Research: 77% of N. American Tier-1 Suppliers Will Reduce Supplier Base

New Research Indicates 77% of North American Tier-1 Automotive Suppliers Will Reduce Supplier Base in Next 12 Months

Initial findings reveal that within three years, auto supplier's ability to
conduct e-business to become increasingly critical in sustaining business

    TRAVERSE CITY, Mich., Aug. 6 The initial findings of a
research study authored by the Center for Automotive Research at the
Environmental Research Institute of Michigan indicate that 77% of Tier-1
automotive suppliers anticipate consolidation of their supplier base over the
next year, and that e-business capability will be a driving factor in deciding
who remains.  The study, sponsored by SupplySolution, and titled "E-readiness
of the Automotive Supply Chain - Just How Wired is the Supplier Sector?"
assesses the overall e-readiness of the North American automotive supplier
sector with a focus on Tier-2 and Tier-3 suppliers.  The survey elicited
responses as to how e-business is conducted today and in the future.
Additional initial findings include:
    -- Today, 15% of Tier-1 suppliers look for two-way e-business capability
in their suppliers.  This figure will rise to 77% within two to three years.
    -- The importance of e-business will increase broadly across diverse
business activities.  "How important is it that you do e-business with your
production parts suppliers?"

                                   Today    In 2-3 years
     Demand, planning, mgmt         2.4         3.4
     Engineering design             2.5         3.2
     Procurement                    2.9         3.5
     (based on a 4 point scale; 4=required for success)

    Another second set of responses relate to how the Tier-1 suppliers
continue to see e-business evolve within their own organizations.  These
initial findings include:
    -- E-business expenditures by Tier-1 companies will increase from
approximately 3% of capital expenditures today, to 13% in the next 2-3 years.
     -- Study participants also estimated the cost reduction impact of
e-business in their organizations today, against when programs are fully
implemented.  In the category of engineering and product design, respondents
indicated a 4% cost reduction today and when fully implemented 18%; for
procurement a 7% reduction today and a 16% future reduction; with quality
assurance, a 3% cost reduction today and a 19% reduction when e-business plans
are fully implemented.
    -- Tier-1 respondents, in assessing their suppliers' capability to manage
e-business in specific manufacturing areas, ranked the "computer to computer
communication - automated on both ends" the highest at 49%; logistics and
order tracking at 18%; and finished goods inventory the lowest at 14%.
    -- Assessing the future capability of the Tier-2 and Tier-3 supply base,
the respondents projected increases of between 27-49% in the specific areas
detailed above, within the next two to three years.
    "To succeed in the emerging business climate, e-business must permeate
automotive supply chains," said Jonathon A. Morelli, PhD, member of
Environmental Research Institute of Michigan's (ERIM) Center for Electronic
Commerce, and one of the authors of the research project.  "Tier-1 suppliers
believe this is true, but are well aware of the problems that may thwart
implementation.  Success will depend on e-business models that work for all
participants, and a vendor community that can provide the supporting
technology and assistance."
    "While there have been a number of studies that have identified the market
potential surrounding e-business implementation, we felt there was a lack of
concrete information about two areas -- the extent to which Tier-2, Tier-3 and
Tier-4 automotive suppliers are equipped to adopt e-business initiatives, and
the extent to which the Tier-1 supplier base was considering e-readiness as a
factor in qualifying current and potential suppliers," said Don Woerner,
senior vice president of sales and business development for SupplySolution.
    The preliminary results of the research project are announced today at a
workshop held at the 2001 Automotive Management Briefing Seminars in Traverse
City, Mich.  The annual event is co-sponsored by the Center for Automotive
Research (CAR) at ERIM, as well as the Center for Professional Development
(CPD) and the Transportation Research Institute's Office for the Study of
Automotive Transportation (OSAT) at the University of Michigan.  The final
results will be released the week of August 27.
    "These findings are extremely important in communicating to the Tier-2,
Tier-3 and Tier-4 suppliers the strides they must make to adopt e-business in
their operations," added Woerner.  "And for technology companies, it is
important that we provide this supplier base with some fundamental, but
equally critical deliverables: education, scalable technologies, and general
understanding of how supply chain technologies can work for their
organizations."