Automakers Get (The Same) E-Ligion

Dec. 21, 2004
The supply-chain mantra in Detroit these days: follow the leader.

Talk about getting converted in a hurry. The "born-again" crowd has nothing on the Big Three. No, we're not talking about the Father, the Son, and the Holy Ghost here. We're talking about Detroit: General Motors Corp., Ford Motor Co., and DaimlerChrysler. In the last year the three giant auto manufacturers have jumped almost in lockstep when they heard the phrase, "" Presenting their respective e-business plans recently at the Supply Chain World show in Chicago, the Big Three laid out plans to connect their business partners that sounded so similar, you'd have thought they were put together simultaneously on Lotus Notes. I mean, don't break stride, guys. We wouldn't want you to take any risks with your business models by stepping out on your own. Not that there's anything wrong with seeing the e-commerce world through headlights that are the same size, color, width, and intensity, mind you. It's just that sometimes we spectators whose job is to witness and analyze the manufacturing technology scene wish there were a little more variation on the e-theme. Witness the Big Three's joint venture called Newco. The idea is for the trio of automakers to "join up to create a separate business to business marketplace," says Brian Beursmeyer, e-business strategic planning manager at Ford. The volume of transactions created by this new venture will be five times the total transactions conducted by, Yahoo! Inc., and eBay Inc., Beursmeyer added. One reason for working together, no doubt, is that the future --especially when it's coming at your windshield at cyber-speed --looks pretty shaky. "We're going to struggle as OEMs until we figure out how to use these e-marketplaces," admits Beursmeyer. Hey, there's safety in numbers, right? Perhaps another reason, though, for pooling their supply-chain interests is economics. When you represent the market for something, you have a tremendous amount of buying power -- and leverage on prices. Suppliers to the automotive industry, of course, are shaking in their shoes. They fear that the Big Three will use their massive combined purchasing clout to dictate lower prices. Naturally, the automakers reject such a notion, claiming simply that they want to "work with suppliers to take waste out of their processes," as David T. Hernacki, SCOR (supply chain optimization reference) process manager puts it. "We had one part that crossed the U.S.-Canadian border eight times. There's got to be a better way to do it." Their view is that by eliminating waste in the supply chain, everyone benefits, including suppliers. "The ultimate objective is to increase revenue for all partners in the supply chain," says Curtis Songer, general director of supply-chain management at GM. Still, the Big Three are experimenting with concepts such as "reverse auctions." These are, in effect, price-bidding wars in which the company doing the buying tells prospective suppliers to go online and bid against one another, driving the price of parts as low as anyone dares to go without losing his company-logo-printed T-shirt. Ford's Beursmeyer described how the automaker recently had tried out a reverse auction for tires -- considered a true commodity by most carmakers -- with impressive results. Five tire manufacturers went online early in the morning and, starting with an initial bid set by Ford, they went at it. "Twelve hours later, they were still bidding," Beursmeyer says. "The suppliers kept lowering the cost. The market tension that created was dramatically different than the traditional buying process. You're going to see a ripple effect through the whole supply chain as a result of this," he predicts. Still, Ford understands that achieving lower prices alone may not lead it to true supply-chain nirvana. "Squeezing people on price is not that good if you can't make your suppliers more efficient," Beursmeyer adds. "We don't really have a good handle at Ford on how to make our supply chain work better." Both Ford and GM have as one of their e-business objectives the empowerment of the consumer, based on a new custom-order model. For its part, Ford plans to partner with Microsoft to enable consumers to go online and order vehicles. "It's our answer to Autobytel," Beursmeyer adds. In the near future, GM expects to do a lot more business directly with the consumer online. The company estimates that it will be doing $80 billion in business online by 2003. Says Songer, "By 2003 we estimate that over half the vehicles sold will be influenced by the Internet." "We want the customer to be in the driver's seat, to be in control of that transaction," says GM's Songer. Likewise, says Ford's Beursmeyer, "Ford wants to put the customer in control of the buying process. We want to become the Dell or Cisco of the automotive industry." That means if you're a car dealer, it's time to reach for the remote. Either that, or start selling tractors and dump trucks instead of Luminas and Tauruses. To handle the influx of online business, GM already has formed a separate business unit called e-GM, consisting of just 100 employees. Ford's also planning to set up an e-business unit, although, as Beursmeyer concedes, "There actually is no e-Ford, but that's our ultimate goal." Psst, hey, GM, remember Darwin? Hey, Ford, whatever happened to competitiveness through differentiation? Say, DaimlerChrysler, we know you're very big on distinctive auto design, but how about trying out some uniqueness with your e-vision? Now you know why new cars look so much alike. Doug Bartholomew is an IW Senior Editor based in San Francisco.

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