Second Century ─ Reconnecting Customer And Value Chain Through Build-To-Order

As the auto industry moves into its second century, it suffers from low margins and asclerotic value chain that cannot evolve with customer desires. Inventories of many weeks pile up ondealer lots and at distribution centers around the world while executives applaud marginalimprovements in factory efficiency.Value streams based on Henry Ford's mass-production model fromthe early 1900s do not deliver the strategic flexibility that is needed in today's increasinglycompetitive and demanding market. With billions of potential product variations, customers stillcompromise by selecting from a limited number of products sitting at dealerships or at distributioncenters. Those customers who dare insist on a specific variation not only wait weeks but also payextra for the privilege of telling vehicle manufacturers what they actually want.In The SecondCentury, Matthias Holweg and Frits Pil provide a comprehensive look at today's dysfunctionalvalue-chain strategies, then systematically discuss the changes in products and in processes thatare needed to bring about responsiveness to customer needs through build-to-order. They look beyondthe dealer, the factory and the design studio to examine the web of relationships and dynamics thathave brought the auto industry to its current low point.Holweg and Pil argue that in this centurythe winners will not be those firms that search for larger and larger scale or those who runefficient factories, or those that squeeze the last drop of profitability from their suppliers. Thewinners, they say, will be those who build products as if customers mattered.

Matthias Holweg is Lecturer at the Judge Institute of Management, University of Cambridge.