Automotive

Analyst Insight

Eighty percent of companies surveyed indicate dissatisfaction with their existing supply chain technology.  Part of the reason for this dissatisfaction lies in the fact that the vast majority of automotive, aerospace, and defense companies run major parts of their supply chain operations on custom or in-house developed technology. Many of these companies are now looking to their ERP vendors or other packaged software providers to help them with the technology needed to enable supply chain transformation and more flexibly adapt to changing business requirements.
—Nari Viswanathan, research director, AberdeenGroup

The automotive industry is undergoing massive globalization. Companies in this industry are in various stages of transformation, which involves moving from a regional/local model to a global model in which the buying, making, moving and selling activities could happen anywhere in the world. To thrive in today’s global environment, automotive companies are reexamining their supply chain processes and their supporting technology.

The key areas where automotive companies are focusing on supply chain improvements include:

• New product introduction: Major focus on rapid new product development programs due to competition from global brands as well as shifts in consumer taste (e.g., vehicles with better gas mileage).

• Order to delivery: The automotive industry is feeling continued pressure to improve order-to-delivery lead times to customers and dealers and better match supply to shortterm demand. Automotive supply chains have the classic push versus pull problems that result in constant tension between the supply side and the demand side.

• Total landed costs: Of increasing importance to automotive companies is achieving full compliance with government import/export and security regulations. Innovators are also achieving better margins and more competitive price points through total landed cost tariff engineering.

• Supply chain visibility: The requirement of supply chain visibility is not towards just cost and quality but towards risk management and continuity of supply. Corporate executives are worried about the holes that may exist in their supply chain.

• Customer management: Among automotive tier suppliers, there is enormous consolidation going on, resulting in increased focus towards new customer acquisition and B2B connectivity.

The Outlook

There are enormous challenges facing this industry in terms of healthcare costs, consolidation, and reduction in overall demand. Environmental concerns are also causing rapid changes in the supply chain. The companies that realize the importance of the supply chain will survive this phase. Technologies should be an integral part of this transformation. Given the nature of complex business requirements within the automotive industry, companies should investigate enterprise applications that are flexible enough to adapt to different company business requirements through usage of service-oriented architecture. Master data management should also be looked at carefully.