TRAVERSE CITY, MI – The dreams of reaping large profits from the Internet and the hype associated with it is dead.

But that doesn’t mean the technology has lost its luster in the auto industry.

Insiders say there remains an area to be tapped that could generate millions of dollars in savings throughout the supply-chain enterprise. But a recent study shows the auto industry still has a lot to learn when it comes to supply chain management (SCM).

SCM has lagged behind other initiatives in terms of importance, says Linda Ban, global automotive lead for IBM Institute for Business Value. The technology company recently conducted a study in coordination with the University of Michigan on the topic of SCM via interviews with 29 executives at 16 global suppliers and OEMs.

Ban says survey results show that although the industry recognizes the importance of SCM, installing proper systems to support it remains a challenge.

“Manufacturers want one face or sole portal setup for suppliers,” Ban says at a session to discuss the survey results at the 2004 Management Briefing Seminar here.

The problem? Suppliers are working with auto makers that have multiple systems themselves.

In addition, during the heyday of supplier consolidation, many parts producers acquired other operating systems with their newly purchased businesses. And many suppliers have legacy systems they remain reluctant to part with.

All of this is leading to SCM falling far behind its potential.

The survey shows several critical areas where SCM has yet to meet its full potential, including forecasting, order fulfillment, operations planning, production planning and supplier management.

Both OEMs and suppliers rank improved forecasting as their top priority overall, noting the need to improve customer satisfaction.

That means many auto makers cannot communicate sufficiently with suppliers to assure the customer gets the vehicles they want in the time desired.

The key is linking forecasts to material requests in order to control costs and improve customer loyalty. Additionally, suppliers need to improve inventory tracking to assure the proper components are being shipped to meet customer demands.

It will require both OEMs and suppliers to break down the barriers that prevent them from meeting the full potential of SCM.

“Current relations between manufacturers and suppliers are not yielding significant collaborative gains for the supply chain,” the study concludes. “We find manufacturers making serious efforts to integrate their SCM processes internally, but with far less attention to and success at collaborating in SCM with their suppliers.”

kekelly@primediabusiness.com