Entech Electro Graphics

www.entechgroup.com.au

Executive Summary

Entech Electro Graphics is the graphic products arm of the Entech Group of Companies. It specialises in the design and manufacture of membrane switches and screen printed products for the electronics and manufacturing industries. It is based in Devon Park, South Australia and employs 35 full time staff.

In 1990, the company initiated Electronic Data Interchange (EDI) to exchange business data.  This technology was subsequently upgraded to more advanced web applications in response to client demands and market pressure.   E-commerce facilitated convenient communication with suppliers and customers leading to improved communication between business parties and shorter production process times.  A faster product delivery cycle provides the company with a competitive advantage over peers.

Entech recognises the importance of adequate security controls to support the increasing reliance on web-based business processes.  This was highlighted when the company received an email-transmitted virus that caused a loss in staff productivity, and more importantly, loss in communication with clients.  To prevent a recurrence of further security attacks, the company has implemented a firewall to control data inflow and outflow from the Internet and installed anti-virus software.  Data back-ups are conducted on a daily basis and the physical security of the server is also assured.

In addition to email communication and data transfer, the e-commerce initiative also included development of the company website. Through an e-portal on the website, customers can be linked to the Enterprise Resource Planning (ERP) software of the company and view the real time status of their orders. The company also utilises e-commerce in a variety of administrative transactions such as online banking, electronic payroll and payment to vendor invoices.

Additional revenue of $240,000 was gained in 2001 as a result of customer preference for e-commerce efficiency. Cost savings of $64,300 were achieved due to a reduction in staff time required to carry out engineering, communication and other business tasks.  The total investment in e-commerce infrastructure was $41,030.

Following the success of the current e-commerce system, Entech plans to upgrade its ERP software at the end of 2002.

The Business

Entech Electro Graphics is the graphic products arm of the Entech Group of companies. It is involved in the manufacture of membrane switches and screen printed products, membrane keyboard design and manufacture, graphic overlays and product marking. The company has been in operation for 15 years servicing the industrial electronics market.

Entech Electro Graphics is based in Devon Park, South Australia (SA) and employs 35 full time staff.

Getting Started

E-commerce was initiated in 1990 with the use of EDI to transmit information between customers and the Computer Aided Design (CAD) Bureau.  Entech sought to streamline communication processes between business parties.  The company also aimed to strengthen competitiveness by improving customer response time and enabling same day service.  To this effect, Entech recognised the need to upgrade from EDI to a more efficient system of transferring data.  The e-commerce strategy is now managed by Roger Kolodziej, Human Resources (HR) and manufacturing systems manager.

Entech conducted preliminary research by contacting hardware suppliers and consulting magazines.  The website is maintained by internal Information Technology (IT) staff.

E-Security

Entech recognised the importance of adequate security controls to support the increasing reliance on web-based business processes.  This issue was highlighted when the company received an email-transmitted virus that caused one day in downtime for each main user.  Another half day was spent rectifying corrupted data.  Although the company incurred some disruption to productivity, the most significant impact of the virus was in the loss of electronic communication with clients.  To prevent similar security attacks, Entech has installed anti-virus software on all terminals.  Company policy was also implemented to prohibit the downloading of executable (.exe) files from emails.

Data inflow and outflow from the Internet is controlled by a firewall.  This was implemented by internal IT staff and involved two to three days in researching suitable applications and one day for installation.  To minimise the impact on staff productivity and operations of data loss, company data is backed up every 6 hours by tape that is then stored in a fire safe.  Other data is backed up every 12 hours on a PC situated off-site.

Physical security of the server is provided through the installation of alarms and monitors.  The e-portal on the website is password protected for current customers. For internal operations, different levels of password access exist for different employees.

Current e-commerce strategy

Communication with customers and suppliers are often conducted through email. Customers previously forwarded a floppy disk containing the specification files, these are now forwarded to Entech via email (a wide range of data files are accepted - PDF, Corel, Freehand etc). Design and manufacturing data are promptly and reliably transmitted within the group as well as to customers via Radio transmission and ADSL.

Entech uses an Enterprise Resource Planning (ERP) software to support the co-ordination of different areas of operation.  The ERP can be viewed as an integration of the enterprise-wide information systems, providing a link between all of the company's business units including human resources, manufacturing, distribution and financials.  Through the ERP system, customers are able to access an e-portal on the company's website and make enquiries online with respect to the orders they have placed and other invoice information.  The Entech Group's Hong Kong office uses a Virtual Private Network (VPN) which allows Hong Kong staff to log onto the main network in Australia and access the local ERP system.

Certain administrative functions are also conducted online. These include online banking, payroll and electronic payment of vendor invoices. Over 90% of customers pay Entech electronically. Sales confirmations are often saved as a PDF image file and transmitted to the customer via email.

The company corresponds and places orders with some suppliers online, for example stationery. Entech also places orders with local couriers via their website which automatically generates the export information and labels needed for Customs clearance.

Sourcing materials has been simplified with online searches for specific products and item specifications. In the past, the process was time consuming and required the engineering department to contact a representative in the United States who in turn would contact the manufacturer of the product.

Revenue and Costs

* Note: Capital Expenditure is amortised over a four-year period

Financial Analysis

The e-commerce initiative allowed Entech Electro Graphics to streamline its production process and shorten product to market time. Additional revenue of $240,000 was achieved in 2001 from projects received as a result of customer preference for e-commerce efficiency. This has contributed $72,000 towards gross profit.

Cost savings amounted to $64,300 in 2001. The majority of these savings were due to time saved by operators in the engineering department ($40,000).   The availability of fast and convenient transmission of data eliminated the need to hire an extra employee to administer correspondence between business sites and for delivery to customers.

The purchasing department was also able to secure a cost reduction of $7,500 from access to an increased range of suppliers. Online research into quotes and material availability allowed Entech to assess a greater range of suppliers and make more informed decisions as to the most competitive prices, features and delivery times.

In the accounts departments, approximately one third of an employee's time is saved through electronic payments as opposed to manually printed and distributed cheques ($9,000).  Receipt of payments are also managed online which saves time spent in recording and physically banking cheques.

In the sales department, sales representatives saved five hours per week previously spent in handling customer enquiries ($7,800).  This is due to customers being able to obtain detailed product order and account information on the website as opposed to sales staff answering phone enquiries or faxing through information. 

The initial cost in setting up the e-commerce system was $41,030. The company allocated $4,000 to constructing its interactive website. This included integrating the website with the ERP system of the company to allow customers access to information regarding the status of their orders. An additional $4,000 was spent in conducting preliminary research prior to web development.   In setting up access to Broadband Internet, $1,500 was spent on installing an Asymmetric Digital Subscriber Line (ADSL) box while $10,500 was spent on hardware and upgrades required for installation of the broad spectrum radio link.   Other supporting infrastructure acquisitions amounted to $20,000. These were necessary to upgrade the company's systems for processing customer files because they were often different versions of the software that all need to be accommodated. 

Costs associated with e-security included installation of anti-virus software ($400) and staff time spent in researching and implementing a firewall ($630).

The ongoing cost of the e-commerce system totalled $28,258 in 2001.  The majority of this outlay was attributed to website hosting and systems maintenance, both conducted internally through IT personnel ($15,000).  Costs associated with the security system include purchase of back-up tapes and CDs ($1,500).   In addition, $10,258 was allocated towards amortisation of capital expenditure over a four-year period.

Non Financial Benefits

Email has assisted data transfer within the company as well as with suppliers. The production time is shortened because it expedites the process of sourcing materials from suppliers and the transfer of data between the company and other Entech related business. The faster delivery cycle provides a competitive advantage for the company.

The e-portal on the company website also improves customer satisfaction because the system provides customers with real time details of their orders, shipment and payment status. It can be accessed at anytime providing customers with a convenient way to monitor the production process.

Use of integrated, online systems in Entech, contributes to the company's image as a dynamic and leading edge business.   Successful use of e-commerce has provided a selling point to potential customers, particularly due to the enhanced customer service offering, such as online access to monitor production status.

Challenges

Entech encountered a breach of Internet security whereby the entire system was infected with a virus that was attached to an email.  As a result, the company experienced one day in downtime and another half day to rectify corrupted data.  Although operational productivity was affected, the more significant impact lay in the loss of communications with clients.  The company has since upgraded its security measures to ensure the risk of another disruption is minimised. 

Future

The success of the current e-commerce system in attracting additional business and improving customer satisfaction has provided the basis for the Entech's plans to upgrade its ERP software at the end of 2002. The new version would contain extra features, such that customers would not only be able to check order status but they could also place orders directly through the company website.  In addition, Entech will ensure that adequate systems are in place to support the security of the e-commerce initiative.