IT and Enterprise Transformation
in the Automobile World
John Leslie King
John Leslie King
Vladislav V. Fomin
School of Information
University of Michigan
jlking@umich.edu
vvfomin@umich.edu
Kalle Lyytinen
Sean McGann
Weatherhead School
Case-Western Reserve Univ.
kjl13@po.cwru.edu
stm3@weatherhead.cwru.edu
Supported in part by a grant from the NSF Digital Society and Technology Program
The Industry Today
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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
Fuel supply to air
Incoming air
Exhaust gasses
(CO, NoX, CO2,
ozone, unburned
hydrocarbons)
Pre-1972
Post-1978
P
T
Computer
Oxygen sensor
Fuel inject/induct
Incoming air
3-way catalytic
converter
Passenger Safety
Pre-1978
Post-1978
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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
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Automatic seat belts
Air bags
ABS
Traction control
• Controversies (e.g., air bag deaths)
• Smart passive restraint systems
• IVHS devices and systems
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
1960
• Market-coordinated
supply chains
• Inattention to
externalities
• Fire-and-forget
customer relationship
• Product industry
2000
• Partnership-driven supply
chains
• Internalization of a broad
variety of costs
• Intimate and protracted
customer relationships
• Service industry