push to pull
TRANSCRIPT
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 1
From Push to Pull: Impact of Internet on Automobile Industry
Mario W. Cardullo, P.E.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 2
Why Push to Pull ?! North American automotive industry and their
networks of supplies and franchised dealers are facing a strategic inflection point.
! Consumers are becoming more comfortable using the Internet as a purchasing source, expectations from the automobile industry are not being fully met for buying vehicles.
! North American automobile industry must resolve the following question: Is it capable of meeting the challengers of the new economy?
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 3
Automobile Industry!16.9 million new vehicles were sold in
the U.S. in 1999, $650 billion retail revenues.
!Vehicles sold primarily through 22,400 dealerships.
! New models had little to do with what the customer immediately desired.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 4
Old Economy Industries Meet New Economy! New economy is based upon meeting
customer needs rapidly.! Important to look at the total supply chain
from the basic supplies through manufacturing and delivery.
! Physical products, such as automobiles must produced, delivered and serviced.
! Automobile industry divided between relationships and manufacturing processes.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 5
Make-to-Stock System
Suppliers
Purchasing ProductionControl
ProgramPlanning
Sales
Manufacturer DistributionCenter Dealers Customers Dealers
Physical Flow
Info
rmat
ion
Flow
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 6
New Economy = Internet Economy!Change occurs at Internet speed!Products lifetimes measured in months!Customers want immediate fulfillment of
customized products
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 7
Old Economy = Automobile Industry = Push!Push system focuses primarily on the
supply chain system.!Manufacturer plans number and type of
vehicles and orders required amount of parts.
!Current supply chain flawed and rigid!Manufacturer develops product and
then finds a market
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 8
New Economy = Future Automobile Industry = Pull!Focuses on value chain!Manufacturer identifies need and builds
product to satisfy that need.!Changing system pull requires changing
legacy supply and manufacturing systems, legacy cultures and existing regulatory structures.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 9
Internet Build-to-Order System
ProductionControl Dealer
Suppliers
Manufacturer Dealer
Customer
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Real-time Information Flow
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9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 10
Push versus Pull Automobile System
BuildShip as to
Plan
Build asRequiredShip as
Required
PlanReceive Parts
AssembleShip
Request PartsReceive PartsAssemble to
OrderShip to Order
ReceivePrepareMarket
SellService
Send OrdersPrepareSupply
Information
SupplyInformation
Supply Leads
SupplyInformationSend Orders
SeekInformation
Buy/Sell
SeekInformation
Buy/SellUsed Vehicles
ServiceParts
Internet VehicleServices
Used VehiclesServiceParts
InternetVehicle
Services
PUSH
PULL
AftermarketConsumersE-SellersDealersManufacturersSuppliers
B2B B2C B2V
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 11
Automobile industry value chain!Business-to-Business (B2B) !Modular Manufacturing System (MMS) !Business-to-Consumer (B2C) !Business-to-Service (B2S) !Business-to-Vehicle (B2V)
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 12
Benefits of Implementing Internet Strategies
Pull Plus Elements Industry Benefits ($ billion annually)
Vehicle Savings ($ per vehicles)
B2B 18.3 1,064 or 5.3%
MMS 18 1,000 or 5%
B2C 44.4 2,579 or 12.9%
B2S Unknown Unknown
B2V Added market of 24 to 48 with operating income potential of 8.2 to 16.3
Additional cost to users of $240 to $480 annually
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 13
Business-to-Business (B2B) ! Development of Internet procurement
systems such as Covisint, Auto-Xchange, Trade-Xchange, and supplier initiatives.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 14
Benefits to Suppliers of B2B Implementation
Annual Savings ($ millions)
WIP Procurement Process
Total
Tier 1 390 4,545 4,935
Tier 2-4 764 6,259 7,023
TOTAL 1,154 10,804 11,958
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 15
Modular Manufacturing Systems (MMS)
! Development of prototype modular manufacturing facilities in cooperation with Tier 1 suppliers and assemblers.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 16
Business-to-Consumer (B2C) ! Development of information intensive
web sites and cooperative business models with existing dealers and dotcoms. Experimentation in foreign countries of direct manufacturer-consumer relationships.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 17
Savings to North American Automobile Dealers of B2C
Dealer Component Annual Potential Savings ($ million)
Inventory 3,952
Sales Commission 4,916 – 6,554
Overhead 3,236
TOTAL POTENTIAL SAVINGS
12,104 – 13,742
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 18
Business-to-Service (B2S) !Movement of dealers and industry to
implement sales and service models using the Internet.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 19
Business-to-Vehicle (B2V) !Lead by GM and their OnStar model,
Ford and other members of the industry are preparing to deliver Internet ready vehicles and services.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 20
We live in automobiles!US consumers spend approximately
500 million passenger hours per year in their vehicles.
!Approximately 210 million vehicles are in use.
! Industry sells annually approximately 17 million
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 21
B2V: The Car of the Future !Safety!Security!Productivity/Connectivity!Convenience!Entertainment
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 22
Marketspace Potential of B2V
$100,000,000
$1,000,000,000
$10,000,000,000
$100,000,000,000
2000 2002 2004 2006 2008 2010
Mar
ket P
oten
tial f
or B
2V
$20 per month per
$40 per month per vehicle
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 23
Will automobile industry capture this potential?!Based on operating margins of 34
percent, can provide operating income of between $8.2 and $16.3 billion to the operators of these B2V systems.
!B2V operating income addition can be eventually of the same order of magnitude.
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 24
Economic Savings of Implementation Automobile Industry Internet Strategy
Value Chain Savings per Day
B2B(Business-to-
Business)
$49 million
MMS(Modular
Manufacturing Systems)
$49 million
B2C(Business-to-Consumer)
$121 million
Total Savings $219 million
9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 25
Range of Implementation Times
Component Implementation Time
(years)
Potential Cost of Delays
B2B 3 to 5 $54 to $90 billion
MMS 4 to 6 $72 to $108 billion
B2C 5 to 10 $220 to $440 billion
From Push to Pull 5 to 10 $400 to $638 billion