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Low-Cost Communications Tools Boost Profits for Manufacturers

As traditional automakers continue to struggle with declining market share and unsold inventories begging for buyers, some innovative manufacturers are learning how to capitalize on ubiquitous communications networks for higher profits.

“Today companies have the opportunity to have end-to-end visibility and collaboration across the value chain from end customer demand to supply. As a result, companies can become more demand-driven as opposed to supply-driven, in other words, move from a model of selling what they build to actually building what they can sell,” says Maha Muzumdar, Oracle’s vice president of supply chain marketing.

Knowing What Customers Want
That information sends a steady flow of customer demand activity up and down supply chains to give manufacturers, suppliers, and distributors near real-time insights into what goods they should produce. Companies that understand how to integrate these tools into their core processes eliminate cumbersome faxes, expensive phone calls, or hard-copy correspondence that takes weeks to reach offshore suppliers.

And that’s changing how manufacturers do business. For years, anxious car buyers often had to wait months for their custom-ordered prize to arrive at the local dealership. Buyers may have assumed the delays came from adjustments to the manufacturing process to create their uniquely configured cars. But the real culprits were plodding communications and manual workflows that often required four to six weeks of processing time to funnel invoices and bills of materials through the supply chain’s approval processes.

“Somebody had to punch in the order, validate it, configure it, and enter it into the system,” Slade says.

Ironically, the combined assembly and delivery times often took only about two weeks.

Low-Cost Communications
Now, some innovative companies are using low-cost communications platforms to capture customer demand data and move it throughout their internal operations and to outside suppliers and various levels
of subcontractors.

The diminutive Smart car, a US$12,000 two-seater built by Mercedes and distributed in the U.S. by Penske Automotive, is bought direct by Web-based orders from customers to determine the colors and options to build into each car.

In addition to increased efficiencies, modern communications help the supply chain dedicate resources to vehicles with waiting buyers, rather than build spec models that may ultimately languish on dealer lots. The result: The Smart car is estimated by its dealers to see profits about 2 percent higher than auto industry norms.