Business Excellence in the Automotive Industry

Business excellence is an ideal that all good entrepreneurs strive to achieve.  In fact, many organizations are devoted to honoring those businesses that best exemplify this concept.  However, business excellence cannot be strictly defined.  Rather, it varies from one industry to another.  For example, in the automotive industry, business excellence includes customer commitment, quality control, efficient supply, and innovative management.

Leaders in the automotive industry understand the need to form a strong bond with customers.  Perhaps more than other sectors, consumers are more likely to make a decision regarding an automobile purchase based upon their experience with those in the industry.  Thus, entrepreneurs need to be concerned with two key features relating to customer commitment.  The first is meeting the needs of the consumer, financially and socially.  People need automobiles that meet their economic means.  This not only means getting a good initial purchase price, but also finding a vehicle that will require minimal repair and maintenance down the road.  Consumers also want to purchase automobiles that will not require excess money to be spent on fuel.  Therefore, business excellence includes finding more cost-efficient production and distribution processes, and subsequently passing these savings on to the consumer. 

The second aspect of customer commitment is meeting societal needs and desires.  This means staying informed of what vehicle features are most important to consumers.  Such information can be garnered using formal surveys and demographic research.  Once you understand the buyer, you are more capable of catering to him or her.  For example, people in some regions are especially concerned with the environmental impact of their purchases.  Thus, the automobile industry would need to show those people they are committed to using recycled materials and alternative fuels.  Additionally, many consumers want family vehicles that are safe and comfortable for children.  Therefore, excellent automobile entrepreneurs will focus their attention on crash test results and extra amenities.

In addition to customer commitment, business excellence must include exceptional quality control measures.  This means ensuring that automotive vehicles are safe and easy to maintain.  Appropriate testing should be undertaken for each new product model, and the results of these assessments need to be made public in a timely manner.  Additionally, individual dealerships should take care to ensure every vehicle is inspected prior to sale and stored under ideal conditions prior to purchase. 

Efficient supply is an aspect of business excellence that is frequently overlooked.  The balance between supply and demand is vital to the automotive industry.  Producing too many vehicles can lead to severely diminished profits.  It can also lead to a waste of resources that could have been better utilized for vehicles more likely to be purchased.  Meanwhile, a supply that is too short can cause companies to lose customers.  When an individual needs to purchase a vehicle, he or she may not be able to wait any extensive period for a desired product to come into supply.  As a result, they will simply find an alternative automobile to purchase.

Finally, business excellence in the automotive industry requires innovative management.  There are several parties involved in the manufacture and distribution of vehicles, and financial as well as labor resources need to be managed from the top down as well as controlled on a micro-level.  Thus, not only do large factories need to communicate with business executives and the dealerships that asses supply, but individual sales representatives need to be appropriately trained and supervised at each individual dealership.

Will the Electric Car Cause a Power Shift in the Automotive Industry?

There was a big imbalance created in the automotive industry, as the Western world’s automotive industry came under serious pressure due to some car manufacturers management and the economy. In the same period, the Eastern world started to manufacture a lot more cars, which were cheaper because the Eastern world’s labor costs are much cheaper than the rest of the world. The reason why they have cheaper labor is due to the massive labor forces they have available.

At the same time, the Eastern world tackled their quality problems by head hunting highly skilled automotive engineers from the Western world. This caused a massive brainpower wave between West and the East. This brainpower shift caused the amount of high quality cars that gets manufacturer in the East to increase massively.

The Eastern countries even merged with some of the world-renowned car manufacturers. Some of these world-renowned manufacturers decided to open their own plants in the East. This wave in the East came like a tsunami, which could not be stopped, this caused the competition to became fierce between East and West.

Predictions are that the East is going to overpower the West in the field of car manufacturing, due to their massive labor force. These labor forces combined with the highly skilled automotive engineers they have head hunted from the West cause them to be a force to be reckoned with.

This whole paradigm shift will cause that the East and Japan to join up and Japan is already a reckoned force in the motor industry. There are predictions that new electric cars will also come out of the East as Mr. Warren Buffet bought some shares in a big company by the name of “BYD” in China who plan to tackle the electric car industry, “BYD” stands for “Build Your Dream”.

All the major players in the automotive industry are busy developing electric cars, even in South Africa there is a company developing an electric car. This will cause a power shift on its own in the automotive industry, as electric cars will replace conventional cars very soon. Predictions are this will happen far quicker than most people realize. Let us not be skeptical about it and look forward to all these power shifts, which may come in the future and hope it will be good for the greater good.

Force the Change in the Automotive Industry

It is time for you, the average consumer, to take a stand!

Fellow consumer, for years we have been taken to the cleaners from the automotive industry: It is time for us to demand change in product quality and how the automotive industry conducts business! As consumers, we need to pressure the industry to change course and give us the best product and service they can or let them die – let them go bankrupt! If a few American companies survive they might just get it – they might finally understand that Americans deserve and expect more.

Do not be fooled by the stories of bad economy and poor sales! The U.S. automotive industry has done this to themselves!

I am not saying that a bad economy does not exist but they have been on this road to destruction for a long time. I used to work in an Oldsmobile, Subaru dealership: in 1986 we sold all models from both manufacturers’, please allow me to cite two models from the 80’s to make my point.

1) The Oldsmobile Cutlass Sierra wagon came with a 4-cylinder motor, air conditioning, A.M. radio, power steering, power brakes, the approximate retail price was 10k to 11k.

2) The Subaru GL wagon came with 4-cylinder motor, air conditioning, F.M. stereo, power steering, power brakes, 4-wheel drive, power windows, power locks, split rear seats, rear defrost, multi position front seats with tilt, roof rack and more: the approximate retail price was 10k to 11k.

The Olds had a reputation for having major motor problems and often would not survive past 100,000. By contrast, the Subaru was well known for surviving 200,000 miles plus with little motor troubles. In addition, there was a massive difference in standard comfort features for the same price – we sold Subaru’s at a rate of 40 to 1 compared to the Olds.

The U.S automotive industry continued down that path for several years, as the price of vehicles rose dramatically they started to use financing tactics to sell their inferior products. The inevitable happened and many of the vehicles sold failed to last the term of the loans without major repairs and the resale value of a U.S. vehicle was poor so you could not trade them in without going financially backwards.

Around 1990 U.S. automotive manufactures started to take heed, they produced some better quality vehicles and kept the prices more stable. Unfortunately, along with the better quality product came a substantial rise in part costs. Thus, repair bills began to skyrocket and continued to stay behind foreign competitors’ and their technology. Around 2000 it seemed we went downward again in the Quality department, around 2005 we started to rise some but I think it was far too little and a little too late.

In 2008 Ford Motor Company had an ad campaign on stating they now had cars that with equivalent quality of Toyota. I don’t know about you, but if I owned a Ford I would feel like “Oh great, so the Ford I bought prior to 2008 was admittedly inferior!”

U.S. automakers sponsor racing teams at a cost of millions of dollars per year: they continue to grossly overpay their executives: they have wildly exaggerated union worker compensation: and still, after at least 2 decades of foreign competitors nipping at their heels, they still stay so far behind in technology and quality. Quite frankly, I don’t understand why!

Now, after years of inferior products, higher repair bills, exuberant executive payouts, must have unions in order to work in the plants, they put their hands out for the taxpayer to bail them out? There should be no question about the answer: a resounding NO!

Thank you Mr. Ford for making the model T and further ushering in the industrial age, thank you U.S. auto manufacturing for providing good jobs for so many years: But you are a business after all and must hold to do or die like the rest of the business world!

I am not advocating Americans should buy foreign products – especially in our current economic crisis! However, the majority of the working U.S. public has a limited amount of money for automobile purchases necessitating we use that limited amount wisely. With past and current conditions in the automotive industry higher quality, better comfort, more options for the same price suggests the foreign automotive makers provide “more bang for the buck”.

(By the way, I own two American vehicles, one I am not pleased with at all and the other has so far *crossing fingers* been fantastic.)

Failure of the Automotive Industry – The Primary Reason

The US automotive industry suffered a fatal blow. Yet anyone who claims that the industry’s demise can be linked to a single root-cause of failure is sadly mistaken. I spent the greater portion of 10 years within that industry many of which in an executive or managerial role.

Unfortunately, there’s no silver bullet that caused the fall. I say unfortunately because a single cause of failure could be prevented in the future. In this case, the blame can be put only on the system as a whole making it difficult to protect against a repeat occurrence.

What the automotive industry suffered was a catastrophic failure caused by multiple points of failure. We’re talking systemic failure in its truest form. As an insider in the industry, I can personally attest to some of the actions (or lack thereof) that pushed the industry to a collapse.

One of the biggest gremlins that undermined the industry was a myopic focus on piece price (cost). Over the years the automobile manufacturers became totally engulfed in driving (no pun intended) suppliers to lower sell prices in an attempt to reduce the production cost of a car or truck and therefore increase the bottom line.

This shortsighted focus on lower piece cost was so strong that supplier relationships were sacrificed. In fact, one of the Big 3 automotive companies believed that if one supplier went under that another would always step up. How is that for arrogant?

The pressure for lower piece cost was so extreme that suppliers were forced to seek low-cost countries for the procurement of parts and for their own manufacturing processes. On the surface this approach may seem logical. However, what was lacking was a holistic view of the situation to see that lower piece price demands were leading to other systemic issues:

Reduced quality and increased life-cycle costs due to overseas outsourcing
Suboptimal designs because of shortcuts to reduce costs
Jobs being pushed out of the US
Collapse of solid, reputable suppliers
Tarnished relationships with the legacy supply base

The situation went as far as the automotive manufacturers demanding payments from suppliers to maintain current business or to be awarded new business. These payments were commonly known in industry as “givebacks”. These givebacks started as checks that were written for absurd amounts of money and then changed into piece price concessions over the length of a given contract (the SEC wouldn’t necessary like the check approach, i.e. buying business).

Business is about more than just the bottom line. The way in which you go about producing profit makes a difference. Our friends in the automotive industry learned the hard way that relying upon myopic, dictatorial and selfishly driven profits at the expense of your suppliers and customers is not sustainable.