Rampant Growth Expected in Automotive Suppliers' Supply Chain eBusiness Transactions
24 March 2000
Rampant Growth Expected in Automotive Suppliers' Supply Chain eBusiness Transactions
Current and Planned eBusiness Initiatives Not Aggressive Enough
DETROIT, March 24 In the wake of the agreement between
General Motors Corp., Ford Motor Co., and DaimlerChrysler AG that the world's
largest Internet-based automotive-parts exchange company is in the works,
automotive suppliers are scrambling to understand how eBusiness strategies
will change the way they do business. Today, less than half of suppliers
surveyed are not implementing eBusiness strategies as it was announced at the
January 2000 meeting of the Automotive Best Practices Forum sponsored by
Arthur Andersen. The Forum and its accompanying study on eBusiness strategies
among automotive suppliers revealed that nearly half of automotive suppliers
do not know the expected payback period for an eBusiness investment, and when
they do, it's often underestimated. The Forum also revealed that
business-to-business communication in the suppliers' supply chain is expected
to increase ten-fold in the next two years.
(Photo: http://www.newscom.com/cgi-bin/prnh/20000123/cgsu001 )
Currently, 41% of automotive suppliers surveyed are not in the process of
implementing eBusiness strategies. For those suppliers that do have eBusiness
strategies in place, the top reasons for doing so include reducing operating
costs, satisfying OEM requirements, and improving competitive advantage. Only
16% of suppliers identified revenue growth as a business driver for eBusiness
-- suggesting that these benefits are not well understood.
"Clearly, if an eBusiness strategy is not already in place, the need to
move quickly and develop a global eBusiness strategy should be a top
priority," said Randy Miller, the Global Automotive Partner for Arthur
Andersen. "The focus should be on strategy development and execution in
100 day cycles."
Nearly half of automotive suppliers indicated that they didn't know the
expected payback of their eBusiness investments. Of the remaining half of
suppliers that are tracking the expected payback period, half expect less than
a one-year payback period, and the other half expect payback in a one to four
year timeframe.
"Given the pace of technology evolution, a payback period of greater than
a year should be closely examined," noted Gary Baker, Director of Arthur
Andersen's Advanced Technology Group's Development Center. "eBusiness
investment needs to be treated like any other investment."
Today, only 6% of automotive suppliers conduct more than half of their
transactions with suppliers via eBusiness. In two years, this number is
expected to increase to 66%. The expected growth areas in the next two years
include order tracking follow-up, production specification/information, and
online price quoting. Suppliers anticipate that the usage of EDI (Electronic
Data Interchange), telephone, and fax communication methods will decrease over
the next two years. ANX usage will increase from 3% to 45% and Internet usage
will increase from 15% to 76% -- becoming the two most widely used
communication methods in the next two years.
About the Automotive Best Practices Forum
In January 1997, Arthur Andersen established the Automotive Best Practices
Forum. Its mission is to bring together automotive professionals to share
knowledge, evaluate best practices, and understand the changing dynamics of
the automotive industry. Participants include executives from over
50 automotive companies.
About Arthur Andersen
Arthur Andersen's vision is to be the partner for success in the new
economy. The firm helps clients find new ways to create, manage and measure
value in the rapidly changing global economy. With world-class skills in
assurance, tax, consulting and corporate finance, Arthur Andersen has more
than 72,000 people in over 80 countries who are united by a single worldwide
operating structure that fosters inventiveness, knowledge sharing and a focus
on client success. Since its beginning in 1913, Arthur Andersen has realized
86 years of uninterrupted growth, with 1999 revenues over $7 billion. Arthur
Andersen is a business unit of Andersen Worldwide.