Leveraging Technology to Address Automotive Industry Challenges
By Kumar Singh, Research Director, Automation & Analytics, SAPinsider
Automotive- An industry prone to challenges
The automotive industry is one of the most prominent industries in the world of manufacturing. Cassia and Matteo quote in their bestselling book “The Economics of Cars”: “The history of the manufacturing industry and the history of the automotive industry were strongly intertwined throughout the 20th century, and such ties will probably remain highly relevant in the future.”
Unfortunately, it is also an industry that consistently grapples with challenges. And when the Original Equipment Manufacturers (OEMs) struggle, the struggle also cascades to their supplier base. While uncertainty is always an integral part of most businesses, digital transformation’s many advantages are providing tools to help manage these uncertainties better. Take an example of the recent semiconductor shortage that hit the automotive industry. While multiple factors led to the shortage, some of them, like limited stock and limited capacity, were factors that digital tools could have helped manage better (and maybe did help many companies manage the crisis better).
Considering the unique challenges these automotive suppliers face, there is a need for focused tools to help them better manage the unique nuances of their business processes. Specifically, they need tools designed to keep the challenges that automotive suppliers face in perspective. SAPinsider recently had the opportunity to discuss the priorities for automotive suppliers with Sahil Dhawan, Global Business Head for SAP business for Tech Mahindra, and get his perspectives on what type of digital tools and technologies can help address those priorities better and get insights on AutoShift. This Tech Mahindra solution addresses unique challenges and aspects of automotive suppliers in the SAP technology ecosystem.
From rapidly evolving SKU portfolios to the imperative to consistently achieve operating excellence, automotive suppliers must manage many challenges and imperatives. Complexities in the supply chain, disruptions arising from these complexities, and the increasingly global footprint of automotive supply chains add to those challenges. To get an expert perspective, we asked Sahil to identify some of the top challenges he believes Tech Mahindra’s customers in the automotive supplier industry are grappling with. The challenges identified were not surprising and aligned with what our conversations with SAPinsiders and our industry analysis highlight. The top four challenges identified by Sahil were:
Challenge I: Need to attain and sustain consistent operational efficiency and excellence.
Challenge II: Globalization of customers means developing the ability to address both global and local nuances of demand
Challenge III: Increasing complexity of strategic sourcing
Challenge IV: Rapidly evolving SKU portfolio
The need for robust visibility and process management platform in the SAP technology ecosystem
We use the word “solution” frequently instead of the term “software” because every software (ideally) helps solve a challenge that individuals or organizations face. In the SAP ecosystem, organizations have a robust tool in the form of SAP ERP that can help them manage these complexities better. However, SAP technology is complex, and hundreds of tables hold pieces of information across several modules. So often, despite having captured the data, organizations still struggle to make the best use of their SAP investment to address their challenges. And automotive suppliers are no exception.
When you think about this from a supply chain perspective, several modules in SAP ERP systems cover the span of data that transcends throughout the supply chain. And hence, tieing all this to create the end-to-end view in itself is a challenge. This end-to-end view is foundational to managing and maintaining operational excellence. Sahil quotes: “OEMs want all the flexibility, but at the same time they want that when they need the parts, the parts are delivered at the right time, in the right place, and at the right cost. So the entire end-to-end supply chain integration is critical. That is why we have that as a key capability in AutoShift, which integrates the end-to-end supply chain, from manufacturing to the customer.”
To create true visibility, multiple SAP processes need to be tied together. To give us a sense of scale, Sahil shared some numbers for AutoShift. This product ties 150+ SAP best practice processes, and the resulting end-to-end visibility helps in operational excellence and efficiency. To add additional numbers against the efficiency perspective, Sahil indicated that AutoSift customers typically see a 2-4% reduction in operating cost by digitizing the end-to-end process.
Another challenge that can be addressed through technology is that of evolving strategic sourcing complexity. With global sourcing footprints, globalized and localized parts requirements and variations, logistics challenges from low-cost country locations, and a myriad of other challenges, automotive suppliers would love to have a tool that can help them address this challenge through features like customized product variant configurations, localizations for key markets, coverage across product categories etc. Similarly, the challenge of developing the ability to quickly get to the market for new products in today’s rapidly evolving product landscape can only be addressed by leveraging a platform that can support end-to-end extended processes across the supply chain. This platform lays a foundation for digital transformation journeys and can help accelerate your journey, in addition to helping you manage your challenges better.
What does this mean for SAPinsiders?
For those suppliers operating in the SAP technology ecosystem, an area where they see the need for a smart digital tool is managing SAP business processes. These suppliers see a need to streamline operations and provide greater visibility and control over core business processes as one of the core necessities of their digital transformation journey. A technology solution, as discussed above, can certainly be a helpful tool to address these challenges and hence a worthy investment. However, there are some key aspects that they need to keep in mind when they embark on their journey:
Identify your critical SAP business processes. Platforms like AutoShift provide you the capability to integrate hundreds of business processes. It is, however, imperative that you also know your business processes and hence create the right end-to-end view leveraging these platforms. This is why industry experience is a key element. Sahil highlighted the importance of experience and expertise in understanding unique business nuances of the industry and emphasized that AutoShift works extremely well for its customers because it was developed leveraging the extensive experience of experts working within the automotive supplier industry.
Evaluate the alignment of the solution. With many options available in the market, you must identify one that addresses the unique operating nuances of your business. While products created out of industry experience and expertise will generally address the unique nuances of the industry, yet the onus is on you to do your due diligence. Use your RFI and RFP processes to get vendor perspectives on unique issues versus general template-based questions. Rather than using standardized templates for these processes, prepare customized questions developed after extensive research.
Keep long-term aspects in focus. Digital transformation journeys are long; every tool or platform you invest in should become an important element or cog of a well-oiled, digitally transformed machine. A tool like the one discussed in this article will be an important foundational element of your digital transformation journey. So, when you think about this capability, consider what additional capabilities can be built leveraging these tools. As an example, a robust tool should enable the application of AI, ML, and RPA-based use cases specific to the automotive supplier industry.
