Suppliers that move purchasing and product development online can reduce costs and speed time to market by 30%, but few have been able to do so so far.
That's the conclusion of the latest Automotive Best Practices Forum survey, conducted by Arthur Andersen in collaboration with the Original Equipment Suppliers Assn. (OESA).
On average, only 22 percent of e-procurement strategies are implemented, with suppliers citing uncertainty about return on investment, lack of funding and their own company's resistance to change as reasons for the slow pace.
Fewer than 10% of the three largest U.S. Covisint exchanges report being active on the platform, according to Andersen, but 54% are currently piloting Covisint or have plans to adopt it.
96% of those surveyed said that e-procurement auctions accounted for less than 5% of their total purchases in the past 12 months. While the majority reported savings of less than 5%, a minority of respondents said these measures reduced costs by 11% to 20%. While only 11% of purchases are made electronically today, suppliers expect that to reach 60% within three years.
“If you're not online, you're not a friendly supplier,” warns Andersen's Russell Hensley.
Hensley says improved supply chain management will become increasingly important as the industry shifts to build-to-order (BTO). Research shows that so far, 37.5 percent of the supply base has begun experimenting with BTO. Forrester Research predicts that by 2010, 21 percent of new vehicles will be BTO, up from 5 percent today. “That means we'll need more accurate, real-time demand release information,” Hensley says, adding that the current demand release schedule is only 58 percent on target. “Of 100 units ordered, only 58 are needed,” he emphasizes.
Toyota Motor Corporation is currently the leader in BTO, according to 41% of supplier respondents.
On the product development side, the majority of suppliers say they will rely heavily on their own exchanges to trade product development data within three years. Nearly a third say they will use industry exchanges for engineering communications. However, many suppliers are cautious about using dedicated exchanges such as Covisint for this purpose, and believe that an impartial third party such as the Automotive Industry Action Group or OESA should take the lead in defining data exchange standards.
