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Speed: Automakers rely on IT to build cars faster (and cheaper)
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August 12, 2002 (Computerworld) -- For General Motors Corp., Ford Motor Co. and DaimlerChrysler AG, the bottom line is, and always will be, to sell more cars than the other guy. To win that race, especially in the current economy, an automaker has to build cars better and faster than its competitors and sell them at a higher profit margin. To accomplish those goals, all three automakers are relying more than ever on IT to streamline operations, cut costs, improve quality and speed up production.
The biggest of the Big Three, GM, is pushing to become the world's first digital manufacturing company by embedding digital technology into virtually every one of its core business processes and linking them on common computing platforms. The idea is to shave time and costs off everyday operations by connecting people, processes and technology in real time.
CIO Ralph Szygenda says the ultimate goal is to revolutionize GM's culture and change the way consumers, suppliers and dealers do business with the company. The only way to do that, he says, is to marry the adroit application of IT with the opportunities provided by the Internet to change processes as well as culture. It's a transformation that's already well under way with several Internet applications.
Ralph Szygenda, CIO at General Motors Corp.
For the past six years, Szygenda and his team have been cleaning and rebuilding GM's worldwide IT house. When they first started, GM's business operations weren't very well integrated with IT. In fact, they were separate business units, Szygenda says.
"We had to change the speed of how we do things at GM," he says.
So he and his team of 1,700 Information Systems and Services (ISS) employees ripped out 3,500 of the company's 7,000 legacy systems and replaced them with $1.7 billion worth of Internet applications. Today these are the foundation for GM's business web, which links the company with its suppliers, dealers, customers and employees. GM's ISS group develops applications, but Electronic Data Systems Corp. in Plano, Texas, its primary outsourcer, builds and implements them.
The business web also incorporates innovations such as customer data warehouses, integrated service centers and customer relationship management applications. Those features are intended to create value by attracting and retaining customers through cross-selling and optimizing customer interactions with the company, Szygenda says. There's also a significant financial payoff: Since 1996, streamlining IT has shaved about $800 million per year from GM's annual IT budget, which is $3 billion for 2002, allowing the automaker to recoup its initial investment of more than $1.7 billion twofold.
What's more, product development time—from design to production—for all GM products has dropped from 45 months to between 18 and 24 months. Since GM has digitized the design and conceptualization of its vehicles, new cars are designed with a computer-aided design (CAD) program, and die construction and structural testing are done with computer modeling.
Marv Adams, CIO at Ford Motor Co.
Adams says Ford's IT strategy reflects the companywide back-to-basics philosophy. The automaker is standardizing and simplifying its core IT infrastructure and building out an enterprisewide Web services-like architecture that it believes is critical to delivering the kind of integrated, real-time systems the automaker needs in order to speed development and production and cut costs.
Like GM, Adams says, Ford has hundreds of disparate data and legacy communications systems. Ford's goal is to have a standard set of real-time systems that allow data to be transparent across all business units, he says. "In three to five years, we hope to have only five core platforms," he says.
Such standardization and simplification are already saving Ford $150 million per year out of its $3 billion IT budget—money the company uses to fund new IT initiatives, such as eSmart, a parts replenishment system developed by Santa Clara, Calif.-based WhereNet Corp. This real-time parts-locating system is based on a wireless tag and a network of readers that locate and track tags that have been attached to supplies. The system also provides a database of parts information, which in turn supports supply chain visibility applications.
The eSmart system speeds production by letting manufacturing line workers submit parts requests for delivery to their workstations by simply triggering a button on the WhereNet system. A timer enhancement invented by a Ford employee allows users to manage the call process more effectively by keeping track of exactly which part was called, when it was called and the duration of the delivery process.
"ESmart lets us have the right inventory at the line at the right time," says Kristin Odeh, director of Ford's global consumer systems. "It also lets our suppliers know when parts are low so they can start shipping into our warehouse."
Adams says Ford is also in Phase 1 of a three-year initiative, started earlier this year, to build an enterprisewide Web services-like architecture that is designed to support the integrated real-time information-sharing that Ford needs in order to build cars cheaper and faster.
Over the three years of the project, Ford could save as much as $300 million, Adams says. Consolidating its legacy systems has already helped Ford cut its vehicle development time from 37 months to 24 or less, he says.
At DaimlerChrysler, CIO Sue Unger says it's critical to integrate IT with the company's business strategy and to standardize its infrastructure to stay competitive in the race to sell more cars.
Two years ago, DaimlerChrysler unveiled a three-year Web-based initiative called FastCar, which includes the deployment of a Web infrastructure that links all aspects of vehicle design, production, financing and marketing, plus procurement and logistics operations.
FastCar provides real-time transparency to the product development process by linking the company's CAD software with the business infrastructure. Already, the vehicle production time has been cut from five years down to 12 to 18 months, Unger says.
"Going forward, we see a huge opportunity for us to streamline our infrastructure and look for ways to drive costs out and reinvest those savings back into upgrading the infrastructure," says Vince Morrotti, DaimlerChrysler's chief technology officer.
Morrotti says the company is also looking to drive costs out of its IT budget by consolidating its 76 global sales and marketing data centers into four regional, massively scaled data centers.
Unger declined to say how much DaimlerChrysler spends on IT annually, but she says the company is saving 15% to 25% every year because of its consolidation efforts and IT's tight alignment with the business overall.
"It's really important that IT is heavily aligned with our business strategy," Unger says. "We are right up front with our business partners to understand where they are going and what they want to accomplish. Our role is also to look at current or new technology to see how it might impact their business objectives."
The Big Three at a Glance
General Motors Corp.
2001 Revenue: $177 billion
Net Income: $601 million
Vehicles Sold: 8.5 million
Manufacturing Plants: 233 in more than 30 countries
Annual IT Budget: $3 billion
Ford Motor Co.
2001 Revenue: $162 billion
Net Loss: $5.5 billion
Vehicles Sold: 7 million
Manufacturing Plants: 180 in more than 26 countries
Annual IT Budget: $3 billion
DaimlerChrysler AG
2001 Revenue: $136 billion
Net Loss: 590 million
Vehicles Sold: 4.5 million
Manufacturing Plants: 180 in more than 37 countries
Annual IT Budget: Company wouldn't disclose
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