DETROIT — Carmakers and Tier 1 suppliers are mustering their computer know-how to slay a dragon plaguing an industry bent on peak efficiency. By early next year, carmakers are expected to sign on to a new electronic highway that will simplify communication of shipping schedules, data files and other messages. The system is expected to save the industry about $1 billion a year by reducing errors and shortening production cycles.
If all goes as planned, the system will envelop 10,000 suppliers and vehicle manufacturers in North America, said Thomas Hoy, executive director of the Southfield, Mich.-based Automotive Industry Action Group, known as AIAG, which is leading the project.
Many suppliers must wade through a rush of hard copy — including faxes, letters and computer-aided-design files — that can take weeks to receive and has no guarantee of reaching the right source. Thus come the delays and misinformation that can make a mire of a carmaker's production schedule.
To add to the confusion, automakers and Tier 1 suppliers use different computer systems, said automotive industry manager Benjamin Bouchard of GW Plastics Inc.'s Ann Arbor, Mich., office.
``File attachments and formats don't always transfer well and schedules don't always reach us on time,'' he said. ``That makes it difficult to respond relatively quickly.''
Yet, there already is some concern about how well the new system will work. For one thing, many smaller suppliers are not equipped to handle electronic commerce. For another, suppliers that already have created an in-house system might be reluctant to shift course.
``We've spent hundreds of thousands of dollars over more than a decade developing [electronic commerce] specs,'' said Steve Elliott, information systems manager for Adac Plastics Inc., a door-handle supplier in Grand Rapids, Mich. ``What do you do, abandon your standardized platform, say it was great while it lasted but here's something new? I've got a real problem with that.''
On the surface, the problem doesn't sound so difficult. Consider that almost every large Tier 1 supplier has an electronic data interchange system, called EDI, to communicate with carmakers. However, the systems are far from perfect.
For instance, Donnelly Corp., a large window systems producer in Holland, Mich., has created a fully computerized system that allows it to speak directly to automakers. Yet, the firm would like more of its suppliers on the same page, electronically speaking.
``Certainly, that's the direction both we and the industry are headed,'' said Dennis Runyan, Donnelly vice president for information technologies. ``Our communication is at a much-higher percentage with our customers than with our suppliers. Looking at it from a vision perspective, we need to link the entire supply chain together.''
That is the direction AIAG is headed. It is developing a computer network called Automotive Network eXchange, or ANX, which will allow the wealth of electronic messages to come down the same road. For security purposes, ANX will not use the Internet, but AIAG's own interconnected network.
``Visualize ANX as the highway where messages and data between trading partners can flow,'' said associate director Richard Simmons. ``Below the first tier, there's not the degree of electronic information flow that this system will provide. With ANX, when you move data or information, you move it immediately.''
Also, under AIAG's auspices, the Big Three have sent letters to suppliers mandating a common set of EDI requirements, eliminating what can be a Tower of Babel of computer languages and formats.
In August, AIAG completed an 18-month manufacturing assembly plant pilot program (or MAP) to gauge the advantages of a unified system. It set up a test study with firms supplying seat assemblies to the Big Three, including Johnson Controls Inc. in Plymouth, Mich., and 12 second-and third-tier suppliers.
AIAG found that by sending data electronically, the auto industry could save $1 billion, or an average of $71 per vehicle. Moreover, JCI shaved its seat production time from 26 to 11 days while reducing order error rates by 72 percent, said JCI information system analyst Terry Onica.
Onica said JCI now is saving half a million dollars annually by sending messages, shipping schedules and CAD drawings via computer to its suppliers. It expects to have all its Tier 2 suppliers on an EDI system by year-end, she said.
``Our approach is to work closely with our suppliers,'' Onica said. ``Smaller companies aren't quite as computer-savvy and don't always understand the benefits of the system. We need to work with them to make this happen.''
That approach could help ANX succeed, said Fred Bauters, partner in the Mayfield Heights, Ohio, office of Crowe Chizek & Co. Ltd., an accounting and business consultant. A unified network could collapse like a deck of cards if the entire supply chain is not on board, he said.
``It has to be a two-way medium to get the real-time response that's the backbone of the concept,'' he said. ``Otherwise, you might be putting an Indy 500 engine on a Model T Ford. If you don't have the parts to realize your capabilities, you'll destroy both the engine and the Ford.''
He estimated that it could cost a firm as little as $10,000 or as much as seven figures to use the ANX highway, depending on the degree of usage. That worries some Tier 2 suppliers, such as Alco Plastics Inc. in Romeo, Mich. The injection molder of exterior and functional parts wonders how much it will cost to join the computer revolution, said sales manager Stephen Gabalis.
``If we could come up with a unifying system of communications, it would make everyone's life easier,'' Gabalis said. ``Right now, it's a little confusing and a little difficult. But before we implement this, we need to know exactly what the expense will be.''
Yet, the process has so many benefits it is destined to work, said Dennis Wisnosky, chief executive officer of Wizdom Systems Inc., a computer consultant in Naperville, Ill. And if it does, it will be the most-extensive use of a single electronic commerce system in U.S. industry, he said.
``The time savings and inventory savings are too much to ignore,'' said Wisnosky, whose firm consulted on AIAG's MAP project.``The bottom line is that if the Big Three say something is going to happen, it's going to happen.''