20 April 2000 | Elizabeth Bellamy
Car manufacturers that do not introduce customer-driven, build-to-order supply chains risk high levels of stock and lower profits, according to research released this month.
The focus of the automotive industry on gaining market share and producing to full capacity has led it to neglect customer demand, said John Whiteman, project director for the Three-Day Car programme, a joint research initiative between the University of Bath, Cardiff University, the government and industry.
Car makers have made great progress in cutting inventory and lead times in the past 10 years, said Joe Miemczyk, a researcher on the programme. But improvements could still be made in the distribution of finished vehicles, he said.
Traditionally, vehicles were despatched directly to car dealers, where they awaited sale, said Whiteman. This often led to dealers having excess stock and forcing them to haggle with customers to reduce it. Customers then had the upper hand in negotiations as they could choose only from what was in stock, which they were quick to point out, he added.
Another problem was that manufacturing managers "tended to make as many cars as possible, but did not take into account the total cost of disposing of these", said Whiteman.
But there have been some improvements, he said. In the past six years, manufacturers have introduced regional and national distribution centres from which dealers can draw when they receive orders. "The average car takes 39 days to build to order, but only two of those days is spent building it in the factory," said Whiteman.
The "ultimate" customer-driven supply chain would see customers receive a car within three days of ordering from their dealer, he explained.
A spokesman for Honda said that the automotive industry will increasingly move towards a build-to-order system, but that it will be natural for car manufacturers to continue to build a pool of cars that they knew would sell quickly.
The trend was more likely to be adopted first in the specialist and niche markets, which already produce a large number of cars to customers' orders, he said.
The move towards build-to-order manufacturing was hampered by customer expectations, the spokesman added, as buyers were "not prepared to wait another six to eight weeks once they had decided to buy".
Around 5 per cent of Honda's sales come from build-to-order customer requests for models such as the Prelude and Legend, he said.