A System From Scratch

By Larry Dignan  |  Posted 2003-08-01 Print this article Print

Build-To-Order, Inc. is starting a custom-manufacturing business from scratch, to revamp the automaking industry the same way Dell reshaped computer making.

A System From Scratch
The systems that will make this work haven't even been built yet. Chief Information Officer Sateesh Lele is building a network and manufacturing system from scratch, just like the company.

Right now, he is talking to vendors and making architecture decisions including one tug of war over whether to go with a Linux-based system or one that relies on Microsoft's .NET platform. Lele has largely ruled out using Unix, saying he would like to think ahead.

"The preconceived notion is that the network will run Unix, but I came to the view that this is a unique opportunity, so why take something that's decades old?" says Lele. Lele is investigating Microsoft's .NET architecture because of its Web services architecture, which in theory could seamlessly meld BTO's systems with its partners. The goal: Get hundreds of suppliers integrated with BTO so they operate cohesively to deliver a car in 14 days. Automated Web services may be the way. "When you're real-time and promising a car in two weeks, every small hiccup will need to be jumped on right away," says Lele.

Read Baseline's coverage of General Motors' campaign to be the first all-digital automaker.

The problem: Discerning between .NET features that are available today in tools such as VisualStudio.NET, and those that remain concepts years from mainstream corporate adoption. "We're peeling back and taking a look and asking if the risk is worth the reward," says Lele, who adds he is still conducting due diligence on .NET.

Each of the building blocks of BTO's information system isn't path-breaking. But the complexity is. It's not as if BTO can mandate that each of its suppliers adopt a single method of exchanging data. The system will have to be able to communicate with suppliers through electronic data interchanges and something as rudimentary as a fax. "We've seen the future and it's a lot of work," says Lele. "If they don't have the systems, we'll have to live with a batch process. In some cases real-time may be one day or one week. Eventually we'll get to real-time. We'll try to work with the suppliers and if they can't link, have them hold one week's inventory to guarantee immediate delivery."

But getting manufacturing partners to exchange data effectively may not be the hardest part. Lele believes the systems that capture the choices of customers accurately will be most important. If that doesn't work, then the whole idea of custom cars—and any competitive advantage for Build-To-Order—falls apart. He'll need rock-solid yet flexible software to take orders, check supplier inventories and deliver a car by a promised delivery date. And, oh, yes, make sure this all works through a browser.

Lele says his customer relationship software choice is between two suppliers: Chordiant and E.piphany. He says those two vendors fit in with BTO's needs because of their customer loyalty and marketing modules. As for Siebel Systems, Lele says it's too complex—like "trying to crack a nut with a sledgehammer."

"The biggest challenge may be the front-end sales process," says Paul Wellener, managing partner at Deloitte & Touche's auto practice. "BTO will have to configure the vehicle and help consumers make a buying decision at a kiosk."

BTO plans to start out by creating five "experience centers" in car-happy Southern California, to sell its cars. A customer at the Los Angeles International Airport, for instance, will check out the features of the Auburn online; and, if need be, ask an adviser—in person—additional questions. When ready to buy, the customer can input the exact components desired, compute the price, arrange financing and get a delivery date. BearingPoint consultancy Managing Director Wayne Stein says BTO will have a tough time herding suppliers. "The auto industry is resistant to change," says Stein. "The idea behind BTO has been around for awhile, but the more configurable they become the harder it could become dealing with suppliers."

BTO plans to overcome that hurdle by hiring auto industry insiders with a lot of pull with suppliers. CEO William Santana Li is the former chief operating officer at Greenleaf LLC, a Ford unit focused on recycling.

Other BTO executives hail from GM and suppliers such as Visteon, a $17 billion parts maker.

If successful, BTO could turn the auto industry on its ear. At worst, BTO will be an interesting technology petri dish.

Painter acknowledges the challenges, as he tries to obtain funding for his brainchild. He needs at least $200 million to start producing and marketing the first Auburn. After garnering its first round of funding in July 2001, BTO currently has $25 million from investors such as AK Steel, Tom Walkinshaw Racing and Deloitte & Touche.

According to Painter, that $25 million could last two years, as the company works out its systems. And he may only need $75 million, to get things moving faster. If BTO raises $100 million, the California pension fund giant CalPERS will match every dollar raised, since BTO is building a unionized plant in San Bernardino.

Once that much cash lines up, Ross Perot Jr.'s Hillwood real estate development unit has agreed to build BTO a plant and lease it back to the company. Painter estimates it'll take 26 months from funding to the time it sells its first car.

Next page: Advice from BTO's CIO.

Business Editor
Larry formerly served as the East Coast news editor and Finance Editor at CNET News.com. Prior to that, he was editor of Ziff Davis Inter@ctive Investor, which was, according to Barron's, a Top-10 financial site in the late 1990s. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism.

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