IT and Enterprise Transformation in the Automobile World

John Leslie King

John Leslie KingVladislav V. Fomin

School of InformationUniversity of Michigan

jlking@umich.eduvvfomin@umich.edu

Kalle LyytinenSean McGann

Weatherhead School Case-Western Reserve Univ.

kjl13@po.cwru.edustm3@weatherhead.cwru.edu

Supported in part by a grant from the NSF Digital Society and Technology Program

The Industry Today• 40 million cars produced globally• 550 million cars in use globally• 134 million US cars in use in 2001 (24% of global)• 5,000 firms, 670,000 workers in US OEM/suppliers:

Context• New vehicles = 7% of automobiles and decreasing• Service is the primary source of profit• Complementary components (service, insurance, roads,

fuel) much larger than OEM/Supplier base.• “Automobile World” is 1/7 jobs in the US economy.• >50% of Los Angeles land is for motor vehicles.

The Contemporary Focus

• “E-business” in the Auto World– Direct sales (e.g., AutoNation, dealers)– Reference (Auto-by-Tel, FordDirect)– Price/product finding (Carpoint, Edmunds)

• Supply Chain coordination– Clearinghouse/Auction systems (Covisint)– Vertical sourcing (e.g., proprietary EDI)

• Entertainment and Communications– Passenger entertainment (HiFi branding)– Passenger communications (cellphones)– Vehicle location and monitoring (OnStar)

A Broader Focus

• IT is pervasive and embedded in the automobile world but its greatest effects are largely invisible

• IT enables but seldom causes transformation• Focus on two examples:

– Atmospheric emissions control– Passenger safety

Atmospheric Emissions Control

Incoming airFuel supply to air

Exhaust gasses(CO, NoX, CO2,ozone, unburnedhydrocarbons)

Fuel inject/induct

Incoming air

P T

3-way catalyticconverter

Oxygen sensor

Pre-1972

Post-1978Computer

Passenger Safety

• Polyvinyl acetate laminate safety glass, 1938• Passenger restraint legislation, early 1960’s• Nader -- Unsafe at Any Speed, 1965• Consumer Product Safety Commission 1972• Safety features in US auto marketing• Pinto liability case, 1978

• Passive passenger restraint efforts– Automatic seat belts– Air bags– ABS– Traction control

• Controversies (e.g., air bag deaths)• Smart passive restraint systems• IVHS devices and systems

Pre-1978

Post-1978

Ecological Shift

• Closed-loop emissions control– Manufacturing liability and extended warranty to

5 years/50,000 miles• Passenger safety

– Design liability of unlimited duration• The key impact of IT is in record keeping systems

– Vehicle/Owner matching and notification for warranty and passenger safety recall

– Actuarial analysis in insurance--> legislation--> OEM loop

Transformation, Indeed

• A combination of forces: – technology, institutions, and the social

construction of reality • Ability to link liability throughout unit life cycle to

the OEM• Shift in financing patterns (lease, vehicle HMO)• EU regulations regarding residual claimant

responsibility for vehicle recycling/disposal• If you cannot escape the liability, why sell the asset?

Summary

• Market-coordinated supply chains

• Inattention to externalities

• Fire-and-forget customer relationship

• Product industry

• Partnership-driven supply chains

• Internalization of a broad variety of costs

• Intimate and protracted customer relationships

• Service industry

1960 2000