UK car firms lead Europe on IT use

British motor component firms look set to become the most advanced in Europe in their use of high-tech information systems, according to a report* published as part of the Government’s Information Society Initiative. But they will still be lagging some way behind the US, which remains the world leader in bringing Electronic Data Interchange (EDI) […]

British motor component firms look set to become the most advanced in Europe in their use of high-tech information systems, according to a report* published as part of the Government’s Information Society Initiative.

But they will still be lagging some way behind the US, which remains the world leader in bringing Electronic Data Interchange (EDI) and Internet use into the car components supply chain.

The report, commissioned by the Department of Trade and Industry and produced by Spectrum Strategy Consultants, compares the ownership and use of information and communications technology within British companies. It also compares Britain’s performance with that of France, Germany, Japan and the US.

The findings show that in Britain, while EDI is speeding up purchasing, delivery, invoicing and supply throughout industry, in the car industry its widest use is limited to the companies that supply direct to manufacturers’ plants – the so-called first-tier suppliers.

Even that spread is still modest compared with the US. Rover and Vauxhall claim that more than 80% of their delivery instructions are sent via EDI, but less than 20% of their invoices are sent or received electronically.

Further down the supply chain, second and third-tier suppliers are less likely to change their current paper-based practices because of the high costs involved.

In the US, though, the pace of change has been quicker. In March last year, General Motors, Ford and Chrysler told all major US suppliers that EDI would become a business requirement: second-tier as well as first-tier suppliers have all been ordered to get EDI links in place by 1998, or get out of the chain.

The aim of the Big Three companies is to compress the time spent processing orders between different tiers in the supply chain by about a fifth: in other words by one working day out of a week. According to one senior GM source, the initiative should ‘reduce cycle times, inventories, costs and delivery delays’.

European suppliers are a long way from making these kinds of time savings. The Spectrum report cites Champion Spark Plugs, which receives most of its orders from car makers via EDI and saves a working day compared with the old system. But Champion still prints the orders off the EDI screens and passes them by hand to the managers concerned. Only when the company gets to its target of a ‘paperless’ office will the entire order process be handled electronically in a matter of minutes, rather than days.

Buckinghamshire-based TRW International – which supplies fastening systems to Rover and Vauxhall among others – has embraced EDI more thoroughly. Inventory levels across its 150 plants world-wide have been cut from 150 million parts to fewer than 30 million, with the proportion of deliveries actually arriving at customers on time up from 50% to 90%.

European suppliers must still overcome hurdles that are not problems for their rivals across the Atlantic, not least of which are cross-border and multi-language EDI transactions.

The Odette project (Organisation for Data Exchange by Tele-Transmission in Europe) started in 1983, is now being coordinated across Europe. It is one of the first cross-border attempts to instigate EDI as standard business practice. It has also recommended common standards that are now being taken up across the UK and Europe.

This is likely to have an impact on the spread of EDI into smaller firms. Already, major first-tier suppliers are having to make big changes to their computer hardware to allow EDI and Internet access to be set up.

Smaller companies, with less resources for such projects, face an even more difficult problem. As they are more likely to deal with many different customers, the chances are their systems will have to be compatible with more than one IT standard, which means investing in more EDI software. Unipart and Rover, for example, use a Lotus system, while Coopers (Champion Spark Plugs’ parent) uses Microsoft.

Standardisation through Europe could accelerate the slow growth of EDI use across the Channel. According to the Spectrum survey, France’s relatively small car components sector has grown more slowly than that of other European markets, and has not embraced much EDI technology.

Germany, while dominant in certain component manufacture, has suffered from a lack of standardisation among manufacturers.

Surprisingly, in Japan, where the supply chain relationships in the car industry are among the strongest in the world, EDI and Internet use are limited, with many manufacturers still relying on traditional means of communications like fax and telephone. However, this is likely to change fast, with a possibility that the Japanese will be looking to the UK for clues on how to improve.

The report says Japanese manufacturers in the UK are perceived to be more advanced in their use of EDI than the parent companies in Japan.

* Moving into the Information Society – An International Benchmarking Study, ISI Business Infoline: 0345 152000.