Selling cars online:Build to order.

Hi guys!! I found new interesting articles to post. ts about the marketing plan that been applied in some automotive companies. It also shows the transformation from the traditional to electronic system in the marketing. so, please read and leave ur comments. Thanks to En Iskandar for the explaination and materials.

The world’s automobile manufacturers are complex enterprises with thousands of suppliers and millions of customers. Their traditional channel for distributing cars has been the automobile dealer , who orders car and then sells them from the lot. When a customer want a particular feature or color (“options”), the customer may have to wait weeks or months until the “pipeline” of vehicles has that particular car on the production line.

In the traditional system, the manufacturers conduct market research in order to estimate which features and options will sell well, and then they make the cars they wish to sell. In some cases, certain cars are ultimately sold from stock at a loss when the market exhibits insufficient demand for a particular vehicle. The car makers have long operated under this “build-to-stock” environment, building cars that are carried as inventory during the outbound logistics process (ships, trucks, trains, and dealer’ lots). General Motors (GM) estimates that it holds as much as $40-bilions worth of unsold vehicles in its distribution channels. Other automakers hold large amounts as well.

Ford and GM, along with other automakers along the world, have announced plans to implement a build-to-order program, much like Dell approach to building computers. These auto giants intend to transform themselves from build-to-stock companies to build-to-order companies, thereby cutting inventory requirement in half, while at the same time giving customers the vehicle they want in a short period (e.g. one to two weeks). However, according to Weiner (2006) this transformation has so far been “doomed to failure by rigid production processes, inflexible product structures, the lack of integrated logistics processes, and inadequate networking of manufacturers, suppliers and customers. “Only when a network of suppliers producing standard modules for cars using standardized processes and IT systems will the dream of a truly agile and responsive supply chain delivering build-to-customer-order capability order be realized.

As an example of this trend toward build-to-order mass customization in the new car market, Jaguar car buyers can build a dream car online. On Jaguar’s Web site (jaguar.com), consumers are able to custom configure their car’s features and components, see it online, price it, and have it delivered to a nearby dealer. Using a virtual car on the Web Site, customer can view in real time more than 1250 possible exterior combinations out of several million, rotate the image 360 degrees , and see the price updated automatically with each selection of trim or accessories. After storing the car in the virtual garage, the customer can decide on the purchase and select a dealer at which to pick up the completed car. (thus, conflicts with the established dealer network channel are avoided). The Web site helps primarily with the research process –it is not fully transactional site. The configuration, however can be transmitted to the production floor, thereby reducing delivery time and contributing to increased customer satisfaction. Similar configuration system are available from all the major car manufacturers. Customer can electronically track the progress of the car, including visualization of the production process in the factory. Another similarly impressive Web site with similar functionality is hummr.com.

Sources: Compiled from agrawal et al. (2001), Gapper(2004), jaguar.com(accessed September 2006), Voigt t al. (2006), Weiner (2006), and Knowledge@Wharton(2005).