification• employee training• management decision making
Extranets:Connecting Exchange Partners
An Extranet(letting partners in… selectively! )
Your Customer or SupplierYour Customer or Supplier
Your CompanyYour Company
Extranets facilitate...
• collaboration between companies• training and support• communication with suppliers & customers• data Interchange• production/purchasing coordination• sales and purchases
What is it?
Access
Users
Information
The InternetThe information superhighway.
Open
Public
General
IntranetsThe use of
Internet technology within
a company or organization.
Private
Organization members
Proprietary
ExtranetsA network that
uses the Internet to link company
Intranets in order to enhance business-to-
business relationships.
By agreement only
Business partners
Selective
eBusiness andthe U.S. Forest Sector
As opposed to Business-to-Consumer (B2C)
Forest-Based Industriesare generally Business-to-Business
(B2B)
A Typical Forest Products Supply/Value Chain
Raw Materials-Timberland- Stumpage
Harvesting- Timbering- Transport- Loggingcontractor
Primary Processing- Pulpwood- Saw timber- Logs
Merchandising- Marketing- Sales
Secondary Processing- Remans- Treaters- Industrial- etc
SecondaryDistribution- Channels- Transport
Consumer-Builder-Remodeler-Retail
Merchandising- Marketing- Sales
Distribution- Channels- Transport
Information Interfaces
(Adapted from -TALPX 2000)
• Inventory management• Consistent supply• Search costs
Timber BuyerForester/Loggers
• Access to markets• Timberland management
Timber Owner
(Forest One 2000)
Even From the Forest to the Mill
Warehouse
Logistics
Possible eLinkages in the Supply Chain
Source(Buyer)
Deliver(Sales)
Planing
Drying
Sawing
Wood Supply SawmillCustomers
Orders + consumption
(VMI)
Consumption forecast
Consumption forecast
Consumption forecast
Consumption forecast
Orders
Order promises
Supply plan
Supply plan
Supply plan Supply plan
Supply plan
Jean-Marc Frayret, Ph.D.
Global Nature of the Industry
eCommerce Rank (%)
Sector
Ship. Value
($ Billion)(% of
Shipments)1 Transportation Eq. $639 46%
14 Paper $166 12%
LAST Wood Products $94 6%
Where is the U.S. Forest Products Industry ineBusiness Adoption?
US Census 2005
Forest Industry eBusiness
Time
Development Introduction Growth Maturity
(U.S. Census Bureau 2004; Vlosky 2000)
Manufacturing Industry in GeneralUS: eCommerce: 21% of total shipments
Pulp & PaperUS: 2.2% of eCommerce shipments
Solid WoodUS: 0.7% of eCommerce shipments
NEW Study-Methodology
Industry Sectors Sampled:
Forest Products Industry (FPI) – 250 wood products manufacturing (SIC 24)– 250 paper products manufacturing (SIC 26)
Non-Forest Products Industry (NFPI)– 250 chemical manufacturing (SIC 28)– 250 food manufacturing (SIC 20)
Kallioranta 2006
When eBusiness Was Adopted
0%
10%
20%
30%
40%
<1 1 2 3 4 5 6 7 8 9 10 >10
Per
cen
t of
res
pon
den
ts
Forest industry respondents (n=43) Non-forest industry respondents (n=45)
FPI:FPI:Mean = 4.7Std.Dev. = 2.5
NFPI:NFPI:Mean = 6.0Std.Dev. = 2.9
t-value: -2.129d.f.: 86pp--value: .036 Sig.value: .036 Sig.(2-tailed t-test)
Years ago since first adopted
Kallioranta 2006
Applications Adopted
35%15%43%85%Total (n=106)
* Significant at α=0.05; ** Significant at α=0.01;+ Assymp. Sig. (2-sided); a 0 cells (0%) have expected count less than 5
.004**.004**.935.017*.017*.243Significance+
1111d.f.
8.496.0075.7031.363Pearson Chi-Square
48%15%54%89%NFPI (n=54)
21%15%31%81%FPI (n=52)
P2P P2P aaeIntermediary eIntermediary aaExtranet Extranet aaWebsite Website aa
Application adopted by % of respondentsApplication adopted by % of respondents
Kallioranta 2006
Why?
• Reactive rather than proactive
• Not inclined to be lead adopter; generally, a wait -and -see posture
• Production-oriented culture
• Lower investment in IT research and development
• Not convinced eBusiness is relevant
• Lack of trained information technology staff
• Lack of application tools
Alien Concept
#1 Concern about Using the InternetU.S. Wood Products Industry
20051995
Exchange partner relationships
will suffer
Security
Security
Impediments toImplementing eBusiness
In the Forest Products Industry
Lack of skilled IT staff
Lack of an understanding of benefits
Expense of development
Expense of hardware and software
Factors Contributing to SuccessfulInternet Implementation in the Forest Products Industry
1) User involvement
2) Development of trust in using technology
3) Management support
4) User training
eBusiness Implementation/Success Matrix
- premature- inefficient- anxious- impulsive- inordinate costs- IS at risk- e-trust loss
- match between IS and strategic adoption
- optimal combination for success
- dinosaurs- traditionalists- survival at risk- resistant to change- denial - untapped resource
- high potential to lose corporate IS e-expertise
High
eAdoption(complexity
depth,strategic)
eKnowledge(depth, breadth)
HighLowLow
(Vlosky 2000)
Options for Involvement
eBusiness Applications-Something for Everyone!(U.S. forest products example)
Relative Frequency
Customer Contacts
Marketing
Vendor Contacts
Product PromotionProduct/Price Inquiry
Websites
Sales to CustomersPurchases from Suppliers
Internet EDIOrder Status
Shipping NoticesOrder Tracking
Inventory ManagementLogistics
Higher OrderApplications
Hemphill 2005
Manufacturers
Wholesalers
LogisticsProvider
Merchants
Dealers
Secondary Manufacturers
eIntermediaries Connect Buyers & Suppliers
DataExchange
Integration
Some Thoughts on eBusiness Strategy
Fit Market Environment
Fits OverallCo. Strategies Realistic
DistinctiveCompetencies Specific
Characteristicsof Good eBusiness
Strategies
MarketOriented
eBusiness Strategy Characteristics
What's the Bottom Line?
The emergence of cyberspace is a fundamentalforce that is transforming business and society.
Internet-based technologies offer revolutionary tools for business development and management.
eBusiness is one means for developingcompetitive advantage.
Companies that succeed will be ones that use the Internet as a complement to traditional ways of competing, not those that set their Internet initiatives apart from their established operations.
Porter 2006
What Does the Future Hold?
