Valvoline.com

Built-To-Order Vehicles

Couture voitures are coming

Technology has changed not only the way we buy little things like books and rare Pez dispensers, but it's actually revolutionized the way we buy bigger purchases, like cars and trucks. While the NASDAQ currently hints that the Internet is next to useless, the auto industry has a different story to tell: Providing massive amounts of information on many different levels of sophistication, the Internet has proven to be a useful—and popular—tool for people in the market for a new car. In fact, over 50% of people who actually buy new cars have in one way or another started by researching the purchase online. Whether it's reading reviews or studying the car company's web site, comparing pricing or securing a loan, the experience of buying a new car has changed.

But that's just the tip of the iceberg: One of the most significant changes that technology has brought to both the customer and the car company is the concept of build-to-order. The idea is that a customer can go online (or to the dealer) and choose the colors they want, the fabrics, the "trim level" or options and equipment, work out all their financing, and click! The main difference is that this car likely won't be built on a massive factory assembly line but instead pieced together via a well-connected chain of suppliers (along the lines of how AM General used to merely assemble Hummers from out-sourced parts). The customer is thrilled because they get precisely what they want, the car company becomes more efficient as they build only the cars that people want, and the dealer won't have to carry the costs of stockpiling vehicles that don't sell.

Sell Like Dell

Perhaps the model for this kind of manufacturing is Dell Computers. Instead of building up a bunch of stores full of staff and inventory, Michael Dell chose to be a direct retailer and focused his business model on building each machine to the customer's specifications. He controlled his product. He controlled his distribution. Instead of paying all his vendors ahead of time to build a bunch of computers and then send them out and pay rent on stores and salaries for sales staff, the consumer pays Dell in advance. The benefits are clear: Dell sells what it makes and gets paid up-front.

But while Dell can assemble and ship a computer in a matter of days, the auto industry needs weeks or maybe even months to make and deliver a custom-spec'd car. The one thing all Americans hate: waiting. "We've done build-to-order for 100 years with the Mercedes brand in Europe, where 80 percent of the customers are more interested in custom products and are willing to wait," says Deiter Zetsche, Chrysler Group President and CEO. As the head of Chrysler in America, Zetsche observes a major difference between his native and adopted cultures: The Europeans will wait for what they want, "but I don't see the American customer interested in waiting."

One of the reasons it takes so long for these "custom" cars to get made is because modern, highly automated, assembly lines aren't made for low-volume, customized production. Billions of dollars have been invested in producing bulk quantities as efficiently as possible. However, factories might need to change their ways of doing things for long-term survival. A recent article in "The Economist" commented on the changing dimensions of the automobile factory:

"Today's metal-bashers will disappear. In their place will be vehicle brand owners. They will do only the core tasks of designing, engineering, and marketing vehicles. Everything else, including even the final assembly, may be done by the parts suppliers." The article notes that "success is going to be limited to those companies which can bring new product to the market rapidly and adapt their production quickly."

New Concepts, New Companies

The industry is already changing. For example, Scott Painter, co-founder and CEO of CarsDirect.com (the first nationwide "e-tailer" that allowed people to research, finance, and even buy cars on the Internet), recently started a new company, Build-to-Order. Through various partnerships, it is going to be the first company to actually build only to customer orders. That means zero inventory. Build-to-Order will maintain some of the traditional elements of a car company in that they understand the need for a dealership-type of place where people can go and see and drive the vehicles. "This is not about a virtual company," Painter explains. "We recognize that people aren't going to buy a car without being able to touch it, feel it, and drive it."

The bottom line: It's all about the love affair between the driver and the car. A vital component of this is that people want a car that either reflects some of their individuality or one that serves their particular needs, one that's tailored differently from every other car on the lot. One way or another, people will find what they want, whether it's a computer or a car.