Automotive: Digitization Across the Supply Chain

The automotive industry is, in many ways, ground zero for digital transformation, and will continue to leverage the Internet of Things (IoT) across the entire design and supply chain.

Let’s take a few moments to think about how much new technology has made its way into our automobiles over the past few years. It’s been an exhilarating ride already, and our research shows that the speed and impact of new business models and technology are only going to increase, touching everyone involved in the industry.

As recently as three to five years ago, consumer expectations did not include automobile systems like advanced collision prevention, standardized infotainment integration with mobile devices, cars as roving wireless hotspots, and certainly not the real promise of driverless cars. Add to that the convenience and expansion of rideshare and temporary car services such as Uber, Lyft and Zipcar across all corners of the globe, and the associated future potential of driverless rideshare services, and the automobile industry is definitely accelerating into the future.

Today’s automobiles already generate and store huge amounts of information and process operating and maintenance diagnostics at subsecond intervals. Some of this information is already being leveraged to optimize maintenance schedules and provide feedback to auto manufacturers and their suppliers about the in-use performance of designs. In the future, the volume and variety of data will increase exponentially, leading to new opportunities to use the information in new business processes, as well as improve safety and comfort for consumers.

Industry leader in digital transformation

The automotive industry is, in many respects, a leader in digital transformation. It will continue to leverage the Internet of Things (IoT) across the entire design and supply chain—within automotive manufacturing, connected vehicles, and in pursuing the ways in which automotive transportation will be consumed and managed. Companies like Tesla and Google have already created disruption in the industry, and we can be sure that today’s automotive business models—from design to manufacturing, through to sales—will continue that dramatic change.

The automotive industry is in a period of rapid growth and recovery after the troubles of the late 2000s. Demand for new cars is high; finished automobile manufacturers and OEMs, along with all suppliers and sub-suppliers, are looking at taking market share, providing higher value and margins, and obtaining their share of new global expansion opportunities.

Our most recent surveys uncovered the top financial objectives of more than 100 automotive industry companies (see graph above). By far, the leading objective is growing revenue (50 percent), followed by growing margins (16 percent).

What does this all mean to the companies that are closest to the automotive manufacturing action? In these same recent surveys, we see that all manufacturers involved in the automotive supply chain still see manufacturing efficiency (Lean) as their top operational priority. It’s no surprise to see compliance as a top operational priority, particularly given the recent exposure of Volkswagen and other companies with regard to emissions regulations. Improving customer service to differentiate and take market share is also an area of focus, along with the ability to get new products that leverage new technology and efficiencies into the market more effectively.

Challenges of a connected world

Digital transformation is accelerating quickly throughout the automotive industry. This, along with traditional continuous improvement, will enable ambitious manufacturers to drive these operational objectives. The use of Industrial IoT (IIoT) in the entire lifecycle of a car—from ideas through design, product introduction and mass manufacturing—will bring unforeseen improvements; these benefits will be extended as consumer and in-car technologies are integrated.

Design and simulation information is being more rapidly shared up and down the supply chain to meet new product introduction challenges. There is already more computing power, memory, networking and software in our vehicles than was imaginable just five to 10 years ago; our automobiles are becoming an ever more connected link in our connected world. It’s time to think about automobiles as the ultimate mobile/connected device that also has the ability to transport us more safely and efficiently than ever. In the future, this will allow passengers to not skip a beat in their connected world and activities.

As with any industry that is undergoing rapid transition, there are many challenges for all of the companies involved. How will all of this digital information be effectively and securely managed, and by whom? Which supplier and technology relationships will be in the driver’s seat vs. in the trunk? What will the new capabilities and roles be for automotive industry suppliers, manufacturers, dealers, services providers and users?

Finally, how will technologies like IoT and IIoT be leveraged to make this automotive future happen? LNS Research is fascinated by the changes happening in this exciting industry. So look for future articles focused not only on automotive manufacturing, but everything affecting and surrounding the automotive experience. This should be a fun ride!

For more information about delivering IIoT value, download “IIoT and Big Data Analytics: Transforming Manufacturing System Architecture.”

>>Andrew Hughes, andrew.hughes@lnsresearch.com, is principal analyst at LNS Research, with a primary focus on research and analysis in the manufacturing operations management (MOM) practice. He has 30 years of experience in manufacturing IT, software research, sales and management across a broad spectrum of manufacturing industries.

 

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