Automotive Industry\'s Value Chain Is Highly Dependent

Automotive industry's value chain is highly dependent on the level of quality management achieved in each phase of supplier validation, sourcing, procurement and demand management, to ensure each customer gets the highest quality vehicle possible (Ro, Liker, Fixson, 2007). The intent of this paper is to compare a domestic manufacturer, Chrysler, with a globally-based one, Toyota on how each manages the quote-to-order process for customized vehicles. While both companies take a unique approach to this process area, both share a common attribute or characteristic of using quality management, demand management, forecasting and pricing data to optimize their performance in production, services and customer management (Breyfogle III, 2010). For purposes of this analysis the quote-to-order process these auto manufacturers and others like them also use to translate customer demand into high quality vehicles is used (Selladurai, 2004).

Describing the Quote-to-Order Process between Chrysler and Toyota

The purpose of the quote-to-order process is to streamline the capturing of customer needs, preferences and requirements and translate them into the highest quality vehicle possible (Bilek, 2010). The way this process works is as follows. First, a member of the auto manufacturer's selling organization will meet with a representative of a fleet buying group or buyer who is going to place an order for up to a hundred units or more which is often how rental care companies buy vehicles (Chow, Choy, Lee, 2007). In the past several years, Chrysler and Toyota have led auto manufacturers with the development of online product configurators which guide potential customers through the series of vehicle options and alternatives, allowing them to build their own preferred car and then order it (Roehrich, Parry, Graves, 2011). This aspect of the build-to-order process being available to consumers has led to over 100,000 quotes being generated on a weekly basis by Chrysler after the introduction of this feature (Roehrich, Parry, Graves, 2011).

Once the quote is accepted, it is translated into an order. At that point, Chrysler or Toyota sales sends the approved quote to production scheduling, which coordinates with the customization and manufacturing teams to create the finished product. This process is shown in Figure 1, Before Streamlining the Quote to Order Process. This is what the entire process and related procedures look like before they are modified to drive out time and cost inefficiencies. What also makes this process unique within Chrysler and Toyota the ability to quantify or measure each step in the process from a time, cost, and revenue implication standpoint on customers and channel partners (Chow, Choy, Lee, 2007).

Figure 1:

Before Streamlining the Quote-to-Order Process

Of the two companies, Toyota has a far more effective approach to quantifying the overall level of accuracy, profitability and quality attained in their quote-to-order process (Dyer, Nobeoka, 2000). This is because the TPS processes, procedures and systems are designed to track customer-based data surrounding orders. As a result, Toyota is capable of drastically streamlining the quote-to-order process both from a time and quality-based perspective. Between the domestically-driven Chrysler approach to An example of how this is achieved is shown in Figure 2, Streamlining the Quote-to-Order Process.

Figure 2:

Streamlining the Quote-to-Order Process

Each of the procedure improvements shown in the process workflow diagram in further underscore how quote-to-order strategies can be measured in terms of profits and performance (Roehrich, Parry, Graves, 2011). When a quoting process or procedure is working as effectively as possible, it can deliver significant competitive advantage, with the greatest being time-to-market and meeting and exceeding customers' expectations (Stalk, 1992).

Why the Quote-To-Order Process Produces Competitive Products and Services in Domestic and Global Markets

The quote-to-order process directly leads to highly competitive products and services globally by accurately capturing customer demand, then translating it into an effective series of production workflows to fulfill demand (Ro, Liker, Fixson, 2007). In the case of Chrysler and Toyota, both have taken the approach of using quote-to-order as a means to unify customer demand and create a consistent procedure for producing customized products. This approach to creating products and services removes a significant amount of variation within the quoting, ordering and manufacturing procedures, thereby increasing customer satisfaction as well (Selladurai, 2004). Both auto manufacturers have also been successful in gaining significant time-to-market advantages out of streamlining their quote-to-order processes as well (Stalk, 1992).

The greater levels of accuracy, increased responsiveness and reduction in time to produce a vehicle, and the ability to add in specialized process knowledge all contribute to greater domestic and global competitiveness (Chow, Choy, Lee, 2007). The quote-to-order process is therefore consider the most pivotal in terms of translating customer demand into finished products.