Profit margins in car making are
increasingly being eroded and now are rarely more than three per cent.
The cyclical nature of the car business
means that producers save up profits from the fat years in order to see them through the
lean years, which invariably follow. With competition increasing, product cycles have
become shorter and many firms are still trying to emulate the Japanese four year product
replacement cycle. As a result, competing models are often launched within months of each
other. This means each firm’s model spends less time than in the past being new and
desirable and this affects sales.
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It is increasingly difficult to recover the
development costs of new models and the inherent high cost of mass car production is
largely to blame.
In order to recover the economies of scale
needed to operate profitably, the industry has entered a major globalization phase.
Much of the cost of designing and producing
a car is determined by engines and the steel unibody construction, so moving towards a
global car, to allow the recovery of costs by much higher volumes sold worldwide, is seen
as a solution.
Unfortunately though, different markets do
not always respond equally well to the same car. Nevertheless, many manufacturers are now
pushing ahead with a world car approach.
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By GlobalDataA common platform
Another way of going about it is to use a common platform. The platform, which represents
the chassis in a modern unibody car, can account for up to 40 per cent of the cost of a
car body in development and production terms. However, it does allow different
superstructures to be built on it so that cars can look different from market to market.
Engines, transmissions and other sub-assemblies can be used globally with minor changes.
Both these approaches allow product
development to be centralized, to reduce costs, but production to be localized in the
markets where the different versions are sold. For this reason, the term
‘glocalization’ is emerging. It is clear, that with these developments, internal
communications and data exchange within car makers’ own networks and with their
suppliers becomes vital.
To achieve effective data exchange many
organizations are embracing the approach of implementing effective Electronic Data
Interchange (EDI) communications with their suppliers.
By working with solutions providers such as
JBA, organizations are able to integrate the software and business practices for EDI into
their key business processes to maximize the benefit.
As globalization increases the number of
links in the Supply Chain, EDI allows not only fast, reliable data exchange, but also
manages the change in communications methods. JBA System 21 has adopted the approach of
supporting industry standard definitions for EDI messages, enabling two partners in a
global organization to ‘talk the same language’ when transmitting data. In this
way System 21 reduces some of the major problems found in organizations faced with
globalization.
