The document discusses how the automobile industry is facing disruption from the internet and shift from a "push" model to a "pull" model. It outlines several strategies for the industry to embrace internet-enabled "pull" systems, including business-to-business (B2B) procurement networks, modular manufacturing systems (MMS), business-to-consumer (B2C) direct sales, business-to-service (B2S) models, and business-to-vehicle (B2V) connectivity. The industry risks significant economic losses estimated in the hundreds of billions if it does not successfully transition to internet-enabled pull systems within the next 5-10 years.

1. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 1
From Push to Pull: Impact of
Internet on Automobile
Industry
Mario W. Cardullo, P.E.

2. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 2
Why Push to Pull ?
! North American automotive industry and their
networks of supplies and franchised dealers
are facing a strategic inflection point.
! Consumers are becoming more comfortable
using the Internet as a purchasing source,
expectations from the automobile industry are
not being fully met for buying vehicles.
! North American automobile industry must
resolve the following question: Is it capable of
meeting the challengers of the new
economy?

3. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 3
Automobile Industry
!16.9 million new vehicles were sold in
the U.S. in 1999, $650 billion retail
revenues.
!Vehicles sold primarily through 22,400
dealerships.
! New models had little to do with what
the customer immediately desired.

4. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 4
Old Economy Industries Meet
New Economy
! New economy is based upon meeting
customer needs rapidly.
! Important to look at the total supply chain
from the basic supplies through
manufacturing and delivery.
! Physical products, such as automobiles must
produced, delivered and serviced.
! Automobile industry divided between
relationships and manufacturing processes.

5. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 5
Make-to-Stock System
Suppliers
Purchasing
Production
Control
Program
Planning
Sales
Manufacturer
Distribution
Center
Dealers Customers Dealers
Physical Flow
InformationFlow

6. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 6
New Economy = Internet
Economy
!Change occurs at Internet speed
!Products lifetimes measured in months
!Customers want immediate fulfillment of
customized products

7. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 7
Old Economy = Automobile
Industry = Push
!Push system focuses primarily on the
supply chain system.
!Manufacturer plans number and type of
vehicles and orders required amount of
parts.
!Current supply chain flawed and rigid
!Manufacturer develops product and
then finds a market

8. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 8
New Economy = Future
Automobile Industry = Pull
!Focuses on value chain
!Manufacturer identifies need and builds
product to satisfy that need.
!Changing system pull requires changing
legacy supply and manufacturing
systems, legacy cultures and existing
regulatory structures.

9. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 9
Internet Build-to-Order System
Production
Control
Dealer
Suppliers
Manufacturer Dealer
Customer
Real-time Information Flow

10. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 10
Push versus Pull Automobile
System
Build
Ship as to
Plan
Build as
Required
Ship as
Required
Plan
Receive Parts
Assemble
Ship
Request Parts
Receive Parts
Assemble to
Order
Ship to Order
Receive
Prepare
Market
Sell
Service
Send Orders
Prepare
Supply
Information
Supply
Information
Supply Leads
Supply
Information
Send Orders
Seek
Information
Buy/Sell
Seek
Information
Buy/Sell
Used Vehicles
Service
Parts
Internet Vehicle
Services
Used Vehicles
Service
Parts
Internet
Vehicle
Services
PUSH
PULL
AftermarketConsumersE-SellersDealersManufacturersSuppliers
B2B B2C B2V

11. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 11
Automobile industry value
chain
!Business-to-Business (B2B)
!Modular Manufacturing System (MMS)
!Business-to-Consumer (B2C)
!Business-to-Service (B2S)
!Business-to-Vehicle (B2V)

12. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 12
Benefits of Implementing
Internet Strategies
Pull Plus Elements Industry Benefits ($
billion annually)
Vehicle Savings
($ per vehicles)
B2B 18.3 1,064 or 5.3%
MMS 18 1,000 or 5%
B2C 44.4 2,579 or 12.9%
B2S Unknown Unknown
B2V Added market of 24 to
48 with operating
income potential of 8.2
to 16.3
Additional cost to
users of $240 to $480
annually

13. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 13
Business-to-Business (B2B)
! Development of Internet procurement
systems such as Covisint, Auto-
Xchange, Trade-Xchange, and supplier
initiatives.

14. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 14
Benefits to Suppliers of B2B
Implementation
Annual Savings ($ millions)
WIP Procurement
Process
Total
Tier 1 390 4,545 4,935
Tier 2-4 764 6,259 7,023
TOTAL 1,154 10,804 11,958

15. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 15
Modular Manufacturing
Systems (MMS)
! Development of prototype modular
manufacturing facilities in cooperation
with Tier 1 suppliers and assemblers.

16. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 16
Business-to-Consumer (B2C)
! Development of information intensive
web sites and cooperative business
models with existing dealers and
dotcoms. Experimentation in foreign
countries of direct manufacturer-
consumer relationships.

17. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 17
Savings to North American
Automobile Dealers of B2C
Dealer Component Annual Potential Savings
($ million)
Inventory 3,952
Sales Commission 4,916 – 6,554
Overhead 3,236
TOTAL POTENTIAL
SAVINGS
12,104 – 13,742

18. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 18
Business-to-Service (B2S)
!Movement of dealers and industry to
implement sales and service models
using the Internet.

19. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 19
Business-to-Vehicle (B2V)
!Lead by GM and their OnStar model,
Ford and other members of the industry
are preparing to deliver Internet ready
vehicles and services.

20. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 20
We live in automobiles
!US consumers spend approximately
500 million passenger hours per year in
their vehicles.
!Approximately 210 million vehicles are
in use.
!Industry sells annually approximately 17
million

21. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 21
B2V: The Car of the Future
!Safety
!Security
!Productivity/Connectivity
!Convenience
!Entertainment

22. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 22
Marketspace Potential of B2V
$100,000,000
$1,000,000,000
$10,000,000,000
$100,000,000,000
2000 2002 2004 2006 2008 2010
MarketPotentialforB2V
$20 per month per
$40 per month per vehicle

23. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 23
Will automobile industry
capture this potential?
!Based on operating margins of 34
percent, can provide operating income
of between $8.2 and $16.3 billion to the
operators of these B2V systems.
!B2V operating income addition can be
eventually of the same order of
magnitude.

24. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 24
Economic Savings of Implementation
Automobile Industry Internet Strategy
Value Chain Savings per
Day
B2B
(Business-to-
Business)
$49 million
MMS
(Modular
Manufacturing
Systems)
$49 million
B2C
(Business-to-
Consumer)
$121 million
Total Savings $219 million

25. 9/12/00 Copyrighted 2000 Mario W. Cardullo, P.E. 25
Range of Implementation
Times
Component Implementation
Time
(years)
Potential Cost of
Delays
B2B 3 to 5 $54 to $90 billion
MMS 4 to 6 $72 to $108 billion
B2C 5 to 10 $220 to $440 billion
From Push to Pull 5 to 10 $400 to $638 billion