Automotive
Driving Profits With Automation
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On This Page
 | Executive Summary |
| Using Hubs for Communications |
| Operating Efficiencies |
| Scenario: The Payoff for Manufacturers |
| About the Analysts |
Executive Summary
In few areas has the Internet made a bigger impact than in the automotive industry. Consumers who once walked into dealer showrooms to learn about models and to be guided into purchases now come armed with information about features, options, and competitive prices. As power has shifted into the hands of buyers, dealers, manufacturers, and their suppliers have found demand planning to be increasingly difficult.
"The challenge is to connect forecasting and marketing and sales activities to manufacturing capacity," says AMR Research's research director for automotive and heavy equipment, Kevin Mixer. To overcome these challenges, the industry's participants must invest in tools that improve demand visibility and provide the operational flexibility to quickly respond to what customers want.
Success requirements for auto industry companies
| • | Continuously improve in manufacturing, quality, and forecasting |
| • | Invest in visibility tools to compare actual demand rates with forecasts |
| • | Build manufacturing flexibility in raw material commitment, prioritization of operational tooling, and points of sourcing |
Source: AMR Research, 2005
By automating the flow of data and capturing information of what customers are really doing, the entire industry has the chance to respond to emerging demand trends, to plan manufacturing and purchasing more efficiently, to avoid costly data processing mistakes, and to better know what customers actually want. One way to achieve these new levels of transparency and communications is with Microsoft BizTalk Server.
Using Hubs for Communications
BizTalk Server is the foundation that combines enterprise application integration (EAI), business-to-business (B2B), and business process automation to support any links in the automobile industry's supply chain. A key member of the Microsoft application platform, BizTalk Server greatly reduces manual processing for greater operational efficiency while making critical information available for smarter strategic planning.
Oxlo Systems of Broomfield, CO, for example, runs a BizTalk Server-based business hub called AutoTPX that automates a number of functions, such as warranty repair payment submissions, new car sales reporting, monthly financial statement submissions, and consumer financing. To do this, it connects dealers with auto manufacturers and other important business partners, such as banks for consumer financing. And most important for the future, the hub also links dealers to the third-party Internet sites that are now generating about 15% of all customer leads.
Dealer profit centers needing automation
| • | New car sales |
| • | Used car sales |
| • | Finance and insurance |
| • | Parts |
| • | Service |
Source: Oxlo Systems, 2005
BizTalk Server enables this interconnectivity because of the wide variety of communications protocols data formats and standards it supports. Therefore, a dealer could use Internet protocols to communicate with the hub while a car maker might use EDI.
"We use BizTalk Server as the core engine of our service," says Oxlo COO Dan Seats. Because BizTalk Server has support for business process logic built in, Oxlo can place business rules that are specific not only to a type of transaction, but even to a given auto maker. Every manufacturer has different rules covering everything from sales reporting to warranty claims. If that were not complicated enough, important factors like sales incentives can significantly vary from one model of car to the next, even if all come from the same company.
One error involving a sales incentive can cause the manufacturer to reject an entire transaction. "Dealers will complain that they don't always know when to apply an incentive to a deal, because it's very confusing," Seats says. Sometimes "they apply incentives to a sale when they weren't applicable, and they subsequently have to cough up the money because the customer is gone." Or, just as bad, a salesperson may not apply an incentive when it is allowed and wind up losing the sale. By automating this logic, BizTalk Server makes the sales process both faster and more accurate.
Operating Efficiencies
Beyond the problem of costly mistakes, inefficiencies also eat away at dealer profits. If systems such as parts ordering and warranty claims submission are not integrated, dealers can find themselves having to enter customer data multiple times. Financial reports for two different car makers might largely require the same information, but mandate entirely different formatting conventions, meaning extra administrative work.
Also, taking a used car as a trade at too high a price can eliminate the profit from a new car sale. Similarly, waiting to move a high mileage vehicle through a traditional auction house can take far longer than if the auto could automatically be listed on a site like eBay Motors. Fortunately, BizTalk Server includes what's called the Business Rule Engine for creating and modifying business rules that can take this kind of pricing information into account. Rules can be set up or easily modified to automatically trigger transactions or alert users in ways that are best for the business.
For example, business rules defined in the AutoTPX hub are programmed to minimize input mistakes and help make money for dealers. "We can catch pricing problems and notify the user immediately," Seats explains, which saves time and money. "Once the business user moves on to the next thing, it's much harder to resolve the problem." The Oxlo system takes data from the dealer and stores it in a Microsoft SQL Server database along with profiles of the dealers, the car makers, and other participants. That way, information is put into the correct formats, and boilerplate sections can be dropped into place without having anyone waste time on unnecessary typing.
Oxlo also uses BizTalk Server's application integration capabilities to tie the hub directly to dealer management systems, like the popular Dealer Management System (DMS) from MPK Automotive Systems, Roswell, Ga. The DMS is vertical solution for automotive retail dealers based on Microsoft Dynamics-Navision, an industry-leading mid-market ERP platform. Every second that these systems take out of the sales and service process means happier customers for the dealers.
One of the most important tasks at a car dealer is arranging financing, and the Microsoft application platform provides the solution for this common scenario. "Things like getting a credit application approved quickly make that transaction a better experience for the customer," says Seats. With BizTalk Server, a dealer can directly send information in real time to a lender, improving the odds that the dealer will make the sale as well as enhance the customer experience.
With this highly integrated approach, Oxlo can help in virtually every department at a dealer—new car sales, used cars, parts, service and financing—and support all levels of the dealership, from the parts desk to upper management.
Scenario: The Payoff for Manufacturers
But automation helps more than just the dealer. Auto makers depend on accurate information to better control their businesses, anticipate demand, and develop the best products for the market. The more they understand of what happens in the purchasing process, the better they can predict what products should interest customers.
In this scenario, the technology platform helps the dealer and the rest of the automaker fine tune the crucial front end of the sales process. Automakers "want to know things like do customers get the cars they want, or did they make compromise purchases?" Seats says. Knowing raw sales numbers delivers incomplete information that can lead to bad conclusions. If blue cars seem popular one month, it could be that the color was popular, or it could be that dealers were low on red cars and the customers took what they could get.
"We know when we passed a lead to a dealer, we know when a car gets sold, but we didn't used to know anything about what happens between those events." Oxlo's BizTalk Server–powered hub helps track the sales process to uncover those missing links.
Steps to automation
1. | Identify processes that use manual intervention. |
2. | Determine customer communications preferences. |
3. | Implement appropriate BizTalk Server accelerators/adapters for connectivity support. |
4. | Use demand information from customer to better plan production. |
Source: Oxlo Systems, 2005
Manufacturers also need accurate details about problems with specific models of cars so they can take corrective action as well as avoid similar mistakes in the future. However, "if you take a vehicle with the same problem into five dealerships, you might get five different diagnoses of the problem," says Seats. "Without the right diagnosis, the manufacturer cannot identify endemic problems and find solutions."
"One of the things we've been prototyping is a Microsoft InfoPath form in Microsoft Office that would guide the dealer to a very precise and accurate diagnosis of what the problem is," adds Seats. The dealer would fill out the form with such things as information about the problem and full vehicle information. The hub will receive immediate notification when the problem report came in and pass it on to any number of people at the manufacturer or at other companies, like a supplier that had built that particular part. According to Seats, the hub could even push the information into a Microsoft SharePoint Portal Server that the car maker uses to monitor potential design problems.
Seats says that Oxlo is looking at other ways it can expand the hub. InfoPath will offer additional opportunities of integrating Microsoft Office into the hub, creating documents in the tools most familiar to employees and then sending the contents electronically. In fact, Seats is counting on BizTalk's flexibility and ability to scale as his own business continues to grow. Oxlo went from no operations six months ago to supporting an expected 1,000 dealers by 2006.
"From our perspective, BizTalk Server is the kind of application that is both economical at the low end and can scale" for larger implementations, Seats says. And as BizTalk Server does the job, everyone in the supply chain gets improved operations as well as better profits.
About the Analysts
AMR Research
AMR Research provides independent analysis and actionable advice to more than 5,000 supply chain and technology executives worldwide to help them make better business investment decisions. AMR Research: Information and advice that matters.
Oxlo Systems
Oxlo Systems develops packaged software applications designed specifically to enable automotive dealers to seamlessly integrate their systems with auto manufacturers, service providers, and other partners. Oxlo differentiates itself by delivering fully preconfigured business solutions that are quickly and easily deployed. Within the existing IT architectures of the dealership, these plug-and-play applications provide the information flow that allows dealers to increase sales and lower costs.
Brian Mulvey is a senior writer for Triangle Publishing Services Co. Inc. with extensive experience describing how to optimize supply chains for various manufacturing industries. Triangle provides articles for BusinessWeek, CIO, CFO, Managing Automation, and other publications.
For More Information
The following links provide a more in-depth look at how BizTalk Server supports supply-chain issues.