The global disruption caused by Covid-19 has taught companies one indisputable lesson: Agility is indispensable. It is the secret to resilience and the ability to adapt to rapid changes, such as shortages of raw materials, bottlenecks in supply chain, digital transformation, and escalating customer expectations.
For the auto industry, the shortage of semiconductor chips caused over $200bn in lost revenue in 2021, equating to about 11.3m units of lost production volume, Motortrend reports. Fortunately, modern technologies can help enterprises analyse risks and respond quickly with confidence in their risk mitigation capabilities.
“The auto industry needs to prepare for continual volatility. Some analysts predict the longer-term impact of the chip shortage could be another 7 million units delayed in 2022 and 1.6 million in 2023. It may be 2025 before the wholesale car market reaches prepandemic and pre-chip crisis levels. Automakers, dealers, OEMs, and suppliers must turn to creative problem-solving, collaboration, innovation, and outside-of-the box thinking to overcome these jarring setbacks,” says Phil Lewis, Infor’s VP of Solution Consulting EMEA.
The need for agility, however, extends beyond supply chain issues. All manufacturers need highly flexible, cloud-based technology to stay on top of global volatility, including disruption from the Ukraine crisis. Customer demands for electric or hybrid vehicles, changes in buying behavior, new user experiences, and assembly-line innovations also place added pressure on the automotive industry to be able to react quickly, pivot resources, and reallocate funding to pop-up priorities. The commitment to agility must be an enterprise-wide strategy, starting at the top of the organisation and communicated down through channels. “A holistic approach, starting with an open mindset that embraces change is necessary – and must be evangelised by the C-suite,” adds Lewis.
Unfortunately, the manufacturing industry is known for its traditions, steady rhythms, and continuity, rather than being early adopters of new technologies. Many CEOs and CFOs are risk-averse, reluctant to jeopardise on-time deliverables and steady cash flow. Capgemini research shows that as recently as 2020, only 32% of manufacturers were using data-based decision making, and 38% were still reliant on paper-based systems to manage the shop floor. Lewis confirms this, noting that, in the auto industry, companies slow to adopt modern technology and struggling with outdated legacy solutions were ill prepared to face sudden and drastic disruption.
The pandemic was a great accelerator, prodding companies to see the value of cloud technology. Those pondering cloud deployment in 2020 suddenly needed it, and quickly, to facilitate work-from-home strategies. IT teams learned the meaning of agility overnight. According to a McKinsey Global Survey of executives: “Companies have accelerated the digitisation of their customer and supply-chain interactions and of their internal operations by three to four years.”
The aftermath of the Covid-19 pandemic will likely be felt for years, McKinsey reports, requiring all business leaders to remain vigilant for market changes and sensitive to changes in remote and office working patterns. According to Lewis, there are six crucial areas that demand greater agility in every automotive organisation:
Product innovation. The transformative impact of CASE (connected, autonomous, shared, and electrified) is widespread, demanding keeping pace with design and operational changes and ever-shortening product life-cycles. Fortunately, product life-cycle management (PLM) solutions can help automakers and suppliers manage the entire process, from research and development stages to testing validation and engineering change management.
Collaboration. Design changes involve engineers, industrial designers, shop-floor operations, procurement, and supply chain. Sharing ideas, designs, Cad drawings and managing the impact of changes across the business can be enabled through collaborative tools such as digital platforms. Collaboration can also extend between companies.
Customer experience. The user (or driver) experience has undergone a major transformation with even mid-priced vehicles now equipped with a growing range of luxuries. Formerly upscale perks that are now often standard features include heated seats, camera-assisted parking, and collision avoidance sensors. These types of major changes, with growing semiconductor complexity, demand unprecedented levels of business agility and correspondingly agile technology solutions. Cloud-based solutions — fast and easy to implement — provide flexibility and scalability in launching new business entities and models, new operational processes, and new partnerships to bring these new capabilities to life and deliver a differentiated customer experience.
Supply chain resilience. The pandemic-driven supply chain crisis has driven home the realisation that the auto industry should not rely on an extended supply chain for critical parts and components. Manufacturers and suppliers worldwide struggle to find the appropriate balance between local sourcing and regional hubs versus leveraging the potential financial and volume benefits of a globally-dispersed supply chain. Many are now reconsidering just-in-time (JIT) strategies, upping minimum safety stock levels to avoid being caught with stock-outs. Supply chain management solutions that provide full visibility, accurate forecasting and augmented analytics can help executives manage strategic and tactical challenges, examine what-if scenarios, and support more effective data-driven decision making.
Engineer-to-order and make-to-order. It’s becoming more and more important for manufacturers to adopt mixed-mode manufacturing processes and be able to collaborate with customers on specifications and design details. Configure, price, quote (CPQ) solutions help streamline the process for customising highly configured products and quickly generating quotes and detailed specifications for customers to approve.
Sustainability. Environmental ramifications will continue to have a significant impact on industry trends and direction. 'Circular industrial sustainability' and 'carbon neutrality' are two terms that have entered the manufacturing lexicon and are appearing with increasing frequency in discussions about the future direction of the automotive industry.
“As companies begin to prepare for the next normal, agility will only grow in importance. Constant and significant disruption is here to stay, so it behooves organisations to prepare accordingly. Highly agile, industry-specific ERP solutions and other cloud-based business process technology help automotive companies thrive in a constantly-disrupted world,” concludes Lewis.