General Motors Corp. has, for years, been groping for ways to arrest its declining market share. One of its latest brainstorms is to jump onto the Internet band-wagon with a plan that would allow customers to order precisely the models and the options they want, over the Internet, and have the car delivered in four to 11 days.
Wow! That sounds great, considering the car I just bought took three months to deliver. Now, granted I didn't get a GM car, but I know the delivery time is typical of many manufacturers. A recent Wall Street Journal story was very up-beat and tried to suggest that GM has finally found a way to connect with what the customer really wants.
Well, I'm from manufacturing and we've seen our share of brainstorms come and go. We have a saying: "You can draw a toilet on paper, but you can't flush it."
The program sounds good. The customer doesn't have to take potluck from the dealer's lot if he or she wants a car right away, or wait a couple of months to get the car they really want.
The Internet plan will allow customers to customize their order. Does that mean the customer will be able to order from an increasing number of colors, fabrics, wheel covers, engine configurations, etc.? I sure hope it doesn't get as bad as it used to be years ago, when you could order umpteen different kinds of options. It took those of us in manufacturing years to convince people to standardize more frequently ordered options and to get rid of the "onesy, twosy," type orders. This improved production line efficiency, considerably reduced inventories and - most importantly - reduced costs.
Although the proliferation of options might not be as bad as it was years ago, it still sounds like GM will offer customers more.
The program will not increase inventory at the build plant, the article says. Translated, that means the supplier will be forced to carry the inventory.
It would be naive to think the supplier is going to have its production lines set up for the exact part the customer will happen to order. Therefore, to accommodate the fast delivery times that GM is talking about, the supplier is going to have to have larger inventories. That translates into higher costs.
Another thing: How many people do you think will just sit down and order a car over the Internet without first going to a dealer and looking at the car, kicking tires and slamming some doors?
Also, how is the car going to be delivered, by UPS or FedEx? I'll assume delivery will be made through a dealer.
I'd be willing to bet the dealer is not going to be too happy about becoming just a showroom and a pick-up point for cars.
It might be that GM is thinking about having company stores where customers could pick up their cars. This almost certainly would be in violation of their dealers' franchise.
The answer might be, going along with the idea, to let the dealer participate in this program. If GM can deliver the cars in four to 11 days like it says, the dealer wouldn't have to keep the huge inventories he now has. All he would have is a couple of cars for show. The savings would be considerable if you add up the inventories of all the dealers. I'm sure it would more than offset the $400 million that GM says this program would cost, and the savings could then be passed on to the customer. After all, based on the 4 million cars GM sells, that would be equal to a savings of $100 per car.
Before we get too carried away with all of this, let's go back and take a look at the original premise. What the customer really wants is fast delivery. I have to question this because, after all, people are willing to wait four to six months to get furniture delivered. Also, based on a J.D. Power & Associates survey, the 10 things the customer really wants, listed in order of their preference are: 1. Front-seat side air bags; 2. "Smart" frontal air bags; 3. Daytime running lights; 4. Run-flat tires; 5. Electronic traction control; 6. Rear seat air bags, 7. Adaptive cruise control; 8. Emergency notification and 911 dialing; 9. Proximity sensor; 10. Navigation system.
Fast delivery is nowhere on that list. I think the customer is more interested in the quality of the product than he is in fast delivery. I'd also like to note that of the 10 items listed above, all but No. 8 were introduced by foreign manufactures.
Obviously, companies can't ignore the Internet. But if GM wants to regain market share it must do what its smaller successful competitors are doing: Develop products that people want, improve quality and reduce costs.