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Case Study: The Impact of E-Business on the Automotive Supply Chain

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Since Henry Ford’s creation of first production lines in the early 1910s the challenges have changed so fundamentally that some researchers called it the ‘third industrial revolution’.

This revolution was characterized by the use of e-business tools and transforming the Automotive industry. The impact of e-business tools in the automotive industry, in Europe alone, where substantial stock levels ranged traditionally between 57 to 72 days with almost 25 per cent of customers not receiving the exact specification that they originally asked for.

However, e-business tools can be costly, one of the examples of such an impact is the results of BMW which spent US $55 million on its European wide online procurement system that decreased the order delivery times by 20 days on average. This was achieved through the information acceleration at order collection which allowed the technical feasibility and delivery date checks to happen within minutes, hence reducing the lead time.

When the order acceptance takes place by the final customer, the response time again can be accelerated. BMW tries to implement this system in their order entry from 13–14 days to a single day. However, BMW is not the only multinational automotive corporation (MNC) that attempts to achieve quicker response times, a similar effort has been shown by DaimlerChrysler’s ‘Global ordering-Perlenkette Project’. Other concepts were relying on the so-called ‘three day challenge’, a study that led automotive companies to rethink their responses to current changes.

Related: Download ‘Disruptive and Emerging Technology: The Brutal Truth’ for free on pointZero now

The case study data collection

In this research the data collection included a single case, focused on individual e-business implementations. While collecting data, Mason points out the need for the researcher to ‘actively construct the knowledge about [the] world’ and ‘not simply [to] work out where to find data which already exists in a collectable state. Instead you work out how you can generate data best from your chosen data sources’. In this research, multiple data sources will be used to ensure the quality of data and validity of results.

The data will be collected from four different sources:

  1. Participant observation which included approximately four and a half months of participant observation over two projects;
  2. The internal archival data of the company;
  3. Interviews accompanied by other sources, which included 10 hours of semi-structured interviews;
  4. Meeting minutes presenting different perspectives on the same case, which included 30 personal meeting notes.

Related: Introducing the pointZero index

The company

The multinational company has already set up the B2B platform in the strategic business unit, which occupies approximately 600 employees. The B2B effort was driven by the senior management team to connect the innovative long-term SME suppliers within their supply chain network and enable data integration and linkage. The move was due to a rather proactive reason, driven by senior management. For the B2B implementation several discussions and arguments took place regarding the investment necessary for the small medium suppliers, and a number of arguments were floated around as to why B2B is necessary and whether it will add any value to the existing processes, products or services at all.

Both participants, the supplier and the buyer, need to evaluate and understand the costs and benefits of the e-business applications.

The current approach was to link these SMEs to the extranet and to generate a cross over point to the intranet. However the B2B was seen as a burden of financial, infrastructural and value added arguments, for example even if the multinational automotive corporation was helping out with the network, system integration, and software and hardware updates, there was still need for internal resources, such as staff training, additional IT staff in case of systems failure as well as the supplier not being the only supplier of the company, what would happen if the other companies wanted to interlink to the system as well?

One interviewee noted:

“The B2B required infrastructure needs in diverse business unit arenas, ranging from software, to technological updates on existing mainframes, additional lines to the existing programmes, new platforms, and new outlines. In some cases it was difficult to make the participants understand why they should have another system on top of their existing ones.”

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Overview of Key Learnings:

The learnings, as found from this case study, from the implementation of B2B integration are:

  1. Both participants, the supplier and the buyer, need to evaluate and understand the costs and benefits of the e-business applications.
  2. The B2B integration can be driven by the more technologically advanced partner, however the knowledge spin off needs to be assessed, as otherwise there will be financial and operational dependency on the most advanced trading partner.
  3. Alignment requires an understanding of the strategic agenda, the scope for long term partnership needs to be evaluated and the importance of the particular supplier (ie is the supplier providing a key strategic item).

Download the full case study in this sample chapter of E-Business and Supply Chain Integration, free on pointZero now.

This post first appeared on PointZero - A Manucore, please read the originial post: here

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Case Study: The Impact of E-Business on the Automotive Supply Chain


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