2002
Current savings per car, as a direct result of the application of Internet technologies, are only around €100, according to a new study of the European automotive industry
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22 April 2002
European automotive manufacturers have traditionally been among the leaders to embrace new technologies, but a recent study, carried out by PA Consulting Group, indicates that the industry has not managed to fully leverage the financial and commercial opportunities created by the e-business evolution. In addition, performance gains are not evenly spread throughout the supply chain, and the impact on the final manufactured product cost is substantially less than the potential that opinion-formers have indicated.
PA's recent survey, carried out in collaboration with the University of Frankfurt, assessed the level of e-business maturity across the European automotive industry value chain - the original equipment manufacturers (OEM) and supporting supplier tiers.
Thomas Burmeister, senior PA consultant based in Frankfurt commented:
"The automotive industry across Europe is actually not as mature in terms of e-business as might be thought and companies are failing to come together as an industry, to work more effectively and efficiently using e-business solutions."
Our key findings were that:
- The average savings per car currently being achieved as a direct result of the application of Internet technologies within the industry are only around €100. This is in stark comparison to previously reported potential savings figures of between $639 and $4,000. This low rate of savings, which may come as a surprise to some observers, has been calculated across the entire value chain where 73% of the benefits have been taken by the OEMs, leaving only 27% from all three supporting tiers. It could be argued that the OEMs, perhaps due to their disproportionate sharing of the savings, have failed to persuade the rest of the industry of the benefits of e-business solutions.
- Low levels of marketplace procurement still centre on trading standardized products. Marketplaces can result in better prices for non-productive goods but are used primarily as a research tool. The majority of respondents (56%) were unclear of the cost/benefit ratio and only 16% actually claim to undertake serious trading activities using marketplaces.
- Whilst 42% of companies currently use the Internet for purchasing materials, this covers less than 5% of the overall procurement spend. It is currently used mainly to purchase office supplies; but respondents expect that its use to procure productive goods will double in the next year. Most businesses surveyed are saving more than 5% of their purchasing transaction costs, but unit purchase price reductions are significantly less with 47% reporting no change in the price for productive materials.
- EDI continues to dominate supply chain and collaborative management information exchange, where 76% of the respondents are using EDI against 28% using Internet base applications. Furthermore, there is reluctance to move away from EDI solutions, and only 12% of all companies plan to implement web-based applications in the near future. "We invested heavily in EDI which is up and running very smoothly. Why should I now invest again in new technology without getting any further benefits out of it?" - small tier one supplier.
- Many companies (66%) lack a company-wide e-business strategy or do not consider
e-business to be part of their overall strategy. Of those that do include e-business within the overall business strategy, many have failed to integrate e-business processes into ERP systems, thereby missing out on the full potential of reducing transaction costs.
PA concludes that, despite perceptions, the industry cannot be seen as being in the forefront of leveraging the opportunities of the Internet. OEMs can be called e-mature in terms of
e-procurement of non-productive goods, but in other high potential areas, such as supply chain management and collaborative engineering, the benefits are still to be realised.
Thomas Burmeister comments:
"The overall low impact of e-business on this apparently advanced sector should be a loud wake-up call to the industry. Individual initiatives are not enough. A more co-ordinated pan-industry approach needs to evolve if the savings are to reach anything like those predicted. It remains to be seen if OEMs take up the challenge to persuade the lower tiers of the value that can be collectively gained, and thereby speed up the process of e-maturity."
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For more information, please contact:
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| Linda Pearse |
| PA Consulting Group |
| Cambridge Technology Centre Melbourn |
| Royston |
| SG8 6DP |
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Tel: +44 1763 267137 |
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Fax: +44 20 7333 5050 |
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E-mail:
linda.pearse@paconsulting.com |
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Notes to editors
Survey methodology: PA surveyed 135 organizations comprising OEMs through the three supplier tiers, drawn from across Europe. The postal questionnaire was supplemented by face-to-face interviews during Autumn 2001. Respondents were principally directors and managers of
e-business, IT and procurement.
PA Consulting Group is a leading management, systems and technology consulting firm, with a unique combination of these capabilities. Established almost 60 years ago, and operating world-wide from over 40 offices in more than 20 countries, PA draws on the knowledge and experience of around 4,000 people, whose skills span the initial generation of ideas and insights all the way through to detailed implementation.
PA builds strategies for the creation and capture of shareholder and customer value, and helps clients accelerate business growth through innovation and the application of technology. PA works with clients to improve performance, mobilize human resources and deliver change effectively, including managing major projects, and designing and implementing enterprise-wide systems and full e-business solutions.
PA focuses on creating benefits for clients rather than merely proposing them, and this focus is supported by an outstanding implementation track record in every major industry and for governments around the world. PA also develops leading-edge technology both for its clients and within its own portfolio of venture companies in areas ranging from software to wireless technology to life sciences.
PA distinguishes itself from its competitors through the range and quality of its people, the depth of its industry insight, its development and use of technology, and also its independence and culture of respect, collaboration and flexibility in working with clients.
We are proud that our clients say "PA makes it happen".
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