Can the auto industry change to build-to-order?

Jan 4, 2022 | Hot Topics

Happy New Year! I hope you were able to chill at least a little in that magic time between “got to get it all done”, “oops, too late” and “it’s a brand new year of possibilities”.

Speaking of … I watched far too much football (the US type, NFL) over my break, and noticed something I hadn’t seen before: Ads from the US carmaker Ford offered buyers $1000 off the list price of a car as well as other incentives if they pre-order a vehicle, customized to their specifications, and were willing to wait for delivery. (Check with Ford for details; this offer may not be for all models, all locations, etc.)

Americans don’t typically buy cars this way. We expect to walk onto a car lot, pick out a car, figure out payment and go. Result: a happy driver in a new car, heading off the lot in double time. My last car purchase was intended to go this way but didn’t — the dealer tried to find the exact vehicle we wanted, color and options but had to give us a (tiny) price break when that couldn’t be found. We happily drove off the lot the next day.

The maker gambled on what we would want, built the car to that spec, and lost.

When you think about the number of options on any given model, that’s a massive potential of lost revenue. I tried customizing (but didn’t order) a Ford Mustang Mach-e, an electric version of the classic Mustang muscle car. For the SELECT (base) version, my choices include battery type (2 possibilities), exterior color (8), interior seating material (no choice for this model), and then 5 more options (some of which were included). By having me preconfigure these choices, Ford dramatically increased the likelihood of building the car of my dreams. [The only downside: At writing, Ford said it would take 20+ weeks for delivery for the base model, the SELECT. Other models are 28+ weeks. Are Americans willing to wait that long for gratification?]

From a PLMish perspective, this has huge implications from what data is needed to how it’s managed,

Carmakers (and others, of course) have been bedeviled for years by the exponential nature of what they produce. Perhaps not so much for the exterior color choices, but the options that could affect the vehicle’s safety and buyer experience had to be managed in a PLM system. We had to create test and simulation protocols for all possible variants, design tooling for their production, figure out marketing collateral, and then, create manuals that logically assist repair and maintenance, not to mention regulatory compliance.

This scheme significantly reduces risk. I presume there’s a deposit as part of the ordering process but didn’t get that far, but even if the original buyer doesn’t take delivery, there’s a ready-made cohort of likely buyers who will want the exact same thing, but immediately rather than in 20+ weeks. And who might be willing to pay more for that instant delivery.

Looking at the supply chain, we’ll see benefits in both directions. Knowing exactly what’s needed to meed scheduled demand should ease some of the constraints we’re seeing — there would be a lot less making or buying on speculation. This should be more cost- and time-efficient for production. At the other end, car dealers wouldn’t have to stock lots with so. many. choices., which is a huge financial drain since they have to pay for the vehicles, the real estate, and the staff.

Some PLMish elements might be simplified, but the tracking of each unique, specific vehicle will take on added importance to ensure that it is exactly right.

Can this catch on? Do you remember Saturn? We once bought a Saturn as a second family car. It’s a long-gone General Motors brand where you ordered a car and then got postcards from it as it was being built. It even sent us a tin of cookies at one point. It wasn’t an awesome car but it wasn’t awful and the experience of buying it and taking delivery was a bit magical. Saturn didn’t, in the end, succeed — GM was restructuring, couldn’t find a buyer and so killed the brand. I don’t know if it was in any way related to the way the cars were purchased, but it’s one example where the make-to-order idea didn’t ultimately pan out.

But maybe this time is different. We are all so used to buying online these days, from groceries to restaurant take-out, that wandering about in a dealership may not be the way of the future. That leaves the question of how long we are willing to wait for a configured vehicle. 20+ weeks? Maybe, maybe not.

Perhaps a better question than, can the auto industry switch is: should it?

The super-spiffy car in the title image is a Mustang Mach-E SELECT, grabbed from here.

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