Applications Planned and Deployed

Automotive Industries,  July, 1999  

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Like any business sector, the auto industry relies on a wide variety of information technologies. However, as noted previously, electronic communications dominates the current landscape. Asked to identify the deployment status of 32 different technologies (Figure 6.1), survey respondents focused overwhelmingly on tools that enable communications: electronic mail (in place now at 87 percent of responding auto companies), local area networks (in place at 84 percent), and EDI (in place at 76 percent). Findings also indicate that, within three years, each of these technologies will be in place at nearly 90 percent of responding companies.

[Figure 6.1 ILLUSTRATION OMITTED]

Technologies expected to enjoy the most rapid growth are executive information and decision support systems (likely spurred by acquisitions and the elevation of system providers) and document-workflow management (driven by the increased sharing of design responsibilities among suppliers and assemblers). According to 34 percent of respondents, both of these will be implemented at their companies within 18 months. Within that same period, 28 percent and 26 percent of respondents will implement two closely related technologies: Automotive Network eXchange and customer/supplier extranets. Thus, by late 2000, ANX and extranets will be in place at 50 percent and 58 percent of responding companies, respectively.

Despite their strong aspirations, respondents' answers do not reflect a leading-edge perspective on technology deployment. After all, there is only limited potential for competitive differentiation among most of the top technologies cited by respondents. In the near future, trending spikes in areas such as distributed architectures, application servers, data warehousing, and interactive multimedia will be produced by those companies that are most serious about using technology to increase their bottom line.

Looking at ERP

According to survey results, auto respondents are somewhat less enamoured with enterprise resource planning (ERP) systems than are many other industries. As shown in Figure 6.2, 33 percent indicate a preference for enterprise-wide systems. Another 50 percent prefer best-of-breed approaches with moderate or significant levels of customization. Seventeen percent opt for custom systems. As noted in Section 2, auto companies have emerged as leaders in the application of middleware and the integration of best-of-breed platforms. Often this has been to the exclusion of auto-industry-specific ERP applications, many of which have only recently reached the market. Older packages often lacked capabilities that are critical to the auto industry, such as line-set sequencing to determine order-build schedules, component synchronization, and scalability to high volume and complexity. Figure 6.3 compares application-development approaches among 17 different industries.

[Figure 6.2 ILLUSTRATION OMITTED]

Figure 6.3: Application development alternatives among various industries. Source of other industry data: "Technology Issues for Financial Executives", [C]1999 by Computer Sciences Corporation.

                                 Enterprise   Best-of-Breed
Industry                           System        Package

Automotive                          33%            50%
Chemicals, Mining, Oil/Gas          46%            36%
Computers/Electronics               63%            33%
Construction/Real Estate            15%            62%
Consumer Goods                      63%            32%
Financial Services                  46%            23%
Healthcare/Pharmaceuticals          68%            14%
Insurance                           21%            43%
Leisure/Hospitality                 33%            67%
Manufacturing - Discrete            62%            28%
Manufacturing - Process             58%            39%
Media/Entertainment/Publishing       8%            50%
Non-profit                          30%            30%
Professional Services               43%            22%
Retail                              30%            35%
Telecom/Utilities                   43%            29%
Transportation                      30%            30%

                                   Custom
Industry                         Development

Automotive                          17%
Chemicals, Mining, Oil/Gas          18%
Computers/Electronics                4%
Construction/Real Estate            23%
Consumer Goods                       5%
Financial Services                  31%
Healthcare/Pharmaceuticals          18%
Insurance                           36%
Leisure/Hospitality                  0%
Manufacturing - Discrete            10%
Manufacturing - Process              3%
Media/Entertainment/Publishing      42%
Non-profit                          40%
Professional Services               35%
Retail                              35%
Telecom/Utilities                   28%
Transportation                      40%

Not surprisingly, respondents' preferences for ERP become more pronounced as company size increases. Only in the less-than-$500-million category is there a preference for best-of-breed over ERP (59 percent vs. 23 percent). For companies with revenues in excess of $1-billion, more than 50 per cent opt for an enterprise solution. As noted in Section 2, the advantages of integrated solutions typically are more pronounced in larger companies, which have more facilities, a wider range of functional requirements, and a greater need for coordinated planning, scheduling, and customer service across multiple business units. Conversely, smaller companies may have less need for fully functional ERP because those companies often are less diverse. However, as noted in Figure 6.6, vehicle assemblers spend an average $5.8 million per ERP implementation, which is very low given the typically large size of an OEM. A reasonable conclusion is that such systems are confined largely to niche uses, such as accounting.