Now this blog entry is not suppose to be a maths lesson!, I thought it was an opportune moment to review the performance of the North American automotive companies during Q1 and take a quick look at the external influencers that are impacting their recently released quarterly results.  So let’s take a look at the vehicle manufacturers first. 

The surprise of the last three months is Ford, they have somehow turned around their business to produce a $100 million profit last quarter.  Considering all the problems that Ford were experiencing just last year, this is dramatic turnaround for their business and has now set them on a path of continued growth and new business expansion.  However Ford are still likely to make an overall loss in 2008 and probably won’t reach true profitability until 2010 when new car models start to hit the market. This profit has not come about simply by selling off Jaguar and Land Rover, that deal won’t go through until next month so what have Ford done?, how have they seemingly achieved the impossible in what is a very tough economic climate? Put simply, Ford have been following an aggressive cost cutting exercise, developing global car platforms, rationalising key suppliers, establishing manufacturing plants in low cost regions around the world and most importantly starting to develop consumer ‘friendly’ cars once again.  Ford sales were boosted by a strong performance in Europe with a pre-tax profit of $739 million, up from $219 million a year ago, the results in Europe helped to counteract the relatively poor performance in North America. 

Turning to GM, they revealed a significant $3.25 billion loss in the first quarter compared to a relatively small $45 million loss during the same period last year. Slow U.S vehicle sales, high fuel prices and a continued housing slump prompted GM to revise their sales projections.  In addition GM is being affected by continued financial troubles at two of their former companies GMAC Financial Services who needed $1.45 billion and Delphi who needed $731 million to help with restructuring charges.  GM are continuing to provide financial support to both of these companies as part of ongoing restructuring efforts. (I will discuss Delphi a bit later). GM also revealed that they lost nearly $800 million due to UAW’s strike action at one of their key suppliers American Axle and Manufacturing Holdings Inc.  GM had to cease production at some of their plants due to the strike action at American Axle.  One of a few positives that came out of this quarter was that there was a sharp decline in GM’s inventories which dropped about 100,000 units because of the American Axle strike, with most of this drop being in full-sized SUVs and trucks.  Even though this was a significant inventory reduction for GM, they still carry too much inventory, ending the quarter with nearly 840,000 units on its books.  Part of this problem has been caused by the tough economic conditions in North America, particularly the higher fuel prices that has made the SUV and truck market a difficult one to compete in.  GM will have to address their product strategy in North America to meet the growing demand from consumers for more fuel efficient cars and continued investments in hybrid and electric vehicles will play an important part in GM’s future product strategy. 

Over at Chrysler, their sales dropped 23.5% for April and down 17.6% for the year to date, the company blaming the decline on the industry’s slow truck and SUV sales and its own decision to reduce sales to rental fleets which for many companies has traditionally helped to significantly boost sales figures.  Some of Chrysler’s key models such as the Jeep Commander, Cherokee and Dodge Ram pickups saw sales drops of 49%, 31% and 23% respectively. To try and counteract these losses Chrysler LLC are undertaking a complete platform review, taking significant costs out of their business and looking for key partners that they can jointly develop new vehicles with. 

Overall, including the other car manufacturers around the world, global car sales fell by 8.6% in the first four months of this year. 

From a supplier perspective the performance of some of the industry’s key suppliers was equally uninspiring.  In a similar situation to Ford, many of the Tier 1 suppliers saw a drop in North American sales but they reached profitability due to stronger sales performances in Europe.   Delphi for example was due to exit Chapter 11 in early April, until a $2.5 billion restructuring package provided by Appaloosa Management LP was pulled at the last minute.  This meant that Delphi have had to rewrite its financing package once again and seek support from former owner GM.  As mentioned before, the situation at Delphi partly contributed to the profitability of GM for the last quarter.  So it will be a while longer before Delphi exit Chapter 11 bankruptcy protection and they will have to continue taking costs out of their business to help boost profitability and improve opportunities for growth.  Since Delphi was spun out of GM in 1999, GM has seen their Delphi related charges grow to $8.3 billion. 

Visteon, formerly part of Ford, also saw a Q1 loss of $105 million on revenue of $2.86 billion, these figures were as a result of plant closures and lower production levels by North American based automakers.  Visteon still generates a third of its sales from Ford but has made significant steps to expand into new markets such as China which has helped reduce their overall losses.  Despite the market conditions Visteon expects to either make a loss of $25 million or a profit of $25 million in 2008. 

American Axle, a key supplier to GM and following recent strike action managed to seriously affect production at a number of GM’s North American plants.  American Axle is currently in an 8 week strike however they confidently told their own suppliers to be ready to begin production shortly.  Now it is OK for American Axle to say that their suppliers should be prepared to start production, but how does a supplier fund such production if they are not sure when the parts will be shipped and hence payment received?, at the other end of the supply chain how much inventory should GM hold to avoid any potential out of stock situations and hence avoid production stoppages?  Managing inventory in today’s economy is on a knife edge, get it wrong and it will have a serious financial impact on the customer, get it right and it will bring improved supply chain performance, reduced costs and hopefully increased sales.  The strike at American Axle centres around different plants receiving different benefits packages, their workers want to see a single and consistent package applied across the whole business.  American Axle have invested in new low cost, high quality manufacturing plants in China, India and Poland so hopefully, once the strike action is resolved, they will be able to continue along a path of continued growth. 

Finally let’s take a look at a shining light in the automotive supplier community.  Borg Warner saw their quarterly profit jump by 52%, again partly due to improved sales in Europe and Asia.  Borg Warner are seeing an increased demand for their product technologies especially those which help improve fuel economy, lower emissions and provide better vehicle performance.  Given the industry’s demand for better fuel economy and lower emissions, Borg Warner is in an excellent position to see significant growth in their business in the next few years.  In fact any company producing fuel cells, batteries, electronic control systems and electric motors stands to benefit from these new market demands. 

So, interesting times for many automotive companies, the general themes emerging from many of the first quarter company results is that of decreased sales in North America, increased sales in Europe, reducing costs by establishing new plants in low cost regions around the world and improving supply chain efficiencies.  I will take a closer look at the performance of European and ASPAC based automotive companies in future blog posts.

Until then have a good weekend

Last week I was fortunate to be able to visit China for the first time.  I was presenting at our ASPAC CIO summit in Hangzhou which is about two hours south of Shanghai.  The event brought together about 20 of our key customers in the ASPAC region to allow us to update them on GXS, our solutions and an opportunity to hear from some customers and partners on how they are managing their B2B infrastructures.  It was interesting for me to hear first hand about some of the challenges they faced, especially from automotive and high tech companies, on how they have established their supply chains in this region.  Establishing these supply chains has been even more difficult for western based companies who not only have to work in a completely different culture and environment but they also have to overcome some significant IT related infrastructure challenges as well. 

China has been making great strides in improving both their IT and transportation infrastructures recently, both are key enablers for the growth of their economy. Take their transportation infrastructure for example, I landed at Shanghai airport last Wednesday morning, their International Terminal was only a few months old, nearly half a mile long, and apart from our flight arrival, the terminal was more or less empty when we arrived.  The airport is connected to the centre of Shanghai via a state of the art Maglev train system, allowing you to get to Shanghai in less than 30 minutes.

To the south of the airport a new three lane toll road allows you to reach the southern regions around Shanghai with great ease. I must have travelled on this toll road for at least eighty miles and I hardly saw any other cars.  No doubt in a few years time, as more and more cars find their way onto these roads, they will become as busy as other major highways around the world. The key thing here is that the Chinese transport authorities have had the foresight to put this superb transportation infrastructure in place now to allow the region to start planning for future growth.  There is no doubt that the Beijing Olympics have had an impact as well, many visitors from western countries will be visiting some of the great tourist hot spots around Shanghai.  This Olympics will be a showcase for China to demonstrate to western companies that they have the transportation infrastructure in place to allow them to get a foothold in this region. 

In addition to improved transport links, China is making great strides in improving its IT infrastructure.  Until recently it was the more prosperous areas on the east coast of China that have benefitted from having access to the internet.  Interestingly last week it was reported that internet usage in China has now surpassed the U.S with nearly 16% of China’s population using the internet. China has seen a 61% growth from 137million to 221 million users in the last year alone and by 2012 it is estimated that China will have 490million internet users.  Now this growth wasn’t due to an overnight improvement in the country’s phone and broadband network, nearly a third of this growth, 75million, was due to the rising popularity of Cyber Cafes.  Many users realising that Cyber Cafes have much faster broadband connections than the modem dial up connections found in many houses, well those houses that have a phone line installed.

Today’s internet is already bursting at the seams and you can imagine by 2012, with an influx of new internet users in China and other parts of the world, that the performance of the internet will dramatically slow down.  So as with China’s foresight to build a state of the art transportation network, what plans, if any, are in place for improving the performance of the internet? 

Well, in the same month that China became the largest user of the internet, a new internet infrastructure was announced by CERN, the original architects of today’s internet infrastructure.  They have built a global replacement for the internet which is estimated to be 10,000 times faster than today’s broadband connections allowing for example a full length feature film to be downloaded in a matter of seconds.  The project, know as ‘The Grid’ (a name probably inspired by the film The Matrix!) will become live this summer when the Large Hadron Collider Particle Accelerator becomes available for the first time. The grid will be used to transport the terabytes of data that are likely to be produced from this machine. 

Whereas today’s internet was created by linking together cables and routing equipment destined for making phone calls, The Grid has been built with dedicated fibre optic cables and modern routing centres.  Within the next two years there are expected to be 200,000 servers connected to the grid around the world, providing unparalleled processing power.  The global fibre optic network is being built in a hub and spoke fashion, for example the UK regional hub has 8000 servers connected to the grid system already.  Most of these servers will be located at academic institutions, but how long will it be before the power of The Grid is made available to other users around the world? 

There are many parallels between the new infrastructure that CERN has created and GXS’ own ‘Trading Grid(R) ’ B2B infrastructure that has been implemented around the world.  We have world class hubs or data centres located in North America and Europe, connected by high speed OC12 fibre optic connections. We provide a means for any company, no matter what their technical capability to be able to connect to this network and begin trading with partners anywhere in the world.  We are investing a significant amount of money in our Trading Grid infrastructure as we believe that for companies to grow they will need access to a best in class B2B trading platform that will allow them to trade with partners any time, any place and anywhere around the world. 

So, an interesting trip for me, an opportunity to learn about a new culture and the rapid technological progress being made in this region.  But despite all this progress, one of my main memories from the trip was seeing a house being demolished at the side of the toll road leading from the airport.  Nothing unusual in this you may think until I tell you that this three storey house was being demolished by four men standing on the top floor pounding the brickwork using only sledgehammers!

In the meantime, if you have a quiet moment and you want to learn more about particle accelerators, you can find more information aboout them here  

Over the past couple of years there has been a significant convergence between the automotive and high tech industry sectors.  Satellite navigation systems, entertainment systems, mobile phone and iPod integration, today’s consumer is partly helping to drive the convergence of the automotive and high tech industry sectors.  So I thought it was about time I found out a bit more about the high tech sector, particularly in Europe.

Last week I attended a meeting hosted by CompTIA, the Computing and Technology Industry Association, in Brussels. CompTIA have been around for 25 years now and along with EIDX in North America and EDIFICE in Europe, they provide an invaluable service to companies looking to implement or manage B2B infrastructures in the high tech industry sector.  This particular meeting was hosted by Ingram Micro and it had good representation from companies such as Computacenter, Toshiba and Dell to name but a few.   

The main theme of this event was to discuss why companies were struggling to implement B2B technologies and what could be done to overcome these adoption barriers.  There were a number of presentations during the course of the day and many drew the same conclusions as to why companies were struggling to adopt B2B technology.  One of the main barriers was a lack of awareness of the benefits and technology that are employed within a B2B environment.  In terms of awareness, one of the interesting ideas to come out of the sessions was to establish some form of certification process for employees of companies that were thinking of implementing a B2B environment.  In many other industry sectors, employees are provided with training in using specific systems or are put through recognised accreditation to specific industry bodies.  A suggestion was put forward that perhaps CompTIA could pull together a B2B accreditation programme to ensure that employees of companies know about the latest B2B technologies and best practices and would therefore be able to identify areas of a business where B2B technologies could be implemented. 

I had an interesting conversation with a researcher from the Henri Tudor Institute based in Luxembourg.   They had developed a software tool that allowed a company to map out, visually, all message transactions between trading partners and then actually run a visual simulation to see what would happen as the transactions flowed around the ‘virtual’ company. Such a tool could help sell, or make a company more aware of, the benefits of B2B before they have implemented any B2B technologies. This tool could easily be adapted to help a company evaluate the ROI that could potentially be expected by replacing old manual processes, such as invoicing, with an electronic B2B solution. 

There was also a presentation from SEPA, the Single Euro Payments Area, an initiative to try and standardise the e-Invoicing process across Europe.  Not an easy task when you think that each country in Europe has a different tax law and each government has a different approach to improving B2B adoption in their respective countries.  For example e-Invoicing adoption levels in the Nordic countries, ie Norway, Sweden and Finland is far higher than any other country in Europe. This is mainly due to government pressure for companies to remove paper from their invoicing process and making local tax rules and regulations easier to navigate through from an e-Invoicing point of view.  

ComputaCenter also provided an interesting insight into the challenges they faced when dealing with software companies who had complex or inaccurate product data in their price lists.  Computacenter suggested inviting software companies to their next meeting to see if there was a way that they could work together to simplify the exchange of information between hardware and software technology companies.  For example if Computacenter could receive just 15 pieces of information or attributes to describe a software product, rather than the 100s of variants they receive at the moment, then it would improve their B2B process no end.  Product Data Quality is becoming increasingly more important within the high tech sector and this example from Computacenter highlighted the trend very well. 

The day was concluded with a discussion panel, this was originally made up of myself representing GXS, OB10, Apple and Inovis.  As Apple and Inovis did not turn up to the event at all, Ingram Micro and GE EDF took part in the discussion panel instead.  Again, the theme of the discussion was to find ways to increase B2B adoption levels and each of us went into our thoughts as to how this could be improved.  B2B Outsourcing was seen as a key way for companies to remove the barriers to B2B adoption and not having to worry about how to manage a B2B infrastructure. They could just get on with their day to day activities and leave the management of their B2B infrastructure to a vendor such as GXS. GXS provide B2B outsourcing services to companies of all sizes, no matter where they may be based in the world.   

So this was an interesting meeting to attend, especially when trying to appreciate the B2B challenges that some of these technology companies faced and how similar they were to challenges faced by companies in the automotive industry.

Many executives in the automotive industry were glad to see the back of 2007. This was a year which saw immense change within the automotive industry. Slow growth in most markets, numerous acquisitions and mergers, companies going out of business and significant workforce reductions in both the OEMs and their respective supply chains. Despite their best efforts many automotive companies are struggling to work out where to go next in their quest to return to profitability. However on the positive side a few of the major Tier 1 suppliers, particularly in North America, are just starting to emerge from potential bankruptcy as a result of drastically restructuring their business operations. 

In recent years there has been an increasing trend towards developing smaller, lower margin cars with improved fuel efficiency. Ford for example are breaking up their premier automotive group, no longer wishing to compete in the premium car market and instead focus on developing global car platforms to compete in the volume car market. Ford recently announced the sale of both Jaguar and Land Rover to the Indian conglomerate, TATA. This is one way for Ford to prop up their balance sheets but they will need to take more drastic action in order to become competitive on the global stage once again. Like Ford, many other OEMs are now trying to standardise on vehicle platforms and component usage across multiple vehicle platforms.   

So what does 2008 hold in store for the automotive industry?  well, very much the same as 2007 with a continued focus on the top two business initiatives of cost reduction and improving business efficiency. In addition, there will be an increased interest in improving IT infrastructures and according to the research analyst AMR, the automotive industry intends to increase its IT related spending by 7.2% in 2008. The ultimate goal of this spending will be to help improve efficiencies, lower costs and hopefully lead to improved customer satisfaction. According to the U.S Enterprise IT Spending Report, 2007-2008, the breakdown of 2008 IT spending will be as follows: 

• The 7.2% increase in IT budgets represents a shift from the -1.2% that was intended last year.
• 50% of the automotive firms surveyed in this year’s study indicate IT budget increases, compared to the 33% that intended increases last year.  Only 25% of the respondents in this year’s survey indicate they will be decreasing their total IT budgets
• 66% of the overall budget will go towards operating costs, with 19% on depreciation.  33% will be targeted for predictable capital expenditure

So what business drivers are influencing the IT investments in 2008? Automotive IT teams are continually under pressure to deliver more to the business, but with decreased funding, in comparison to other industries such as retail and high tech. In addition to the previously mentioned initiatives of increased efficiencies and cost reduction initiatives, IT departments will have to address a mix of other IT priorities during 2008: 

• Improve the utilisation of enterprise data, ie developing enterprise wide IT platforms that integrate into many different business systems and at the same time ensure that both internal and external stakeholders who want to get access to information can do so in an efficient and timely manner
• Implementing IT outsourcing initiatives to manage for example PCs, network infrastructures and associated helpdesk support
• Using Business Process Outsourcing (BPO) to outsource entire business processes, for example having an outside vendor manage all aspects of a company’s B2B e-Commerce infrastructure
• Exploring the use of Software as a Service infrastructures to improve the deployment and management of software implementations, especially amongst smaller companies with limited IT support capabilities

The aim of all these initiatives is to reduce the amount of time and money that IT departments spend on these activities, allowing them to focus on other IT projects that help to improve business efficiencies still further. OEMs for example will be looking for ways to help their business partners introduce cost savings to their own IT infrastructures. To achieve this, many companies will have to improve internal collaboration between disparate business functions and then extending that collaboration to external trading partners. A company should be working more closely with their trading partners in order to achieve a number of goals:·        

• Reduction in inventory through a better understanding of demand, as well as the ability to translate demand to supply for profitable response
• Collaborative, not prescriptive, relationships with suppliers to identify opportunities for process and product related improvements and innovation
• Further rationalise and centralise supply chain functions, particularly logistics as well as sourcing and procurement

To achieve these goals automotive companies will have to improve visibility into their respective supply chains and introduce Business Process Monitoring (BPM) to ensure that the entire supply chain is operating to its most efficient levels. Many companies are starting to introduce Key Performance Indicators (KPIs) for measuring the performance of suppliers and logistics providers and in 2008 it is expected that many more companies will adopt such monitoring and measurement techniques to help take costs out of their supply chains. 

GXS has a number of solutions and services to help automotive companies implement some of the afore mentioned IT initiatives, for further information on how GXS can help improve the efficiency of your automotive supply chain in 2008, please visit www.gxs.com

OK, well as the 2007 vehicle production figures are starting to filter out I thought it was time to provide a quick review of the production performance of the established and emerging automotive markets around the world. 2007 was quite a turbulent year for the automotive industry and there were a number of surprising facts and figures to emerge from last year’s production of vehicles around the world. According to the International Organisation of Motor Vehicle Manufacturers, OICA, just over 73 million vehicles were produced in 2007, that’s a 5.4% growth over 2006 production figures. This production figure includes passenger and commercial vehicles and is the equivalent to a global turnover of around $2.79 trillion. An interesting way to view this is that if the automotive industry were an economy then this would make it the fourth largest economy in the world (based on 2006 GDP figures) after the United States, Japan and Germany. To achieve this level of production, the automotive industry, on a global basis, employs nearly 9 million people which in turn represents 5% of the total global manufacturing employment.   

Overall there was a 5.4% growth across all markets with the largest growth of 8.5% in the Asia Pacific region, 6.3% growth in Europe and a flat growth of 0.2% in North America. Whereas most of the global growth for the past few years has come from China, Eastern Europe has seen significant new growth in 2007 with new European member countries such as the Czech Republic, Hungary and Slovakia seeing a combined growth of 25.2% over their 2006 production figures. Much of this new growth has come from western and far eastern automotive OEMs building brand new factories on green field sites in these Eastern European countries.   

KIA for example has recently built a brand new factory in Slovakia to help with demand for their vehicles in Western Europe. In order to support the production demands of these newly built factories many of their suppliers have also had to establish a presence in this region so as to reduce logistics costs of shipping parts to the car factories. Slovakia is currently seen as a new automotive hub for the Eastern European automotive industry and therefore many automotive companies are establishing a presence in this country. 

Russia is also emerging as a new region for the OEMs to manufacture their vehicles and St Petersburg Port is seen as the next area which will see significant investment from car manufacturers and their associated suppliers. Finally, the other growth region from a vehicle manufacturing perspective is India which last year saw growth of 14.4%. As India’s road infrastructure improves so the population will be encouraged to move from their traditional two and three wheeled vehicles to new low cost 4 wheel cars.  

From a North American perspective the growth was relatively flat and with the continued economic conditions in North America during 2008, many automotive companies will be facing a tough challenge to re-structure their companies in order to win new business and remain competitive. The North American automotive market is being helped by European and Far Eastern automotive manufacturers such as Hyundai increasing their presence in regions such as Alabama.  Alabama is seeing a continued interest from numerous automotive suppliers wishing to establish a presence near to the car manufacturers in this region. Overall, it is good to see that the Automotive industry is continuing to grow, albeit at a slower rate than in previous years and with emerging markets such as India, Russia and Eastern Europe starting to come online, it will help the car manufacturers and their respective supply chains exploit new markets and develop new business opportunities over the next few years.  

GXS, with one of the world’s largest B2B trading networks, Trading Grid®, is in a unique position to help automotive companies expand their businesses in every region around the world. For further information on how Trading Grid can benefit your company and allow you to reach trading partners, no matter where they may be located around the world, please visit www.gxs.com for further information.

Ford finally said goodbye to two of their automotive brands on 26^th March 2008, the Indian conglomerate TATA took control of the two luxury British car brands in a deal estimated to be around $2.3Billion. Jaguar and Land Rover were the cornerstones of Ford’s premier automotive group, however due to tough economic conditions Ford has been forced to sell. Ford have owned Jaguar for nearly 20 years now and in that time they have struggled to turn Jaguar around, mainly due to changes in consumer demand and a general decline in the luxury car market in some regions of the world. Meanwhile Land Rover was actually a profitable business and has been so since Ford bought the company from BMW in 2000.  Ford had developed numerous joint business and engineering processes between Jaguar and Land Rover and for this reason trying to split and sell the brands independently would have been an expensive and lengthy process. In addition, both brands use a similar set of suppliers in the UK where Jaguar and Land Rover cars are manufactured and so rather than try to develop new supply chain strategies for both companies it was felt that both companies should be sold as a going concern to one buyer.  So who exactly are TATA and how have they got into the position of being able to buy two famous British car brands such as Jaguar and Land Rover? 

TATA is a multinational conglomerate based in Mumbai, India and they are the largest private company in India.  TATA has interests in steel, cars, information technology, communications, power, tea and hotels.  TATA bought the former British Steel company called Corus a few years ago and their TATA motors division is the largest domestic car manufacturer in India.  TATA Motors was established in 1945 when the company began making trains.  In 2004 TATA bought Daewoo’s truck manufacturing unit.  In January this year TATA announced the NANO, the world’s cheapest car at $2500 which is intended to be sold in the Indian market.  Given that most of the population of India is using two or three wheeled vehicles, a low cost four wheel vehicle will be quite a revelation and hence why TATA feel that they have to make the NANO cheap enough for this market.  If TATA can bring the car to market for this price then they stand to corner a lucrative part of the Indian automotive market.  In addition, the NANO has been designed for sale in other markets as well.   

In addition to the NANO, TATA have also funded the development of the world’s first vehicle to run on air.  This offers the ultimate zero emission vehicle which in this day and age could again bring TATA significant revenue opportunities, if they can bring the engine to market at a reasonable price.  Both the NANO car and the development of the air engine car were announced over the last couple of months during a time when TATA were preparing a bid to take over Land Rover and Jaguar.  From a marketing perspective the NANO car has propelled TATA onto the world’s automotive stage and many of the OEMs are now revisiting their own car strategies to see if they can also develop their own low cost NANO vehicle.  On the same day that TATA announced their acquisition of Jaguar and Land Rover, BMW announced plans to launch a successor to their Isetta micro car.  TATA has not been the only one to demonstrate their engineering prowess recently, Jaguar has been busy launching the new XF saloon to rave reviews from the world’s motoring press. Land Rover recently launched the LRX concept vehicle for a new ‘baby’ Land Rover which will incorporate hybrid engine technology. So TATA have got the attention of the world’s automotive industry but what will they do with Jaguar and Land Rover now?

Given that many companies around the world are lowering costs by outsourcing parts of their business operations to specialist offshore companies based in India, you would think that TATA would be looking to move production of Jaguar and Land Rover vehicles to India to significantly reduce costs and boost the profit of every car produced.  However this won’t happen any time soon, Jaguar and Land Rover employ 16,000 highly skilled personnel between them, they have state of the art production and engineering facilities in the UK and most importantly they have an extensive supply chain infrastructure which is primarily based in the UK as well.  TATA have committed to retain the ‘Britishness’ of the Jaguar and Land Rover brands and they will also invest significantly in their respective manufacturing infrastructures.   In addition, TATA have committed to retain all workers from both Jaguar and Land Rover and they have signed a deal with Ford to continue sourcing engines and other key components from them over the next few years.   However further down the line there could be an opportunity for Jaguar and Land Rover to set up an engineering facility in India, this could be to leverage the highly qualified engineers in the country and to possibly provide valuable engineering experience to help bring the NANO car and air powered vehicle to showroom reality. 

TATA are no strangers to the UK manufacturing industry as they have an engineering research facility at Warwick University.  Interestingly Jaguar and Land Rover also had a research facility at this University, as do Corus.  So you can see that, possibly, TATA have been sowing the seeds to have a larger presence in the automotive industry for a few years now.  Corus of course are owned by TATA and they provide the raw steel from which some of the Jaguar and Land Rover vehicles are manufactured. In addition, having  a presence at this particular university has helped TATA to understand the dynamics of the many automotive suppliers that are based in the West Midlands region of the UK where Jaguar and Land Rover are based.   This is an extremely interesting way for an Indian company to learn about how UK based suppliers operate and interact with major OEMs.  There could of course be opportunities for parts or sub-assemblies for Jaguar and Land Rover vehicles to be manufactured in India, but the infrastructure for manufacturing components for luxury cars would have to be significantly improved from where it is today. 

Once the dust settles on this acquisition I will take a closer look at the future supply chain strategies for TATA and how they could leverage the experience of Jaguar and Land Rover in developing their automotive supplier infrastructure in India.

So after a brief sabbatical, I thought it was time to start blogging again

In recent weeks we have been running a series of Executive Briefings across Europe to showcase a recent study that we conducted with Stanford University.  Late last year we completed a research study with Stanford which looked at the area of B2B outsourcing and why companies look to outsource their B2B infrastructures.

Last week I presented at two Executive Briefings in Paris and Munich, the feedback we have received from those companies that attended was that they found the briefings very informative and that it had changed their perceptions as to why they should consider outsourcing their B2B infrastructure.  The briefings were very interactive with a good mix of companies from a variety of industries talking openly about the challenges they faced with managing their B2B infrastructures on a daily basis. These briefings, held over dinner in exclusive hotels in the heart of Paris and Munich, provided the ideal informal environment to discuss B2B best practices and it also provided a chance for the guests to learn from each other as to how they manage their respective B2B environments.  I certainly found the events useful to understand, at first hand, why companies consider going down the outsourcing route and the challenges they faced in today’s tough economic climate.  Based on both the feedback from the attendees and the results from the research, I believe B2B outsourcing will pick up more momentum across many different industries over the next 12 months. 

B2B outsourcing is no longer reserved for large global corporations, many mid market companies are also starting to take an interest in B2B outsourcing as well.  In fact, nearly 25% of the respondents to the Stanford research were from mid-market size companies.  The research confirmed that these smaller companies are keen to leverage the B2B outsourcing services that have been used by the larger companies for many years.  The research showed that many of the smaller companies were able to implement new B2B technology very quickly,  provide connectivity and support to global trading partners and more importantly significantly  improve customer satisfaction. 

The research with Stanford was conducted by Dr. Hau Lee who heads up Stanford’s Supply Chain Management Forum.  He is regarded as one of the world’s leading authorities on developing supply chains.  He is famous for developing his ‘Triple A’ theory that says that nearly all supply chains are made up of three key characteristics.  He says that supply chains need to be AGILE, in other words they need to be designed in such a way that they can be flexible to certain market conditions.  They need to be ADAPTIVE, in order to change according to differing supply chain patterns and they need to be ALIGNED to the incentives applied to all trading partners involved in a supply chain. Recently, Dr. Hau Lee suggested that his theory could be extended by the addition of a further ‘A’ and that is ensuring that supply chains are ARCHITECTED properly to ensure that maximum value is obtained from the supply chain management process. 

For me, as part of my preparation for presenting at these events, it was a great opportunity to take a more in depth look at the results from the Stanford research.  For example, of the companies that took part in the research, just under half had only been using B2B outsourcing for the last year.  This was probably due to tough economic conditions, a need to globalise their supply chains or possibly a need to update their B2B infrastructure to support new connectivity standards or electronic document formats.  Whatever the reason, B2B outsourcing is here to stay and GXS expect many more companies to go down the B2B outsourcing route over the next few years. 

If you would like to find out more about why companies are looking to outsource their B2B infrastructures then please feel free to download a copy of the Stanford report from our website. Alternatively if you are based in Europe and would like to join us at one of our Executive Briefings in the near future then please keep a close eye on the events section of our UK website , as we will be running a number of other briefings over the next few months.

Today’s automotive Original Equipment Manufacturers  are trying to find ways of simplifying B2B infrastructures, make them easier to deploy on a global basis and at the same time ensure that all suppliers are able to use the same B2B solution, no matter what their B2B expertise may be or where in the world they may be located. 

In recent years, hosted supply chain management solutions have been seen as a possible way of simplifying B2B infrastructures, but how will this be achieved?  Software as a Service (SaaS) based environments have been around for a few years now but they have really only been used for specific functions within a company, for example in customer relationship management or human resources applications.  SaaS based environments have many advantages over traditional software implementations, for example  

• there is no upfront capital cost in purchasing software, it is delivered via a monthly or annual subscription model
• there is no software infrastructure to manage, all you need is a web browser to access the hosted SaaS application
• as the software is managed centrally you can be assured that all users of the SaaS application will be using the latest version

In order for automotive OEMs to expand into new geographically dispersed regions around the world and to ensure 100% involvement from their trading partner community, they will have to find new ways to support their supply chain. SaaS has the potential to transform today’s B2B platform used within the automotive industry, providing companies with access to the same information, anytime, any place and anywhere in the world at a lower cost using a simpler, easier to manage infrastructure.   

The new version of SaaS, version 2.0, includes capabilities to integrate seamlessly with other back office systems, and this could see more widespread adoption of SaaS based environments within the automotive supply chain. There are a number of building blocks that make up a SaaS based environment and GXS Trading Grid infrastructure provides the ideal platform to deploy a SaaS based environment.  The highly available and reliable nature of our Trading Grid  infrastructure means that applications can be deployed and used simply by using a web browser.  For a small supplier with no internal IT support or skills to deploy their own B2B infrastructure, SaaS has the potential to provide a new level of interaction with an automotive manufacturer’s supply chain. 

Moving forwards, Integration as a Service, (IaaS), will also grow in importance and you can be assured that through our partnership with Software AG and their webMethods solution we will be able to provide hosted integration solutions as well.

SaaS will form the basis of a presentation I will be giving at the Odette show at the end November in Prague, which will look at ‘Next Generation B2B Trading Platforms’.  For further information about this event please visit www.odette.org.

In recent months we have seen an increased interest from Tier 1 and Tier 2 automotive suppliers wishing to outsource the management of their B2B infrastructures. Automotive OEMs are asking their key Tier 1 suppliers to take on more solution based work, for example producing entire transmission, drivetrain and suspension systems for delivery to their customers. As a result, a shift of responsibilities is occurring in the automotive supply chain where the original Tier 2 suppliers are now being asked to undertake work previously carried out by the Tier 1 suppliers. In order to manage this shift in the supply chain, many of the lower tier automotive suppliers are having to re-evaluate their B2B e-Commerce strategies so that they can remain competitive and support their customers with their global expansion plans.

Many of these suppliers will have never implemented a B2B platform before, or know how to manage their B2B environment effectively. In addition, these suppliers may be in a different country or located in a region where B2B expertise is limited and IT infrastructure cannot support global trading partner relationships.  These smaller suppliers are expected to embrace new B2B technologies and at the same time change business practices in order to implement these solutions and services. Also, they will not have extensive inhouse expertise to run a complex B2B environment and more importantly they must be allowed to focus on their core competency, manufacturing automotive components for their customers.

GXS hosts its Managed Services environment on GXS Trading Grid®, GXS’ secure, scalable, high-performance B2B integration services platform that spans best in class data centres around the world. If required, GXS can provide a web form based trading environment, community enablement programs and support for a multitude of communication protocols and document formats.

So if you are an automotive Tier 1 or Tier 2 supplier and you want to stop pulling your hair out trying to think about how you will implement a best in class global B2B trading environment, simply visit our Managed Services microsite for further information.

Just in case you think I am about to review a new Star Trek movie!, I am actually going to draw comparisons between old and new generation car models and how some of the characteristics of these cars are similar in many ways to how GXS has evolved over the years.

The automotive industry has many examples of companies that have stood the test of time, not only in terms of how long they have been producing cars but also how long a particular car model has remained in production.  In 1967 the Chevrolet Camaro was introduced to compete with Ford’s Mustang, an era that saw many ‘muscle’ cars take to the streets in the US.  In 2007, Chevrolet introduced their vision for what the next generation Camaro would look like, taking strong design cues from its 1967 predecessor.

In 1967, Porsche was one of the leading producers of high performance sports cars. Today’s 2007 Porsche 911 Turbo stays true to the original and contains many styling cues from its early predecessor.  Porsche are one of the industry’s most profitable car companies and they have partly achieved this by sticking to a ‘tried and tested’ design.

The final example I want to refer to is the Mini. This car, when it was introduced in the late 1950s by the British Motor Corporation, completely changed how small cars were designed and packaged. It was also very affordable meaning that more people could take to the road for the first time. Today’s Mini, albeit produced by BMW, stays very close to the original design concept and because of this has seen strong sales growth in all major car markets around the world.

The interesting thing about all these cars is that the external shape of each has changed very little over the past four decades. Each generation or evolution of the afore-mentioned cars has seen significant improvements in terms of performance, economy, quality, reliability and even service levels at garages has improved considerably over the years. Like a fine wine, these cars have become much better with age but still manage to remain true to the original concept.   

GXS has been around for forty years as well, hence why I highlighted these particular car models, and it is interesting to draw comparisons between how these cars have evolved over time and how GXS has evolved over the same time period.  Each of the afore-mentioned cars was brought to market for a particular reason, similar to GXS who in a former life was responsible for setting up one of the world’s first private email networks.  GXS has successfully transformed itself from being a mere provider of Value Added Network services to becoming a leading provider of On-Demand B2B solutions and services. GXS provides global coverage and with the introduction of our Trading Grid Ultra infrastructure, customers and their respective trading partners now have access to a high performance and highly available B2B trading platform. 

Today’s cars also contain relatively complex engine management systems and they are not as easy to maintain as their 1960s predecessors.  For this reason you will probably use an authorised garage to undertake any repair or service work.  Similarly, GXS know that there are many companies out there today that do not wish to look after their own B2B and EDI platforms and so they think about outsourcing.  GXS Managed Services, as discussed recently by my colleague Mark Mixter in his blog, offers the complete solution for companies wishing to outsource their B2B infrastructure. 

There are many other companies and products out there that have ‘reinvented’ themselves over the years and GXS are a great example of this. Our Trading Grid infrastructure will continue to evolve and our next release will contain some exciting new capabilities, more about these in the near future.  So what will the next generation B2B trading platform look like?, well this is an area that I will be discussing at the Odette conference in Prague in a few months time, I will post some thoughts on this in the very near future, but in the mean time do you have any thoughts about what you would like to see in the next generation B2B platform?