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As the auto industry moves into its second
century, it suffers from low margins and a sclerotic value
chain that cannot evolve with customers' desires. Inventories
of many weeks pile up on dealers' lots and at distribution
centers around the world while executives applaud marginal
improvements in factory efficiency.
Value streams based on Henry Ford's mass-production
model from the early 1900s do not deliver the strategic
flexibility that is needed in today's increasingly competitive
and demanding market. With billions of potential product
variations, customers still compromise by selecting from
a limited number of products sitting at dealerships or at
distribution centers. Those customers who dare insist on
a specific variation not only wait weeks but also pay extra
for the privilege of telling vehicle manufacturers what
they actually want.
In The Second Century, Matthias Holweg
and Frits Pil take a comprehensive look at today's dysfunctional
value-chain strategies, then systematically discuss the
changes in products and in processes that are needed to
bring about responsiveness to customers' needs. They look
beyond the dealer, the factory, and the design studio to
examine the web of relationships and the dynamics that have
brought the auto industry to its current low point.
Holweg and Pil argue that in this century
the winners will not be those firms that search for larger
and larger scale or those that run efficient factories or
those that squeeze the last drop of profitability from their
suppliers. The winners, they say, will be those that build
products as if customers mattered.
Matthias Holweg is University Lecturer
at the Judge Institute of Management, University of Cambridge.
Frits K. Pil is Associate Professor at the Katz Graduate
School of Business and Research Scientist at the Learning
Research and Development Center, University of Pittsburgh.
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