It is the misquote heard around the world.
On Aug. 2, 1999, Ray Tanguay, vice president ofMotor Manufacturing Canada Inc., gives a presentation about a new logistics system at the auto industry's big annual summer conference in Traverse City, MI. The system allows Toyota's Canadian operations to make color, trim and option changes to its weekly Solara production schedule as close as five business days before production.
A few reporters, with the help of some over-eager manufacturing consultants, misinterpret Mr. Tanguay's speech. Soon the word on the street is thatwill be shipping custom-ordered Solara coupes built in Canada to customers' homes within five days "just like Dell Computer Corp." Not only will a variety of color and option combinations be available for every whim, but short and tall people can special-order versions, too. Manufacturing consultants coo about a "new manufacturing paradigm" and Wall Street sits up straight and takes notice. Toyota's competitors, who are quietly trying to chop their own order-to-delivery times, are stunned.
And so the urban legend of the five-day Toyota is born. Despite the company's best efforts to set the record straight, the myth lives on, just like the story about the guy who wakes up in a strange hotel one morning missing a kidney.
Unfortunately the myth makes the progress automakers have made during the past year a bit anticlimactic. While most experts think a true "5-day" car remains years away and may never be worth the cost and effort, two-week cars should start appearing in high- and low-volume markets in 2001 and 2002. That's thanks to a confluence of Internet, manufacturing and retailing technologies that's starting to make it possible to wire all these disparate processes and technologies together like they're - as our cover suggests - all on one big circuit board.
Suddenly the idea of a consumer custom-ordering a vehicle on his or her home computer and then picking it up at the dealership a couple of weeks later - rather than a couple of months - is no longer a pipedream.
Consider these events:
*Corp. is pushing its OTD (order to delivery) system to deliver a vehicle to customers within 15 to 20 days from the time it is ordered. For the customer in a rush, it's shooting for the capability to do it in the proverbial five days. GM also recently announced a joint venture with participating dealers to offer vehicle, sales, pricing and competitive information online. The deal will allow consumers to purchase vehicles through its dealers directly over the Web, in response to the growing popularity of online vehicle sites such as Autobytel.com.
"The most significant e-business process change at GM - one that promises rewards for the first company there . . . is OTD: the capability of meeting customer expectations by providing the right vehicle within the right response time, delivered exactly when promised, with zero inconvenience," says Ralph Szygenda, GM's chief information officer.
* Someof Canada customers now can build, price and order new vehicles on line.
Consumers can custom-build a vehicle, get a price and locate their choice at a dealer, on the assembly line, or place an order directly into theProduction System. Initially the site will be restricted to the test regions and three vehicles: Focus, Taurus and Windstar. But it should be expanded to include all Ford Motor Co. products in the test area within six months, and the rest of Canada within 12 months. It will be expanded to other countries once the bugs are ironed out.
* French AutomakerSA says its New Distribution system, initiated in early 1998, will bear fruit in 2001. All Renault products will be delivered to customers throughout Europe an average of two weeks after order, and that includes Central and Eastern Europe, Renault says. The French automaker expects to save about $150 million annually in distribution costs, while enhancing customer satisfaction and improving its sales mix.
* Cash-strappedMotor Co. Ltd. plans to deliver custom-ordered vehicles to consumers in Japan and Europe within 14 days by 2002. It expects to deliver vehicles faster to North American consumers as well, but is less aggressive here because 90% of U.S. consumers currently buy vehicles off dealer lots. In Japan the situation is almost the reverse: 50% to 60% of vehicles leaving the factory already are spoken for and another 30% to 40% have potential buyers waiting. Only 10% are ordered by dealers to sit on their lots. owns 36.8% of Nissan. Officials say it is "coincidental" that both automakers have 14-day delivery goals.
*AG is rolling out manufacturing initiatives to reduce OTD time while allowing customers to make last-minute option changes. Today the process in Germany takes 28 to 32 working days. The goal is to reduce that to less than 20 days and for pre-confirmed orders to still allow customer-requested changes within 10 days of the delivery date.
For the record, Toyota is considered one of the best - at least in Japan - and can build a car to order there in 25 days. A 5-day car isn't in the cards right now for Toyota.
"We're good, but we're not that good," a Toyota spokesman tells inquiring reporters. But contrary to the myth, in the U.S. it's currently a lot harder to custom-order a Toyota from the factory than it is a Ford or a Chevy - a hangover from the days when Toyota was only an importer and it built a limited number of option packages.
No matter. Auto companies now are desperate to portray themselves to consumers and Wall Street as being customer-focused and transitioning from the old to the "new" economy. For that purpose, Order to Delivery is a made-to-order buzzword, even though almost all American car buyers and 70% of Europeans currently buy vehicles from auto dealer lots.
Proponents argue that e-commerce is moving so fast that while consumers today might be content to kick tires at local dealerships, three or four years from now it could be considered an archaic activity by Internet-savvy consumers.
"The better they get at buying books online and the more comfortable they get buying clothes online and doing banking transactions online, the more likely they are to do the same in the auto industry," says Brian P. Kelley, president of Ford ConsumerConnect.
"The Internet is driving an environment where the buyer will be in control. As much as we'd like to stop it, slow it down, change it, it's not going to happen. It's going to be the future, and we need to get prepared for it," says Richard M. Lee, General Manager North America Operations for e-GM.
U.S. automakers in particular see OTD, or BTO (build to order), as helping them win more respect on Wall Street because it encompasses just about every new e-commerce and basic business initiative they have, from business to consumer (B2C), business to business (B2B) to basic cost-cutting and market share issues. Analysts say, for instance, that an efficient OTD system would allowCorp. to take 50% - $20 billion worth of goods, services and products - out of its delivery pipeline.
Looked at another way, analysts say OTD could save automakers as much as $3,700 per vehicle by eliminating overhead, inventory and other related costs. Analysts at Roland Berger & Partners LLC are more conservative, estimating OTD could save $1,200 per vehicle in the U.S., $600 in Europe and $500 in Japan - still big numbers in an industry that fights to save fractions of a penny on many parts.
So exactly a year after Toyota's phantom 5-day car debuts, OTD becomes one of the mainstream buzzwords at Traverse City, and GM, Ford and DaimlerChrysler Corp. send up their biggest guns to tout their efforts.
This year, thanks to the expanding power of the Internet, new e-commerce initiatives and supplier exchanges such as Covisint, it all sounds plausible.
"We think build demand will drive the real efficiencies in the next five years," says Ford's Mr. Kelley. "We mean actual consumer demand driving what our plants build. Consumer demand drives what dealers order and stock on their lots. We're very close to being able to get pure, unadulterated, unedited consumer demand into our plants to be able to begin that process," he says.
Plus the message is becoming more practical and focused, with automakers talking about delivering vehicles in 20 days or 14 days rather than five. GM officials point out their most recent studies show that the most important issue with consumers is not how fast a vehicle can be delivered, but that it shows up on the date promised. What's more, all OTD scenarios feature vehicles being delivered by automotive retailers, not Fed Ex.
Strong U.S. franchise laws, a recent string of legal victories in the U.S. Southwest, and basic repair and maintenance needs ensure that - at least in the short-term future - dealerships will continue to be the only outlet for delivering new cars to consumers.
The World Wide Web already has made an impact on the retail part of the auto industry. Every manufacturer has a web site that features products and dealer locators. Most dealers have sites that range in capability from a glorified Yellow Pages advertisement to fully interactive places of electronic commerce.
But for the industry as a whole and automakers in particular to fully benefit from this relatively new communications medium, experts agree that a lot still has to happen.
"The automotive industry is a very fragmented environment," says Lloyd G. (Buzz) Waterhouse, president and chief operating officer of Reynolds and Reynolds Co., the Dayton, OH-based dealership information system supplier. "We need to share information better to help customers in a smarter way. It's a very complicated and disconnected system now."
So critical is the dealership information system to the future of e-commerce that GM acquired a 20% stake in Reynolds.
Another problem facing automakers is supply and demand. They can't produce enough of the hottest-selling vehicles and build too many of the ones that sit around on dealership lots for weeks and months.
"The allocation system today is very frustrating to dealers, who are trying to satisfy customers," says Mr. Waterhouse. "The industry has to fundamentally change the way it manufactures cars."
Enter the Internet and all of its promise of instant communications and customer satisfaction at "web speed."
"If you get real customer demand information tracked on a real-time basis, you'll at least be able to build more of the right cars," surmises Mr. Waterhouse. "Cars that people want. Cars that won't sit around in dealer inventory and require extra marketing and incentives to sell."
"The 10-day car with customizing and with supplier management in place will take four to five years to implement, minimum," says Mr. Waterhouse. "You can do what I call fake build-to-order in a year. And if you never really get a true BTO, you'll have better planning."
A BTO system with suppliers providing just-in-time parts based on consumer orders will require a lot of time, since the industry's infrastructure will have to change, says Mr. Kelley.
"All the automotive plants, the supply chain, all of those systems that are embedded in the industry will have to change dramatically," he says.
The first version of BTO that we're likely to see, the "fake" BTO as referred to by Mr. Waterhouse, still will require new software and a change in industry culture.
"The customer will go in through a system or an agent, like GM Buy Power or something like that," the president of Reynolds and Reynolds explains. The system first will check dealer inventory for the vehicle the customer specifies. If the dealer doesn't have it, it'll check the entire company's inventory at all dealers. Once found, it can be taken to the customer's favorite dealer and he or she will buy it there.
"Today it's done with phone calls and faxes," says Mr. Waterhouse. "It's not really crisp."
If the vehicle the customer wants isn't in any current inventory, the software checks into the manufacturing pipeline to see if the vehicle is being built, when it will be done and when it will be delivered. It might not be available in 10 days, but the dealer should be able to accurately say when it will be ready to pick up.
The long-term OTD plan is more complex and all-encompassing.
"The current plan is to have Web-based software in the dealer system," explains Mr. Waterhouse. "It would check dealer stock. If the vehicle is not in stock, it will shoot the order to a set of programs in the automaker's system. It'll capture data and go into the manufacturer's system where it will impact supply replenishment and capacity planning. It's a tiered system or a strainer."
"The end game here is to really turn GM into a digital business" says e-GM's Mr. Lee. "We're not in the process of throwing out our traditional assets. We're in the process of merging those in an environment that will enable us as a company to do things through the click environment that we couldn't do in the physical world."