Internet is no substitute for know-how

Manufacturing has never been a glamorous buisness. Yet there once was a time, at least, when the actions of the Fords, IBMs and Dows of the world fueled the editorial fires of the Financial Post, Wall Street Journal and other top business publications.

How times have changed.

Today news about software-, e-commerce- and Internet-based business and companies dominate the airwaves and print media. In this financial version of Hollywood-style who’s hot/who’s not ratings game, Yahoo, Red Hat and Corel are prime time; while Boeing and Bombardier are somewhere off-Broadway.

Little-known tech companies whose stock, together with a dime, would have got you a cup of coffee a year ago, are giving new meaning to the terms hype and hyper-capitalized. No one knows if, when or how many of these companies will ever turn a profit, but it matters little at a time when investor analysis of price-to-earnings ratio has been replaced with price-to-expectation speculation. Even the term “technology”, which once meant the broad application of the sciences for practical uses, has been co-opted by the info-tech golden boys and media to mean exclusively “virtual@everything.com”.

With the launch of Cindy Macdonald’s new “Web Watching” column, as well as a feature article on e-commerce this month, we too have decided to devote more coverage to the e-world. The reason is a compelling one: Undeniably, the Internet and e-business are transforming the nature of manufacturing, and by default the plastics industry. To call the Internet all hype is to beckon for egg on your face.

Think about it: Through a PC (or television) the Internet essentially puts a store front (or two), stocked with a limitless inventory of products, services and information, in every house and office in the world. Even at this rudimentary stage of development, the growth of e-commerce has been phenomenal. The amount of business-to-business e-commerce in Japan alone was over $70 billion in 1998. While North America leads in Internet usage, with 479 regular Internet users per 1000 people, the rest of the world is quickly catching up. The number of online houses in Europe will triple over the next five years, according to one estimate.

Nor will the effects of the Internet be limited to changing the way people buy stuff. Already the Internet and e-commerce have changed manufacturing. How? Because suddenly, it is possible for suppliers with better or cheaper products to compete in a global market. And the change is not virtual but real, measurable: In 1998 companies farmed out 15 percent of all manufacturing. In 2000 companies will outsource more than 40 percent, according to one estimate.

There are several implications for processors from all this.

One, ready or not, you are going to have to invest in and master the specifics of e-business.

Two, this investment will be quite high; more than you are willing to pay.

Three, creating a shoddily conceived and maintained website will do your business more harm than good.

Finally and most important of all, the downward pull on pricing brought about by Internet-spurred commerce will make it even more imperative that you possess the good old-fashioned shop floor know-how and do all the basics right all the time.

This, then, is the glossed-over truth about the Internet. Like any service, for example banking, it creates nothing. It merely facilitates creativity, innovation and good business practices. Ironically, tapping the full potential of the Internet will still depend on how well your team designs parts, cuts molds and runs lights-out on the floor.

e-mail: mlegault@southam.ca