Newton, Mass—A survey of Tier-1 automotive suppliers indicates that 77 percent plan to consolidate their vendor base over the next year. The survey found that 15 percent of Tier-1 suppliers expect their lower-tier suppliers to be e-commerce capable, but that will rise to 77 percent in two or three years.

"E-business capability" was cited as a "driving factor in deciding who remains," according to the Center for Automotive Research at the Environmental Research Institute of Michigan.

In the survey, 49 percent of Tier-1 suppliers indicated that the most important consideration in assessing lower-tier suppliers is "computer-to-computer communication, automated on both ends."

Some data that backs up the claim of respondents to the survey is in a Department of the Census report on 1999 e-commerce. It found that 75 percent of wholesale distribution e-business occurred in only three industries — automotive, pharmaceuticals and computer equipment — making top-tier automotive suppliers prime candidates to sharply increase their demands from lower-tier vendors.

Distributors have heard this same kind of urgency before, with buyers and sellers, and software providers, urging them to invest in more technology. Manufacturers and customers claim that one of the criteria for doing business is e-business capability. However, with each declaration in the last 18 months that e-business will be a requirement for doing business, news reports noted another "dot-com bomb" that represented customers' disinterest. They don't see the need for expensive equipment and software.

According to a report, "How Your Customers Will Use Technology in 2006," by Adam J. Fein, president of Pembroke Consulting, a distribution management consulting firm, by 2006 wholesale distribution customers will buy through the Internet, but that will not be the dominant method for transactions. Traditional sales methods like the telephone will prevail. Distributor respondents to Fein's survey expect to do 37 percent of their business online by 2006.

Automotive Tier-1 distributors are expecting a much more aggressive migration to e-business from their suppliers, according to the CAR report, and the Tier-1's expect their e-business spending to rise from three to 13 percent of their capital expenditures.

Tier-2, 3 and 4 suppliers will have to determine if more quickly acquiring technology that readily communicates "computer-to-computer" with their customers puts them in a better business position, or saps too much working capital in today's economic situation. Due in part to a sharply downturned economy, technology experts say that a "wait-and-see" attitude may still be in distributors' best interests.