The dynamics of e-commerce are forcing automakers and suppliers to react quickly. Four executives from inside and outside the auto industry discussed e-commerce and its effect on the supply chain during a May 17 panel discussion at the Automotive News New Manufacturing Conference in Birmingham, Ala. Participants included:
Paul Hebeler, automotive industry director, Oracle Corp. in Troy, Mich.;
Keith Lawrence, vice president of procurement and supply, Mitsubishi Motor Manufacturing of America Inc. in Normal, Ill.;
Greg Robey, managing director of global integrated solutions, Federal Express Corp. in Memphis, Tenn.;
Bill Taylor, chief executive officer, Mercedes-Benz U.S. International Inc. in Vance, Ala.
Edited excerpts follow:
Q. Was there an e-commerce moment of conversion for you?
Mitsubishi's Keith Lawrence: It goes back about two years ago, when one of the OEMs was talking about some information he had wanted to get down to the lowest levels of the supply chain. This particular automotive executive put out some information, and I believe he called six tiers down into his organization. He said, "Listen, this information has to do with a project. I want you to call me as soon as you get it." About six weeks later, he got the phone call from the Tier 6 supplier who says, "I got it." I was looking at that and thinking the Internet can help speed that up quite a bit.
Q. Will the need to be e-competitive drive suppliers out of the automotive business, just as globalization and other challenges have?
Lawrence: I don't think it will drive them out. I think it should enhance the relationship. At Mitsubishi, we're encouraging our supply base to be enabled, technologywise.
Oracle's Paul Hebeler: The history of suppliers is that the day you stop moving forward is the day that is the beginning of the end.
Federal Express' Greg Robey: It goes across all industries. I think it's fair to say that there are going to be some companies that don't keep up.
Q. Is Mercedes as much a part of this new business as is the Chrysler side of DaimlerChrysler?
Mercedes-Benz International's Bill Taylor: Yes, it will be. We are in a quiet time right now. The emphasis is being realized. And when we move from there, we'll define that when we get there. I think it's at a point in time right now where it's really not so tangible to give you a concrete answer.
Q. Will Mitsubishi be part of the Covisint trade exchange?
Lawrence: We're certainly interested in seeing how this develops. Our strategy is not going to change. It's just that we have certain things we want in mind. For example, we want more collaboration with suppliers. I think it does require certain stability in the supply base.
Q. Will automaker and Tier 1 inventory decrease, while the inventory of unfinished goods at Tier 2s and lower tiers increase?
Hebeler: It's not an inventory shift. The key here is to get rid of the inventory, because by the time the actual pull sequence comes from the assembly plant, the suppliers are already anticipating. If they don't know it's coming, then they have to keep things in inventory. But if they anticipate the signal coming, then they don't have to stock up on their finished inventory.
Q. How important has worker training been for Fed-Ex's evolution into e-commerce?
Robey: It's continuing to be a big issue, especially when it comes to managing information and communicating to our customers our capabilities. The electronic commerce environment really changes the business equation when it comes to logistics.
Q. How can an automaker continue to be competent on its outsourced items?
Taylor: You still have your hands around it, and you're still involved. It's a partnership that's sharing information. Johnson Controls [Inc.] is a good example. They make many seats, and bring their knowledge in making seats for us. It just brings more information to the table. We don't lose competency.
Q. Will Federal Express and other logistics companies become more critical to auto suppliers because they can orchestrate the supply chain in an e-commerce world?
Robey: Our customers are asking us to play a larger and larger role in their business every day. That's why we've had to evolve from selling solutions or point services to offering integrated solutions that provide not only the physical goods, but also that information flow, that complete commanding control and dominance. We're getting demands in every industry to do that.
Q. What is the bottleneck when it comes to automakers speeding up order to delivery?
Hebeler: The consumer research that we've done says that the consumers really don't care if you supply them with a five-day or 15-day car. What they really want is for the dealer to give them a date, and they want it to be perfect. You're just as bad off being early as you are being late. If you can predict accurately, people will come to you for that.
Q. Do your customers in Europe really care whether you speed up the delivery of their M class by a few days?
Taylor: Yes
Q. Is it really the best time to be diverting your focus and your suppliers' focus to e-commerce technology rather than quality improvement?
Lawrence: Let's envision that a traditional supplier gets a supplier rating sometime after the fact. This is in fact a snapshot of the past; it really has nothing to do with the future. Let's envision a different scenario where one of our workers on the line has a problem and walks over to the computer screen and a digital camera snaps a picture of this thing and it is instantly sent out to the suppliers' quality department to take a look at what's going on in the facility. So, if we're talking about quality, the whole thing still comes down to speed and communication and the ability to use the two. And I think quality can be enhanced.
Q. Mercedes partners with suppliers early on to improve speed. How do you then ensure that suppliers are competitive, and how do you test the market price?
Taylor: By bringing a supplier in at the development phase, it takes care of itself because of the transparency. It takes place right from the first day. And then it becomes a price issue, and we know the competition, we know the price points that we want to achieve is how we get there. And to me, that collective approach is a whole lot better than the other.