|
Paper Abstract:
|
The intent of this paper is to set the groundwork for the analysis of the impact of recently maturing Information Technologies, like E-commerce, on the automobile industry. Automobile manufacturing and retailing of such products has been greatly affected by such information technology advancements. On-line retailing has been maturing for the past six years, in particular, in the Business-to-Consumer (B2C) area. The automobile industry has to capitalize on this gain beyond traditional information sharing. In addition, the major impact of the e-commerce environment will likely be in the Business-to-Business (B2B) area. The B2B area is estimated to account for more than 70% of the total transaction volume in the years to come. The first part of this research will address the impact Information Technology (IT) has in the automobile manufacturing industry in general. Then, the consumer end of the Supply Chain will be discussed based on recent developments in customer relationships management, specifically the management of consumer automobile needs and expectations. Online transactions will be explored. The next part of the research will concentrate on the current and potential developments in the B2B area of the E-commerce world regarding the relationships between manufacturers and suppliers, such as e-supply management and e-postponement. Finally, the overall re-engineered Supply Chain of the automobile industry and the corresponding responsibilities of each entity and relationship to each other will be presented and discussed. From the manufacturing end of the industry, the main issue that the automobile manufacturers and the OEMs of the industry supply chain face, is the efficiency and speed of their processes. Internally the automobile manufacturers have to invest in gaining flexibility within their processes. This will allow the manufacturers to quickly respond to changing consumer needs and expectations, thus raising the satisfaction level (service level) of the sector. The goal here is similar to what has made companies such as Dell Computer famous, the concept of a demand-driven supply chain. Obviously the complexity of the automobile industry, which involves the assembly of a few thousands parts as compared to the fewer parts in the computer industry, makes the true practice of the concept very much more difficult. But consumers in the automobile industry are not interested in the selection of individual nuts and bolts of their automobile. There are limited numbers of critical modular components that differentiate one automobile to another from the consumers point of view, such as the stereo system, roof-racks, or leather interior. An ordinary consumer may not be particular in the type of cooling system in his/her automobile even if given the choice to select one. It is the contention that on a limited basis, the automobile industry would be improving itself by practicing a demand-driven type of supply chain where consumers can select from a limited number of modular components. Production cycle times will have to be reduced and lower batch sizes will have to be realized resulting in a smaller amount of purchases from suppliers and with a quicker order-cycle time. By shortening the cycle times this demand-driven supply chain will lead to the reduction in process inventory overall. But the concept of reducing production cycle time via flexible manufacturing and a modularized approach can lead to higher cost as a result.The practice of the postponement concept is critical in addressing the Total Cost of Production and Fulfillment. A major re-design of the products from a manufacturing point of view will have to be undertaken. But Hewlett-Packard has already validated this practice by successfully applying it to the production of ink-jet printers. This is an area whereby the complexity of an automobile will provide an advantage since there are more opportunities for gains. The implementation of the demand-driven concept can be greatly enhanced by using IT to cement strong supplier-manufacturer relationships (Grisi & Ribeiro, 2004; Dyer. & Nobeoka, 2000).. Leading edge practices such as Collaboration, Planning, Forecasting, Replenishment (CPFR) will have to be installed in order to advance the cause. In addition, at times, with the suppliers being in other countries, it will make the synchronization that much more difficult (Boyson, et al., 1999). It is necessary for the OEMs of the automobile industry to re-examine and differentiate the suppliers so as to be able to keep certain types of suppliers closer in proximity to maintain short order cycles and other suppliers to continue to strive for low cost and efficiency and remain offshore (Lewis, 2004). The issue of off-shoring regarding suppliers and other major concepts is also a major issue and is examined in more detail elsewhere (see Boyson, et al. 1999 and Humphrey, & Memedovic, 2003). The utilization of e-hubs, as made popular by organizations such as Cisco, shows tremendous upside opportunities for the automobile industry. But, as demonstrated by the joint efforts of GM, Ford, and Chrysler, via the electronic marketplace COVISINT, e-hubs are at times difficult to implement due to the necessary change in operational processes both for the OEMs and the suppliers (Veloso & Kumar, 2002). With an estimated volume of one half of a trillion dollars, it will be a matter of time for the procedures to be re-designed to fit the e-marketplace environment. A recent trend in supply management is the use of reverse auctions to provide short term gains for OEMs of an immediate 15-20% reduction in procurement costs (Humphrey, & Memedovic, 2003). Unfortunately, the basic premise of the reverse auction runs against the fundamental principle of collaboration between vertical partners in the supply chain. The potential instability of the supplier base can lead the automobile industry back to the 70s where short-term costs were the major objective of most American OEMs. This had a detrimental effect on product quality. Most of the concepts mentioned above can add significant value to the strategic direction of the OEMs of the automobile industry. At times, they do create internal conflicts and involve trade-offs in order to optimize total value. The consumer side of the supply chain for the automobile industry has provided plentiful of opportunities for strategic re-positioning. Due to various factors, it is amazing that consumers have been willing to accept the common practice of the industry and often times purchase an automobile with less than perfect characteristics. Consumers frequently make compromises between color and other important features. Consumers settle for less than desirable characteristics on their automobile while the industry sacrifices in terms of revenue via discounts and rebates. The main culprit is the perennial mismatch between consumers desires and the OEMs forecasted desires. We think that the build-to-order (BTO) concept, as made popular by Dell, is of significant value to the automobile industry. Even though there are challenges involved with the implementation of this concept, the automobile industry can engage in a hybrid type of environment in the form of a virtual BTO system. The OEM must be able to answer the following questions (Lele, 1997; Ives & Learmonth, 1984): What modular components do consumers want standardized? What components choices do consumers want available? Which components should be repairable? Replaceable? Which components should never fail? What should the reliability index of each modular component be? Conventional wisdom dictates that in the e-commerce world, buyers are generally benefited more than sellers. Usually, this is due to the availability and access of information. So it is to the advantage to the automobile industry to establish the practice of standard pricing. This will most definitely reduce anxiety and eliminate the undesirable consumer chores of shopping around and price negotiation. In particular, the OEMs, such as Toyota and Ford, realize the necessity of establishing the leading-edge practice of customer relationship management. Current disasters such as the capturing of wrongful consumer data need to be minimized. A good example is when a customer, who desires to purchase a white car, ends up purchasing a blue car because the white car was in the dealers lot for a long time and the dealer was eager to be rid of such a car and thereby offered substantial discount. In the database of the OEMs, the data will show that this customer wanted a blue car. Also, the automobile industry often times will not know that a specific customer is in the process of buying a new car until the customer walks into a dealership By that time it is too late for some OEMs. The OEMs need to capture the necessary data that will help them support the customer decision process much earlier. The concept and tools of Customer Relationship Management can correct such deficiencies and can be quite valuable to the automobile industry. With the advancement of the e-marketplace concept, the relationships between consumers and the OEMs of the automobile industry will be re-defined. The demand-driven supply chain will also re-shape and diminish the role of dealerships in the chain. The airline industry provides a precedence for such changes (Choudhury, Hartzel & Konsynski, 1998). These changes may be of a lesser impact to the automobile industry due to regulations and the complexity of transactions. It is the authors opinion that servicing will become the main thrust of dealerships and consumers will make all of the purchasing decision and delivery arrangements directly with the OEMs. |
