New Research Quantifies State of E-Business Penetration Into Lower Tiers of the Automotive Supply Chain

TRAVERSE CITY, Mich., Aug. 6 -- The initial findings of a new research study authored by the Center for Automotive Research (CAR) at Altarum, with execution support from Amplitude Research, provides a first-of- its-kind glimpse into the lower tier automotive suppliers' assessment of e- business both up and down the supply chain in relation to the e-business intensive environment of today's automotive industry. This research report is second in a series that investigates the e-readiness of the automotive supply chain. Last year, CAR issued a report on the e-readiness of the top tier automotive suppliers.

The study, sponsored by SupplySolution, and entitled "Just How Wired is the Supplier Sector: The Mid-level Supplier Perspective" elicited responses as to how e-business is conducted today and in the future by the lower tiers of the automotive supply community. The initial findings indicate that while these tiers of the automotive supply chain anticipate further consolidation, they are also lagging behind the upper tiers in the adoption of e-business tools. Yet, lower-tier suppliers are adopting specific types of tools with perceived business value and implementation of those tools will continue over the next few years.

Initial findings released today include:

81 percent of the respondents anticipate that their customers will be reducing their supply base within the next two years, and the supplier community itself anticipates further consolidation. Additionally, respondents themselves plan to reduce the number of their suppliers and will use the capability to engage in e-business as a key factor in supplier selection. 27.1 percent of suppliers say that e-business enabled demand planning and management is "required for success" in today's automotive supply chain. That number almost doubles to 47 percent for those who expect it to be required for success in the next two to three years. 18.9 percent of suppliers characterize e-procurement applications as being required for success today, but 39.3 percent expect procurement to be required for success within two to three years. But, design-related applications will not have as high a growth and adoption rate. Approximately 70 percent of respondents, when asked which e-business tools would have the greatest impact on their organizations, indicated that inventory reduction was most highly ranked. It is also important to note that respondents expect a small increase in IT spending over the next 2-3 years. Given today's economic climate, this is noteworthy. "It's clear that, while e-business adoption has proceeded more slowly in the lower tiers of the automotive supply chain than at the OEM and Tier 1 levels, there are still applications that are perceived as having real business value in the lower tiers, such as demand planning and management and procurement," said Jonny Morell, Ph.D., senior research analyst for the Center for Automotive Research. "There seems to be a push within this group of respondents to implement e-business applications with their suppliers and customers."

Engineering and design applications lag behind demand planning and management and procurement in the estimation of survey respondents, and will continue to lag over the next two to three years, the researchers found. While a significant number of customers have managed to implement CAD interoperability or mandated single-platform CAD usage, very few of the suppliers' own suppliers have managed to get to that point, with only minor improvement expected over the next two to three years.

More than 160 supplier representatives responded to the Web-based research survey, more than triple the number originally expected to participate. 80 percent of respondents were from suppliers based in the United States, more than half had annual revenues under $100 million and 12.7 percent had revenues over $1 billion. More than half the respondents do more than 80 percent of their business within the automotive industry, and were significantly likely to be engineered or unique-content parts suppliers.

"The lower tiers of the supply chain are critical to the success of e- business initiatives in the automotive industry," said SupplySolution General Manager of Automotive and CFO Lee Grubb. "This research makes it clear that Tier 2 and lower suppliers are willing to implement e-business tools when it makes sense to their business, but not until then."

The preliminary findings of the research project are announced today at the 2002 Automotive Management Briefing Seminars in Traverse City, Michigan and will be discussed at a press conference on August 8, 2002. The final results will be released the week of August 26, 2002.

About the Study

"Just How Wired is the Supplier Sector: The Mid-level Supplier Perspective?" was initiated in May by The Center for Automotive Research (CAR) at Altarum. The research was conducted using Web-based technology provided by Amplitude Research. More than 160 suppliers responded to a comprehensive e- mail survey authored by Jonathan Morell and Bernard Swiecki, of the Center for Automotive Research.

About SupplySolution

SupplySolution is a leading supply-chain execution company, delivering value to manufacturers, distributors, exchanges and suppliers through the implementation of collaborative supply chain applications, including the i- Supply Service, i-GetIt and the SupplySolution Global Infrastructure. Today, i-Supply is one of the most widely used real-time, direct-material fulfillment applications in the automotive industry, in operation at over 2,000 organizations.

SupplySolution was named a Top 100 Emerging Company for 2002 by Computerworld Magazine, and was a finalist in the 2002 Automotive News PACE Award for innovation in the automotive industry. The company's technology headquarters are located in Santa Barbara, California, and its sales and service headquarters are located in Southfield, Michigan. For more information about SupplySolution, visit www.supplysolution.com .

About Altarum

Altarum is one of the nation's fastest growing nonprofit research and innovation institutions. As a full cycle innovator (research to deployment) of advanced informatics systems solutions and knowledge tools, Altarum serves government and industry customers in the healthcare, national security and energy/environment and transportation sectors. Based in Ann Arbor, Mich., with major operations in Virginia, Texas and abroad, Altarum employs approximately 315 people. For more information, visit www.altarum.org .

About Amplitude Research, Inc.

Based in Birmingham, Mich., Amplitude Research, Inc. is a full service online survey company that applies patent-pending methodologies, flexible levels of privacy, powerful data collection technology and advanced statistical analysis to provide its clients with information that is loud and clear. Amplitude surveys consistently result in high response rates and candid feedback from survey takers, and include broad statistical analysis and complete survey administration. Amplitude's target client base includes Fortune 1,000 companies, technology providers, financial services companies, multinational manufacturing companies, educational institutions, private associations and consulting firms. For more information about Amplitude Research, visit www.amplituderesearch.com .