ebusiness in the Forest Products Industry:
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1 ebusiness in the Forest Products Industry: A Comparison of the United States & Canada Richard Vlosky Associate Professor Forest Products Marketing Olivian Pitis Marketing Analyst
2 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.
3 Business-to-business ecommerce will grow tremendously in the next several years, bringing significant change to most industries. In 1999, global business-to-business ecommerce was $149 billion and is projected to be $7.3 trillion by 2004 (Gartner Group). Increasing competition and globalization are two factors fueling ecommerce growth.
4 A survey of senior executives of U.S. based businesses with revenues of at least $1 billion showed 87 percent of the companies now use the Internet for business purposes (Deloitte & Touche 1998). Of these, 98 percent use the Internet to provide information about their business and 69 percent reportedly sell products or services via the Internet.
5 The Study In 1998, ebusiness was researched in the context of the forest products industry in the United States and Canada. Both solid and pulp/paper companies were surveyed. This presentation is on the solid wood industry.
6 Objectives Examine the current and future uses of ebusiness in the solid wood industry. Identify how the industry is investing in and leveraging ebusiness. Compare the United States & Canada.
7 Results All Respondents
8 Responses by Geographic Region (overall response rate=18%) Central Canada 1 company.05% of respondents West Canada 1 5 companies 7% of respondents East Canada 22 companies 1 0% of respondents North/Central US 36 companies 1 7% of respondents West US 34 companies 1 6% of respondents Northeast US 35 companies 1 7% of respondents South US 64 companies 30% of respondents
9 Respondent Major Product Categories - Pulp and Paper Market pulp Printing paper Specialty paper Packaging products Office/commercial paper 12% 10% 9% 9% 8% 11% 18% 23% 29% US 38% Canada 0% 10% 20% 30% 40% 50% Percent of total respondents from each country (multiple responses possible)
10 Lumber Plywood Particleboard OSB Treated products Engineered lumber Respondent Major Product Categories - Solid Wood 20% 21% 10% 17% 8% 13% 12% 4% 8% 13% US 74% 69% Canada 0% 20% 40% 60% 80% 100% Percent of total respondents from each country (multiple responses possible)
11 Percent of Respondents by Sales Category 100% All Respondents Currently Use the Internet (1998) by Company Size 80% 60% 40% 43% 53% 53% 38% 64% 20% 24% 0% Less Than $10 Mill. $50-$99 Million $500-$999 Mill. $10-$49 Million $100-$499 Mill. >$1 Billion
12 Percent of Respondents by Sales Category All Respondents Planned Use of the Internet in the Next Year (1999) By Company Size 100% 80% 82% 100% 60% 58% 60% 56% 40% 20% 19% 0% Less Than $10 Mill. $50-$99 Million $500-$999 Mill. $10-$49 Million $100-$499 Mill. >$1 Billion
13 Results United States & Canada Solid Wood Manufacturers
14 Respondent Distribution by 1997 Sales Revenue US (n=142) Canada (n=38) Less than $10 Mill. $10-$49 Million $50-$99 Million $100-$249 Million $250-$499 Million $500 Million - $1 Bill. 7% 4% 8% 5% 4% 17% 18% 17% 25% 30% 29% 36% 0% 10% 20% 30% 40% Percentage of respondents from each country
15 Distribution of Respondent Companies by Spending in Information Technologies in 1997 US (n=142) Canada (n=38) Less than $1 Million 86% 97% $1-$9 Million 2% 14% $10-$49 Million 1% 0% 0% 20% 40% 60% 80% 100% 120% Percentage of respondents from each country
16 Perceived Benefits of Reaching Customers via the Internet Scale: 1=strongly disagree to 5=strongly agree US (n=142) Canada (n=38) is a competitive advantage will attract new customers will make the company more responsive to customers
17 Perceived Benefits of Reaching Customers via the Internet Scale: 1=strongly disagree to 5=strongly agree US (n=142) Canada (n=38) * is a superior way of doing business *will increase customer retention will increase shareholder value will lower SG&A costs * - difference is statistically significant for alpha=5%
18 Internet Capabilities in 1998? US Canada No 46% Yes 54% No 27% Yes 73% Percentage of respondents from each country
19 If Not, Plan Internet Capabilities in the Future? US Canada Yes 34% No 31% No 66% Yes 69% Percentage of respondents from each country
20 When Internet Capabilities Were First Developed 1998 US (n=76) 31% Canada (n=28) 56% % 32% % 22% % 6% % 9% 0% 10% 20% 30% 40% 50% 60% 70% Percentage of respondents from each country
21 When Extranet Capabilities Were First Developed Not Extranet capable and earlier 6% 13% 2% 0% 3% 0% 2% 6% US (n=76) Canada (n=28) 81% 87% 0% 20% 40% 60% 80% 100% Percentage of respondents from each country
22 Investment Made to Date on Internet/Extranet Applications Less than $10,000 $10,000-$49,999 US (n=76) 21% 31% Canada (n=28) 56% 67% $50,000-$99,999 $100,000-$249,999 $250,000-$1 Million 4% 6% 4% 6% 4% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% Percentage of respondents from each country
23 Reason for Implementing Internet and/or Extranet Capabilities Scale: 1=strongly disagree to 5=strongly agree part of corporate strategy retain customers US (n=76) Canada (n=28) customer request increase accuracy of data reduce errors
24 Reason for Implementing Internet and/or Extranet Capabilities Scale: 1=strongly disagree to 5=strongly agree US (n=76) Canada (n=28) * reduce cycle time create a cost saving implement JIT inventory management improve cash flow * difference is statistically significant for alpha=5%
25 ebusiness Applications: 1998 and Planned in 1999 Customer Contacts Marketing Vendor Contacts Product/Price Inquiry Product Promotion Sales Purchases Shipping Notices Order Tracking Order Status Inventory Mgt. Internet EDI Logistics US (n=142) 18% 16% 21% 20% 18% 18% 11% 15% 8% 14% 13% 13% 18% 13% 11% 13% 11% 9% 8% 24% 29% 29% 33% 32% Canada (n=38) 46% 51% 0% 10% 20% 30% 40% 50% 60% Percentage of respondents from each country
26 Is your company where it wants to be in implementing Internet capabilities? US Canada No 62% Yes 38% No 50% Yes 50% Percentage of respondents from each country
27 If your company has an Internet capability, have the desired benefits been received? US Canada Yes 30% Yes 36% No 70% No 64% Percentage of respondents from each country
28 Impediments to Implementing Internet and/or Extranet Capabilities Scale: 1=strongly disagree to 5=strongly agree *lack of skilled IT staff lack of an understanding of benefits expense of development * inadequate application tools * lack of technology infrastructure expense of hardware and software customer resistance US (n=76) Canada (n=28) * difference is statistically significant for alpha=5%
29 The Internet Offers our Company: Scale: 1=strongly disagree to 5=strongly agree greater exposure to potential customers increased access to industry information timeliness of information exchange greater access to my company enhanced image of the organization increased sales greater access to vendors *increased value to my customers US (n=76) Canada (n=28) * difference is statistically significant for alpha=5%
30 Concerns about Using the Internet S cale: 1 =not a concern to 5=is a major concern security of sensitive info. training of personnel need to change procedures cost availability of technical resources US (n=76) Canada (n=28) speed of access
31 Concerns about Using the Internet Scale: 1=not a concern to 5=is a major concern competition can too easily track US (n=76) Canada (n=28) loss of contact with customers less contact from the sales force *it won't be profitable need to restructure the sales dept. *it is a passing fad *difference is statistically significant for alpha=5%
32 All Respondents Specific Examples of How Respondents Benefit From ebusiness Faster response to customer inquiries. We have obtained new customers. Customers can look up order and shipment status on-line reducing phone calls to reps and freeing them up to handle orders rather than inquiries. We have generated far more sales than could have been generated without an Internet presence. Faster, easier purchase of needed items from vendors.
33 All Respondents Specific Examples of How Respondents Benefit From ebusiness Faster response to customer inquiries. We have obtained new customers. Customers can look up order and shipment status on-line reducing phone calls to reps and freeing them up to handle orders rather than inquiries. We have generated far more sales than could have been generated without an Internet presence. Faster, easier purchase of needed items from vendors.
34 All Respondents Specific Examples of How Respondents Benefit From ebusiness We have reduced inventory by broadcasting available stock to customers via the Internet. Better inventory control because of better information on inbound product locations and ETAs. We increased market share in large accounts by managing customer inventories on-line.
35 All Respondents Specific Examples of How Respondents Benefit From ebusiness We put pictures on the Internet showing how we make our products better. Customers 1,000 miles away can take a "virtual tour" of our company and see who they are dealing with. Savings on overseas long distance charges. Shorter lead-time.
36 Summary No significant differences in perceived benefits of reaching customers via the Internet. No significant differences in reasons for Internet implementation. 35% more Canadian respondents were Internet capable in Of those not Internet capable in 1998, 102% more Canadian respondents planned Internet capability in Canadian respondents were further along in where they wanted to be in Internet implementation. More Canadian respondents feel they have received desired benefits from Internet implementation.
37 Summary Overall, respondents are not using the Internet for "higher order" business practices. U.S respondents are using the Internet for "lower order" applications with twice the frequency as Canadian respondents. Canadian respondents perceive greater Internet advantages to their company. Canadian respondents perceive fewer impediments to implementation. Canadian respondents have fewer concerns about using the Internet.
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