Key Planning Capabilities Automotive Suppliers Will Need in the Next 10 Years

An aim10x webinar saw Joao Gaurisse, VP of Sales at o9 joined by Jesus Beas, VP of Supply Chain at Marelli to discuss the importance of digital maturity in the automotive industry and understanding a company's position in terms of processes and technology. 

The webinar opens with a question to its wider audience: where do you gauge your level of digital maturity? 62% rated their automotive business’ digital maturity as low, with only 31% responding as medium, and 8% as sophisticated (These numbers don’t add up…?). These scores serve to highlight the need for a drastic increase in transformation efforts. Jesus and Joao go on to note that crafting a business case for digital transformation and data fragmentation might seem like supplementary factors to consider when planning for the future, but ultimately this crossroads in digital planning uptake is undeniably pivotal and crucial in the quest for building long-lasting automotive supply chains. So, as automotive companies look to digitize their operations and improve efficiency, it's vital that decision-makers understand where they rank in terms of digital maturity and processes. 

As we look to the future, it's clear that digital transformation will play an increasingly important role in the supply chain industry. Companies that can leverage the latest technologies and processes will simply be better positioned to compete and succeed in the years ahead. However, this will require a willingness to invest in digital transformation efforts and a clear understanding of where a company stands today in terms of digital maturity. By engaging in conversations like these, we can chart a path forward that ensures a brighter future for automotive supply chains.

Having established the why, Joao and Jesus move on to the how. The first step could be a total alignment of resources across different departments to achieve the digital maturity an automotive supply chain requires. To achieve digital maturity, companies need to focus on meta capabilities, such as customer understanding, digital factories, and piloting and experimenting:

• Customer understanding is a top priority for digital companies, and they go out of their way to understand customer patterns and anticipate future problems and desires.

• Digital factories (a network of digital models replicating aspects of a physical factory) involve mapping all activities that deliver customer value and automating as much as possible to create a system where most decision-making is done automatically by algorithms. This approach streamlines the production process for improved efficiency.

• Piloting and experimenting is another essential element of digital maturity, whereby companies encourage their employees to challenge the status quo and fundamentally rethink their core business. Companies that continually create hypotheses, develop pilots with clear success criteria, and scale those successful initiatives benefit from a recurring, dynamic competitive advantage.

Overall, the automotive industry is rapidly changing, and automotive businesses need to embrace digital transformation to stay competitive. By prioritizing customer understanding, digital factories, and piloting and experimenting, organizations can become digitally mature and meet the challenges of the future head-on.

What the Future Holds: Essential Capabilities

Following that, the speakers identified a need for certain capabilities in the automotive industry within the next five to ten years, the growing importance of sustainability, and the transition to electric vehicles (EVs). The conversation also touched on the impact of EVs on the supply chain and the spare parts & services business, as well as the geopolitical implications of raw materials needed for EVs. Additionally, they discussed the challenge of integrating sustainability into day-to-day business decisions; highlighting the need for companies to develop a single, integrated process that connects sustainability to the overall business strategy.

According to Jesus, next-gen technologies, strong executional plans and hyper-connected factories and partnerships with transportation companies will all continue to serve as increasingly important capabilities within the next 5-10 years. Similarly, sustainability has become a major focal point in automotive with a growing importance placed on tracking carbon footprints and minimizing the impact of transportation on the environment. The impact of EVs on the supply chain promises a seismic shift in planning requirements, not least because the average number of parts in an EV is significantly lower than in that of an internal combustion engine vehicle. It should also be noted that raw materials that were not previously needed for internal combustion engines are now critical for EVs, and that this will likely have geopolitical implications. With that in mind, it’s necessary to consider the importance of sustainability in the EV industry and the need to minimize the impact of EVs on the environment.

Overall, the conversation highlighted the need for companies in the automotive industry to be prepared for the transition to EVs and to prioritize sustainability in their business strategies. Both speakers acknowledged the challenges of integrating sustainability into day-to-day business decisions, but also underlined the importance of developing an integrated process that connects sustainability to the overall business strategy.

So, where can you find the crucial data to drive your decision-making? It’s clear that in the rapid evolution of today’s business landscape, automotive companies need to take a more holistic approach to decision-making, incorporating not only internal data but also external information. Market trends, customer feedback, and social media insights can provide just that: valuable insights into customer preferences and industry shifts, allowing companies to make informed decisions that will drive growth and improve customer satisfaction.

Internet of Things (IoT) devices are one of the most significant sources of external information, capturing data from a wide pool of sources and analyzing it to identify patterns and trends. Companies that invest in IoT technology can leverage this information to optimize their operations, improve product quality, and enhance reliability, ultimately leading to improved customer satisfaction and increased revenue.

As an automotive company looking to the future, then, you should explore new profit sources by transitioning from selling products to providing services that meet your customers' needs. It should be noted that this approach requires a deep understanding of customer needs and preferences, but crucially a willingness to adapt to changing market conditions.

Automation is another growing trend that can help companies improve efficiency and reduce costs. Hyper-connected factories and automated warehouses can support day-to-day operations and decision-making, allowing companies to focus on strategic initiatives and innovation. Bear in mind that managing the future while containing the present is vital in a constantly changing geopolitical environment; companies that stay agile and flexible in their decision-making can adapt quickly to new opportunities and challenges, gaining a competitive edge in their industry. By setting clear goals and benchmarks, monitoring progress, and making adjustments as needed, automotive companies can achieve long-term growth and success.

The when is dictated by the period of evaluation, and honesty is the best policy when evaluating the current state of a supply chain and identifying opportunities for growth. Developing a clear vision and initiative that’s based on the present is critical to establishing a successful supply chain management system and identifying the key levers that drive the supply chain and creating a business plan that outlines how to measure success and pay back investors is crucial. This process ensures that everyone involved in the supply chain is on the same page and working towards the same goals.

Standardizing systems and communication across a global business with diverse cultural backgrounds can be a challenge. Still, it's essential to create a streamlined process that everyone can understand and follow. Leveraging technology is critical in modern-day supply chain management. During the COVID-19 crisis, for example, Marelli successfully used tech to aggregate data and make significant improvements to their business, such as achieving a 1% or less discrepancy in sales predictions and factory volume, demonstrating the value of technology in supply chain management.

Similarly, it's essential not to flounder in the face of crisis, and instead find motivations for investment in new technology or other improvements. Companies that invest in technology during difficult times can come out stronger in the long run, and the COVID-19 crisis should serve as - and has been - a wake-up call for many, highlighting the importance of digitalization and investing in supply chain management in order to pivot at a moment’s notice.

So, honesty in self-evaluation, developing a clear vision and initiative, understanding digitization efforts, and investing in technology during difficult times will help companies establish a streamlined and efficient supply chain management system that will drive growth and success.

As an automotive business undergoing a digital transformation, it is also necessary to factor in disruptions in the electronics industry. This can be an especially daunting task on account of the long lead times and small market segment. It's important, for example, to secure capacity for semiconductors in order to manage risk, as the supply of electronics is experiencing unprecedented disruptions, with shortages expected to continue well into 2023.

Automotive companies must also keep an eye on industry changes and the aggregate demand to stay ahead of the curve. In the current climate, capacity is not meeting the demands of some industries like tablets, phones, and computers, so businesses must be organized and disciplined to thrive in this environment.

Being data-driven, customer-focused, and automated is essential, along with securing capacity for semiconductors. To succeed, businesses need a transformation strategy, robust roadmap, and support from the C-suite executives. Understanding industry changes and aggregated demand is crucial, and technology can help reach the next level of controls and understanding.

Solutions to Change in the Automotive Industry

The automotive industry has long been known for its traditional way of doing things. However, as digitization and automation take hold, the industry is facing a significant challenge in managing change effectively. In the webinar, several key takeaways were highlighted as important considerations when it comes to change management in this industry. One of the most critical challenges facing the automotive industry is the need to involve people from day one, without provoking chaos by changing everything at once. Many of those in the industry have been working according to a certain methodology for many years and it is essential to respect their experience and knowledge. Implementing changes gradually and involving everyone from the outset, therefore, is vital to ensure buy-in and minimize resistance.

Another significant challenge in the automotive industry is data quality and standardization. With so many different companies, suppliers, and factories involved in the process, data interchange can be difficult due to various systems, languages, and formats. Standardization of data systems is essential to avoid confusion and reduce the risk of errors.

Getting executive sponsorship is also critical to the success of any change process. Having senior leaders support and push through changes reduces roadblocks and helps overcome resistance. Demonstrating tangible and intangible benefits at every step is also essential to gain credibility and funding. The ‘human factor’ is another critical aspect of change management in the automotive industry. Individual thinking is a human condition, and each person tends to think their method, process or viewpoint is superior to others. Addressing this aspect of the process is essential to getting people on board, and it may just require a top-down or grassroots approach to change, depending on the situation.

Standardization is also crucial. Having too many different systems can cause problems and upgrading them can be costly and time-consuming. Silos are also common in the automotive industry, and breaking them down can be a challenge. Standardizing processes and systems can help avoid these issues and streamline operations.

In conclusion, change management in the automotive industry requires careful planning and execution. It is essential to involve people from the outset, ensure data quality and standardization, get executive sponsorship, demonstrate value at every step, and address the human aspect of the process. By following these guidelines, the industry can manage change effectively and adapt to new technologies and ways of doing business.

o9 Achieves Catena-X Demand and Capacity Management Certification, the Automotive Industry’s First Open and Collaborative Data Ecosystem

The Certification Marks o9’s Position as a Frontrunner and Trusted Provider of Interoperable and Secure Solutions for the Automotive Value Chain

Read the full press release