E-business: the new game in town
A build-to-order future?
With the Internet, in particular, one of the main forces driving product development - as well as most processes from designing vehicles to selling them - is the consumer. The Internet enables people to be more knowledgeable, and thus more powerful consumers, by allowing them to access an almost unlimited amount of information on products, including vehicles and their accessories. The phrase "knowledge is power" certainly applies, as many in the industry realize that business operations must be transformed to put the customer first. Harold Kutner, Group Vice President for Worldwide Purchasing and North America Production Control and Logistics, General Motors Corp., referred to this transformation in a speech on GM's Order-to-Delivery (OTD) initiatives (Table 2).
Matt O'Malley, President and CEO of Glovia International, a California-based Fujitsu company that provides B2B e-commerce solutions, echoed the same sentiment: "The Internet provides the launch pad for an entirely new model of collaborative global commerce as the Internet shifts power from the seller to the buyer. This migration is part of a transformation that turns businesses from supply-driven enterprises that make, store, distribute, and sell products into demand-driven enterprises that sell, source, and ship products." Essentially, Internet technology is driving a shift away from supply chain management and a movement toward demand chain management.
In an attempt to satisfy consumer demands, automakers hope to build customer-specific vehicles and deliver them more quickly. A build-to-order (BTO) system would allow customers to design their cars on the automaker's website and purchase them either online or at a traditional dealer. Kutner, referring to GM's OTD strategy, said the process should result in the amalgamation of "the right vehicle, the right place, the right time, the right price" to increase "customer satisfaction, enthusiasm, and loyalty." BTO does more than just sate the needs of consumers, however; it also provides tangible benefits to both OEMs and suppliers. For example, GM's OTD has resulted in a 40% reduction of North American lead times, according to Kutner. It is also believed that a BTO system can cut costs by reducing inventories. Instead of automakers and suppliers forecasting, or essentially guessing, demand, they would ideally be able to perfectly match supply to demand and, thus, avoid overstock.
 Figure 5. The Tritanium - a rugged concept vehicle designed and built in 90 days using computer-aided industrial design (CAID) techniques - was unveiled in November by Model E, the first Internet build-to-order automotive company.  |
Deutsche Bank/Roland Berger's report stated that "contrary to many industry forecasts," the traditional vehicle sales model of purchasing a vehicle from a dealer's lot would represent approximately 70% of the market in five years and more than 50% in 10 years. It also said that e-commerce tools should be used to improve forecasting, planning, and anticipating consumer preferences within markets, which could result in a "build-to-market" system as opposed to BTO. Even so, initiatives are under way now to take advantage of the demand for customized vehicles, such as GM's OTD strategy, and to lay the foundation for a possible BTO future. In fact, the first Internet BTO automotive company, Model E, was founded in 1999. The Fremont, CA-based company partnered with race driver Rod Millen and engineering and technology firm Autokinetics to produce the Tritanium (dubbed Project Ironman originally), a rugged concept vehicle unveiled in November (Figure 5). Real-time input from customers through Model E's online Virtual Design Center was used to help create the concept, which was designed and built in 90 days using computer-aided industrial design (CAID) techniques, eliminating the need for traditional clay modeling. The Tritanium demonstrated how collaborative partnerships and Internet-based technology can cut the industry's traditional sketch-to-concept vehicle time frame from 12-18 months to 90 days or less, according to the company. The concept, as well as future Model E vehicles, will be distributed via the Internet.
Model E's Internet BTO strategy employs several techniques in addition to CAID and the Virtual Design Center, including Web-based configuration and ordering, zero-asset production via networked micro-factory partners, and modular component technologies. "Think of Model E as the Dell of the auto industry, designing products based on what customers truly want and leveraging best-in-class components and micro-factory approaches for rapid design, launch, and direct delivery," said William Santana Li, President and CEO of Model E. The Internet company is also currently using its BTO methodology to customize existing vehicles from companies such as BMW, Mercedes-Benz, Lexus, and Porsche.
Ford will take another step closer to a BTO future when its Internet sites feature an interactive visual accessorization tool, provided by EyeVelocity, Inc., that will allow customers to personalize their vehicles online. Expected to be available sometime this spring, EyeVelocity's Internet Accessorizor will allow customers "to modify the appearance of their vehicles by interactively 'trying on' Ford accessories," said Matt Kesler, Sales and Marketing Manager, Ford Vehicle Personalization. Kesler added, "Customers will be able to make a more informed purchasing decision because they no longer will have to wonder what their vehicle will look like when accessories are added."
Other automakers have incorporated customization tools for customers on their websites as well, including Jaguar - which is part of Ford's Premier Automotive Group - and Honda. Jaguar added a "Build your Jaguar" feature to its website in October, which will be available to users across multiple markets (U.S., UK, France, Germany, Spain, Netherlands, Belgium, Japan, and Italy) in multiple languages - an industry first, according to the company. The technology allows users to select up to 10 personalized features and to either store those preferences in a "virtual garage" or forward them directly to the user's local dealer.
Likewise, Honda recently launched the second phase of its e-commerce Internet shopping initiative, which has streamlined the online process by allowing customers to configure their car of choice "after just one screen" as opposed to several. The site also provides specs, price quote verification, and assistance in selecting a dealer after the customer's vehicle has been configured.
Certainly, there are varying opinions as to when and how the auto industry will progress, not only with regard to BTO and other customization tools, but with its e-business initiatives as a whole. One thing is evident, however; the auto industry is committed to playing its hand in the e-business game.
