Unlike Traverse City beaches, the automotive supplier community is shrinking. And companies that want to keep their place in the chain need a viable strategy for e-business -– and fast, according to a study presented at this week’s conference.
The Center for Automotive Research (CAR) and the Environmental Research Institute of Michigan (ERIM) conducted the research earlier this year. E-business application developer SupplySolution Inc. sponsored the study of 16 Tier 1 suppliers with average sales of $4.4 billion and each with an average 1,300 production suppliers.
The Tier 1 suppliers surveyed say they currently select only 15% of their suppliers based on their ability to handle e-business. Within three years, they will select 77% of their suppliers based on the criteria.
The survey also found that Tier 1 suppliers expect to save more money from e-business than they spend on it, and that capital spending on e-business will climb from 3% of total expenditures to 13% within three years.
The bottom line?
“E-business matters,” says Jonathan Morell, principal member of ERIM’s Center for Electronic Commerce. “These companies will reduce their supply base, they’re going to put a lot of money into e-business and they’re expecting a lot of payoff across a whole variety of business activities
When their e-business plans are implemented, the suppliers estimate they will reduce costs by 18% in the area of engineering and product design (compared to 4% today), 16% in procurement (compared to 7% today) and 19% in quality assurance (compared to 3% today).
The Tier 1 suppliers also say that concern about the longevity of e-commerce Websites and application providers is causing their suppliers to resist e-business initiatives.
Based on other ERIM research, Mr. Morell says he did not expect the study to reveal a greater state of readiness for suppliers with regard to e-business.
A similar survey of Tier 2 and 3 suppliers should be completed within a few months, Mr. Morrell says.