Auto Industry Way Behind in E-Business Race

The automotive industry is far behind other industries in terms of e-business progress and must overcome significant cultural, technological, and security issues to move forward, according to the results of a study by KPMG.

KPMG’s global study of automotive leaders from multinational OEMs and Tier 1 and Tier 2 suppliers in the United States, England, Germany and Japan was conducted in October and November 2000. It found a lack of trust between suppliers and OEMs to be holding back e-business progress.

“One of the hallmarks of successful e-business is integration of the value chain,” said Brian Ambrose, national industry director of KPMG’s automotive practice. “Instead of keeping all your cards close to the vest, share some of what you are holding with your value chain partners. It isn’t a zero-sum game where your win is a value chain partner’s loss. It can be a win-win game where the whole value chain shares information and objectives.”

According to Ambrose, automotive chief executives need to follow two tracks to be successful. They must adopt an e-business vision that encompasses the entire value chain; and second, they can force change in their own organizations by instilling an e-business challenge that touches every employee. In terms of their own organizations succeeding at e-business, Ambrose says progress must come bottom-up, not top down.

“The CEO must challenge its operating units to foster e-business ideas and initiatives,” Ambrose said. “It is then up to the CEO and executive ranks to fund those ideas that are warranted and leverage the successful ones, where possible, across the organization.”

In addition to the findings of its current B2B E-Commerce study, KPMG and the Economist Intelligence Unit conducted another in June and July 2000 and found the automotive industry trailing six other industries (financial services, chemical, pharmaceutical, electronics, consumer markets, and communications) in terms of e-business progress, measured by advances in technology and to what degree senior management was involved in e-business implementation. The survey found that only 35 percent of automotive senior execs were actively involved in e-business initiatives, which was by far the lowest response of all industries, and quite lower than the cross-industry average of 58 percent.

When asked about the potential barriers to e-business implementation, the executives in the KPMG/EIU survey cited cost (51 percent), followed by the need to re-engineer business processes (47 percent), and the lack of e-business skills (45 percent).

The current KPMG study finds that although technology costs are a factor, many are waiting to see what the competition does.

“Business drives technology,” Ambrose said. “It’s not the other way around. Automotive companies need to move their business agenda forward, and use technology appropriately to do so. Furthermore, waiting to see what a competitor does is not a sound strategy in the e-business world because those who take a leadership position stand to gain the most in terms of strengthening their balance sheets for acquisitions. Leaders will be rewarded and followers forced to merge.”

KPMG’s latest study also found that the majority of respondents reported widespread concern about security issues. Respondents cited security as one of the factors prohibiting OEMs and suppliers from swiftly adopting digital solutions.

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