Automakers racing to develop the quick car

By Brian Milligan -- Purchasing, 9/7/2000

General Motors Corp. calls it the Order To Delivery system. DaimlerChrysler calls it the FastCar. Everyone has a name for it, and everyone wants to be the first out the door with a quick car, a car that can be custom made-to-order in record time. And while this may be good for the customers in the long run, can the process work for suppliers?

Not easily, some analysts and supplier representatives say. "I can't say we don't fell pressured," says Neil DeKoker, managing director for the Michigan-based Original Equipment Suppliers Association.

GM is trying to launch Order To Delivery, or OTD. The system, if it works, will encompass virtually every aspect of designing, engineering, building and selling vehicles. If all goes according to plan, the system will come online in 2003.

The industry average for building a custom-made car is anywhere from 50 to 80 days. GM's plan would, ideally, give customers a custom-made car in 15 to 20 days.

Moving quickly

Tony Koblinski, executive director of global order to delivery for GM, says the plan is moving quickly. He says by the first quarter of 2001, GM's average customized delivery windows will be reduced from more than 70 to less than 40 days.

"OTD is important because the world is changing from the traditional mass marketing of products to one of building to personalized customer requirements," says Koblinski. "We believe this trend is real and the automotive industry will not be immune to it.

"In fact, this is our intent to not fall victim to the significant changes at hand, but rather help shape the changes and become an e-business leader," he adds.

If it can pull this off, GM will reap many benefits. By moving to this model, GM will be able to reduce huge amounts of capital invested in inventory while satisfying customer demand more quickly. GM's goal is to cut its global vehicle and parts inventories, now worth $40 billion, in half over a number of years.

Specifically, the OTD model will incorporate existing plans for expanding and investing in the company's information systems technology.

"We'll earn our way with our dealer body-it won't be force fed," says Koblinski. "They'll be a part of developing the process. As we begin to demonstrate our commitments to dealers in reducing leadtimes and providing reliable delivery dates, they'll be able to make those firm commitments with their customers.

"It will also allow them to begin to realize that they can operate without huge levels of inventory, reducing costs for both dealers and for GM," Koblinski continues.

But if this process works, it brings up two intriguing questions. The first: Can suppliers live up to their end of the bargain? The second: Will consumers buy it? The answers to both questions are a mixed bag.

Complex relationships

Koblinski is the first to say that the OTD system is complex, and it will require complex supplier relationships. This puts the onus on GM to tweak its strategies and devise a plan that will keep suppliers happy and willing to be in the game. And it promises to be an exhausting game.

GM describes itself as being at the "beginning stages" of developing the complex supplier relationships to make this work. Dave Barnas, a spokesman for GM, says some of these will probably use Covisint, a mega online marketplace being developed jointly by GM, DaimlerChrysler and Ford Motor Co. These initiatives will cover design, engineering, and all things associated with building the vehicle and moving it out of the manufacturing plant.

Predictably, those "stages" will include seeing how GM can use the Internet to rope in not only tier-one suppliers, but tiers two and three as well and on down the line. Supply creation and delivery will have to be precisely timed on all ends. It is a massive undertaking and can't be done without electronic communication.

"I imagine in the future, we'll be working through electronic portals and sharing information with the entire supply chain," Barnas says. "It will be much more transparent, the communication between us and the suppliers."

The strategies here will have an impact on product planning, purchasing, manufacturing and sales. GM now has a project team of 200 people that's poring over every element of the supply chain. Koblinski further states that GM will have to work out a complex logistical strategy that will get the parts sent to the manufacturing plants on time.

"We are going to be developing key strategic alliances with logistics partners that generate great ideas and efficient solutions to the logistical challenges that come with OTD," he says.

And Koblinski balks at suggestions that American consumers are not ready for such a quick turnaround on a custom-made vehicle. Americans are long thought to be complacent car buyers. They take what they get at the dealership, unlike their European neighbors who are willing to wait up to seven months for a custom-built car.

"Quite frankly, we'd like to give the customer a little more credit in knowing exactly what it is they want or don't want in regards to their vehicle choice," Koblinski says. "Right now, about 10% of all vehicles are personalized by customers. However, most consumers don't even know that they can order their exact vehicle or preference directly through their dealer."

Familiar promises

But if all of this sounds familiar, that's because it has been tried before. Or at least, it's been proposed before.

Toyota Motor Corp. made headlines in the fall of 1999 when a representative said the company was taking steps to quicken the time it takes to build customized Camry Solaras at its manufacturing plant in Canada. Real Tanguay, vice president of the manufacturing plant in Cambridge, Ontario, said Toyota has developed a way to produce a car within just five days of receiving a custom order. The company later recanted this, saying it cannot produce a car in that time-yet.

Some analysts believe Toyota is still trying to bring this plan, or one similar to it, to fruition. "Toyota is a strange company," says Dennis Virag, president of the Michigan-based Automotive Consulting Group Inc. "They'll say something, then won't talk about it, and then suddenly, the system is being executed."

And Virag says Toyota isn't the only one that is trying to win this game. "It's something that Toyota is working on, Ford is working on, it's something that Chrysler is working on. All of the major vehicle manufacturers are working toward this type of sales model and production scheduling model," he says.

And he's right. DaimlerChrysler has announced its FastCar program. The program is designed to allow DaimlerChrysler to leverage Internet technology, interconnecting its design, engineering, manufacturing, quality and marketing activities. The project is designed to do what the title implies-build a car fast.

"The FastCar project is as ambitious as any we've ever done," says James Holden, president and CEO of DaimlerChrysler. "It will provide real-time transparency to the product development process, but more important, it will dramatically increase the speed and precision of development, reduce waste and increase the quality of the products."

But can suppliers live up to these demands? Are the fast cars and order to delivery systems just "pie in the sky" promises? Some representatives from the automaker supplier community don't think so.

DeKoker says suppliers are listening carefully to all of the promises and then making some of their own. They want the fast business that fast cars will bring.

Still, DeKoker isn't fooling himself. He says working out such systems will be laborious and complex. The automakers are calling for things that will take complex design collaboration, real-time design and engineering data sharing with suppliers, and all of the things that will reduce new vehicle development time. At present, that time is about 32 months. The plans by the automakers will call for reducing that to 18 months, or possibly as low as 12 months.

"There are a lot of things we will have to work on to help us produce and deliver parts to those assembly lines," DeKoker says. "This calls for delivery in a much more efficient manner."

McElroy, a member of the Society for Automotive Analysts, remains skeptical about all of the plans. He says the problems will begin at the assembly lines.

"The way consumers will be allowed to configure their cars the way they want to will make it extraordinarily difficult for an assembly plant to keep up with orders coming in," McElroy warns. That's one problem. But the more complicated problem involves modular systems.

Modular systems

While there is a push on among automakers to increasingly make modular units, they still haven't come far enough, McElroy says. Such a unit would make it comparatively easy to make changes in a custom-built vehicle. If a consumer wants a car built a certain way, the automaker simply puts in the different unit that incorporates his or her wishes.

But until those units are more widespread in the design and manufacturing process, problems are going to pop up, McElroy says.

"Automakers will take orders every day, and everybody wants something different," McElroy says. "How do you get them that quickly? That efficiently? And still make a profit at it?

"It's difficult to do," McElroy says. "For these changes, we need interior systems that come in modular groups. So if you want this sort of sound system-boom! You plug it into the car. Today, we put a speaker here, a speaker there. It is very time consuming."

But DeKoker says this is just a piece of the puzzle. He says it is just one more thing suppliers will have to adjust to.

"Change is always difficult," DeKoker says. "There will be challenges with it. It's true, there are savings with this. But there will be costs as well."

What the Order to Delivery System promises: