Researchers find that the automobile industry and its supply base ranked last in terms of technological preparedness as well as organizational commitment to digitization.
That's the conclusion of a broad-ranging survey unveiled Wednesday by the automotive consulting practice of KPMG International. Researchers presented the severely unflattering survey, prepared in conjunction with The Economist Intelligence Unit, during a media conference at the 2001 North American International Show--usually a venue where proud industry executives tout technological savoir faire.
In a two-month survey of 331 executives on three continents in seven distinct industries, researchers found that the automobile industry and its supply base ranked last in terms of technological preparedness as well as organizational commitment to digitization.
Electronics and financial services were the top-rated industries. Chemical and pharmaceutical sectors competed for the bottom position with automotive and manufacturing companies.
The study found that automobile suppliers--the companies that build unglamorous but necessary parts ranging from brake systems to grommets and floor mats--perceived five giant risks that have scared them to near paralysis:
• A security risk, in which suppliers' competitors get to peek at proprietary designs if they transmit them online.
• A standards risk, in which suppliers purchase expensive and complicated software that must soon be replaced with a new system.
• An implementation risk, in which the software, online exchanges and other digital initiatives fail to deliver on their promises.
• An early-adopter risk, in which a well-intentioned supplier takes the plunge but then becomes a guinea pig or beta test for the rest of the industry.
• An opportunity risk, in which a supplier spends millions or billions of dollars on software and technology that could have been spent on core competencies such as factory upgrades, wage hikes or other more tangible benefits.
Researchers found that the auto industry's biggest hindrance is a distinct lack of trust among automakers--among the largest industrial corporations in the world--and the 30,000 or more suppliers that build and design parts for them.
"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 partner's loss. It can be a win-win game where the whole value chain shares information and objectives."
The lack of trust among large automakers and the relatively small suppliers has become a sticky subject for Covisint, a giant automotive parts mall on the Web. KPMG researchers say the tortured project is perhaps most bogged down by suppliers who are skeptical of sharing purchasing or design information with competing automakers and supplier rivals, factions that in some cases have been at odds for more than a century.
Ambrose noted that security concerns could also be perceived as the flip side of deep cultural divisions that separate Covisint's founding partners--General Motors, Ford Motor and DaimlerChrysler, not to mention rival tier-one suppliers such as Lear, Johnson Controls, Visteon and Delphi.
Although lack of trust is an overriding concern for Covisint, the complicated and controversial project has been beset by turmoil almost since its inception 11 months ago. It was originally mired in a high-profile antitrust investigation, and it is now engaged in a grueling hunt for a chief executive officer and permanent headquarters.
In addition to lacking trust in the venture, suppliers told KPMG researchers that they believed the expected benefits of Covisint, or any other online exchange, were highly overrated.
Many margin-squeezed suppliers also lamented that they don't have the capital required to invest in technology--especially as the economy heads into a cooling period, and many industrial companies are trimming information technology budgets to focus on core competencies.