A tall order for suppliers

Lean manufacturing techniques have given car makers huge gains in efficiency and lower costs. But the down side is that their supply chains inevitably long and complex are now under severe pressure, even in a business which is still mostly make-to-stock. The basic pattern of the industry is still geared to the ‘push’ concept of […]

Lean manufacturing techniques have given car makers huge gains in efficiency and lower costs. But the down side is that their supply chains inevitably long and complex are now under severe pressure, even in a business which is still mostly make-to-stock. The basic pattern of the industry is still geared to the ‘push’ concept of first making cars and then trying to find buyers.

That is fine in a static world. But the world is changing fast. With over-capacity in the industry and uncertainty in the economy, cars are set to remain a buyers’ market well into the new millennium.

One result is that car buyers and dealers are beginning to force a move to make-to-order, and that is likely to prove a stress too far for today’s automotive supply chain.

Make-to-order dictates a move from push to pull, with consumer orders triggering responses back down the supply chain a reversal of current practice.

The industry’s supply chain communications, still largely based on yesterday’s electronic data interchange (EDI) technology, is its Achilles heel.

The technology is proven, understood and efficient, and these are solid advantages. But it suffers from equally solid disadvantages: inflexibility and lack of responsiveness to rapidly changing situations.

And the market situation is changing rapidly. Brand loyalties are evaporating. With the coming of age of the ‘I want it now’ generation, consumers increasingly want and expect instant gratification of their demands.

Two other factors are intense competition in a global industry and the variety of options available. The salesman who can offer a white car today or the customer’s first choice of colour in six weeks will soon be out of a job: consumers want their precise specification or a greater choice and they want it fast.

But with EDI-based supply chains, the problem is an inability to cope with this shift from push to pull.

The push concept gives time: to plan production schedules; to cascade orders down to tier-one, two and three suppliers; to get car kits together and manufacture in batches.

It also smoothes out fluctuations from the weekly or daily norm, so variations from the average pattern of delivery for any component are likely to be relatively small.

Under make-to-order, or at least under the make-rapidly-to-order which the consumer demands, the luxury of time is no longer available. Rapid replanning and rescheduling become the norm, and the system has to be able to cope with big day-to-day variations in normal patterns.

Moving to new web-based technology would solve many problems and create the super-responsive supply chains that the industry will soon desperately need. But the move must be part of a strategy to embrace the make-to-order, customer-orientated philosophy.

The industry’s attempts to harness web technology have been largely, and correctly, judged as failures. Web technology has been viewed primarily as nothing more than a cheap means of delivering EDI data.

In reality, it is far more than that. It has the potential to provide high visibility and transparency to all the players in the supply chain. It can facilitate rapid response to changing order patterns. It can bring suppliers at all levels into an effective team, with the same shared goal of getting the right end-product to the right place at the right time.

However, the internet isn’t, or shouldn’t be, a low-cost, high-tech way of preserving the rigid non-responsiveness of EDI technology. The intelligent use of web technology could even prove the key to the much-discussed and long-awaited ‘three-day car’.

Les Mara is executive director, and Colin Wilson head of automotive consulting, at business consultancy and IT services company Cap Gemini.