Imperatives

Globalization
Automotive companies acting in a globalized world are faced with global markets (customers and competitors), global supply chains, global production networks, and global sourcing (suppliers and partners). This new business environment requires breakthrough thinking and radical new business strategies as things are no longer ‘business as usual’.

Environment and Regulations
An increased environmental awareness and stricter regulations, for example CO2 emission, combined with sky-high raw material prices has created a higher demand for more fuel-efficient cars and technologies. Additional governmental aid programs have accelerated the shift to more environmentally friendly models.

Financial Crisis and Economic Downturn
The credit crunch combined with higher financial costs make the required investments in new technologies and financing of new car sales more and more difficult for all members of the automotive value chain. The financial crisis and economic downturn raise additional uncertainties about jobs and savings, which lead to cancellations and delays of private investments with a dramatic impact on the new car sales volume. Further concerns on the effectiveness of national government aids or incentives to boost sales or enable bailouts inhibit the actions to improve the overall economic situation.

Business trends

Fuel Efficiency Improvements and Innovative Concepts

• Development of new cars such as urban and hybrid cars. The concern for the environment and sustainability has given rise to new engines and concepts that are beginning to be brought to market, including zero-emission and hydrogen cars.
• Car use will be rapidly transformed as environmental concerns are gaining car users’ attention. Oil will become a very expensive commodity, costs of using a car will increase (for example, with city congestion charges, insurance), and alternative mobility or public transportation will be improved (by the way of car pooling, opportunities to cycle, extension of multi-modal transport).
• Fuel efficiency and new regulations, alongside high oil prices, will increase the demand for more fuel-efficient technologies like smaller engines and turbochargers, cylinder cut-off systems, and startstop systems. Small cars with minimal weight, innovatively spacious interiors, and alternative transmission systems with improved battery technologies will increase the overall efficiency of new car models.

Safety and Comfort Requirements
Enhanced safety and comfort requirements, mainly driven by new regulations and higher customer expectations, lead to new innovations like camera recognition systems, extended communication infrastructures,

such as car-to-car and vehicle-to-infrastructure, as well as emerging call and real-time traffic information systems. These technologies will be introduced firstly in the mid- and upper-premium car segments.

Low -Cost Strategy

• Low-cost cars for emerging markets like the BRIC (Brazil, Russia, India, and China) countries provide additional business potential for existing and new car manufacturers. Renault’s successful Logan launch and the new Tata Nano represent major breakthroughs in lowcost car business.
• Low-cost product development and production strategy will
• increase as a direct consequence of the demand for low-cost cars. The automotive industry has to re-think its entire product development, introduction, and Innovation Management. Original equipment manufacturers (OEMs) and suppliers are challenged to develop commonly cheaper and simpler solutions to match the price and expectations of the new markets and customers.
• Low-cost sourcing as an additional cost-saving element along the entire value chain requires intelligent global supply chain management with enhanced risk management capabilities. This is the foundation for a more global and more flexible location and production network which will enable automotive companies to respond faster and more accurately to the changing business environment.

Cost Reduction, Higher Efficiency , Continuous Improvement and Innovation Answer the Challenges of a Globali zed Automotive World

• Price and margin erosion are being exacerbated by increases in the cost of doing business—by way of energy and waste, price of raw materials, labor, research and development, and automation investment. Low industry profitability due to aggressive, and possibly excessive, price- and incentive-based competition suggests that many companies in the industry may have problems to keep the strategic focus.
• Growing importance of the new local-global car manufacturers, especially in China and India. The rise of the new Asian automobile industry will trigger significant changes at global level.
• Major industry shake-out and restructuring as a consequence of the market downturn and rapidly changing customer demands. There will be a reduction of production volumes to adapt capacity to the new economic situation, producing a better balanced volume-mix and market-mix. The complexity of launching new models and the volatility of market reactions demand flexible production capacity.
• Product and service innovation increase the rate of change for short product lifecycles. Continuous innovation and frequent changes of models have become conventional competitive weapons to maintain market share and brand equity. But it is not always clear that end customers really need them, or are willing to pay for them. Shorter times-to-market and times-to-volume require an increased collaborationbetween design, development, production, and sales—meaning a tighter collaboration between these departments to produce an overall lifecycle management approach for the car and customer.
• Greater operational excellence with a ‘design for manufacturing’ and ‘design for efficient supply chains’ approach, in combination with lean manufacturing processes, will reflect shortened product lifecycles. Realtime shop-floor integration will allow better decisions and lean service delivery processes, which will shorten service cycles. Management of both global and local sourcing schemes and use of an extended supply chain will introduce the entire value chain into your business processes
• Customer loyalty and brand equity. Widespread consumer incentives and longer-term warranty promises, new competitors, and new developed markets are applying pressures on margins. A customer loyalty and brand equity strategy is business critical to maintain margins and market shares. Aftermarket business and extended service offerings, such as co-operation with fleet management and accident handling companies, offers higher margins to recover profit on low margin / high volume sales. Brand equity will be one of the new future OEM core businesses, retaining ‘sophisticated’ customers who are constantly looking for new gadgets in their vehicles, but not always willing to pay for them.
• Collaboration and consolidation will help automotive companies survive in a globalized, more competitive and quickly changing business world. The main challenge will be developing all the new innovative products and services required by the changing markets within a business environment of shrinking margins, lower sales volumes, and stricter credit regulations.
  

Impact technologies

A single view of information across all the business’s data sources by way of Enterprise Information Integration will give the business the on-demand intelligence it requires. The business needs to be able to take an educated view on future requirements in a number of areas including demand and supply, as well as labor and energy / waste costs. Business Intelligence and Performance Management in the form of predictive analytics and dashboards are also of great value.

Vast assets in manufacturing plants will benefit from new Enterprise Asset Management technologies, with asset location and status available in real time. RFID is pivotal to tracking parts in the inbound supply chain and vehicle tracking in the outbound supply chain. This improved visibility of the supply chain will also feed into enhanced customer service. The requirements for improved supply chain security and continuity will be met with improved deployment of Identity and Access Management.

Customer demand and production (planning and operation), as well as real-time synchronization, helps to minimize inventory stock and reduce operational cost by ensuring a better Overall Equipment Efficiency (OEE).

Manufacturing Executions Systems (MES) close the gap between shopfloor and top-floor and create an ‘integrated enterprise’.

Product Lifecycle Management (PLM) solutions have evolved from a set of engineering-oriented tools to an enterprise-level solution. PLM solutions help to get design data and modifications under control and set up a standard process to manage product development and introduction. They also organize and give structure to collaboration, enabling faster time-to-market, deals with increasing product complexity, and customization. PLMs ensure faster innovation, quality improvement, and lower costs, exploiting intellectual assets more effectively. Simply, PLM solution areas are at the heart of today’s business management.

The need for business responsiveness along the product lifecycle, as well as effective cost reduction, will benefit from Service-Oriented Architecture (SOA) impacting across many parts of the business— e-Commerce and CRM (Customer Relationship Management) to ERP (Enterprise Resource Planning) and SCM (Supply Chain Management), to new product development.

New Web 2.0 technologies can enhance knowledge transfer and collaboration, both internally and externally with suppliers and customer alike—developing customer and supplier loyalty through increased participation. Change and configuration management now have multiple sources where, in addition to the usual technical and marketing, we have new inputs coming from Web 2.0 technology, with an even stronger role for customers and dealers.

Grid Computing can ensure technology resources are used more efficiently, ensuring better performance, especially in accommodating peak requirements. The need for cost reduction can be supported by the use of open source software.

Customers are constantly looking for innovation in the vehicle market, in particular telematics in cars that can interact with their environments using technologies such as GPS for location-aware services as well as wireless networks, GIS, and sensor networks.

With shorter product lifecycles, effective innovation management is becoming a key enabler to ensuring a fresh product portfolio. Manufacturers are increasingly using open source operating systems and virtualization technologies (in their data-centers) to reduce hardware costs and simplify deployment.

There will be a rise in Human-Computer Interaction (HCI) technologies including gesture recognition, haptic (touch) feedback, video telepresence and e-books. HCI tends to be of interest in niche application areas in particular, namely those involving complex or constrained interactions, such as real-time decision support or mobile computing. The visual impact of new display and interaction techniques can offer value in branding a company as ‘leading edge’.

Augmented Reality involves supplementing a user’s view of the real world with relevant information, typically by using a head-up display to show text or graphics about the user’s environment over real-world objects. These technologies will especially help to fulfil the higher enhanced safety and comfort expectations within the automotive industry.

Green IT and sustainability involves the optimal use of Information and Communication Technology (ICT) for managing the environmental sustainability of enterprise operations and the supply chain. It also includes the management of its products, services, and resources throughout their life cycles—a very sensitive topic for the entire automotive industry.

Carbon-sensitive SCM planning and execution refers to a range of technologies and applications that enable enterprises to identify, model, and ultimately optimize their environmental effects across entire supply chains. Initially, solutions will be narrowly focused on specific supply chain processes and activities, such as transportation planning, network design, and carbon footprint information. Afterwards, the solutions will extend across other resource constraints and across the entire extended supply chain and product life cycles for all environmental conditions. The carbon footprint is the primary focus today as future users will need to consider other factors that affect the environment.

Regulatory compliance has become an important element in IT decision making. The cost of compliance initially will grow with each new regulation, especially if the IT organization controls each of them separately. Many organizations are turning to control objectives for information and related technology, including the International Organization for Standardization (ISO), Information Technology Infrastructure Library (ITIL), and other standards, to meet multiple regulatory requirements with a single set of controls. The alignment of IT operations, processes and controls with these standards and frameworks brings added business benefits of quality, reduced re-work, and reliability. It is important to note that most automotive companies have quality, security, and reliability needs that go beyond any compliance organization.

Almost all new innovations in the design of motor vehicles come from developments in automotive electronics. Collision avoidance systems, electronic throttle, active steering, and brake-by-wire technologies promise to deliver a car that can use its navigation and lane-keeping support systems to drive itself from a starting point to a destination without colliding with other road users. The deployment of autonomous vehicles (mobile robots) is being developed as a safety application.

Increasing costs of oil-derived fuels have made hybrid and electric vehicles a viable option for drivers. With the shortage of oil reserves worldwide, automotive manufacturers are seeking alternative fuels to power the vehicles of the future. The parallel development of these new systems (up to now it’s not clear which technology will be the winner) is a tremendous challenge for all companies within the automotive industry, especially in stormy economic times. The impact of having new transmission systems could have a significant impact on the automotive and energy aftermarket business. For example, petrol stations will have to sell electricity within new power supply networks or could even no longer be needed because plugin electric cars could be charged at home.

Cloud Computing offers the potential of scalable IT-enabled capabilities delivered as a service to external customers using Internet technologies. The Cloud Computing model is changing the way the IT industry looks at user and vendor relationships. Users are already changing their buying behaviors, although it is unlikely that they will completely abandon existing licensing models, or that they will buy complex mission-critical processes through the Internet. There will, however, be a movement to consume services in a more cost-effective way.

Software-as-a-Service (SaaS) is best understood in contrast with traditional licensed applications. External providers own and remotely manage software, delivered on a set of common code and data definitions, on a pay-for-use or subscription basis. This potentially can save time, money, and resources over the traditional approach of deploying packaged applications for automating functions supporting prospects, customers, internal staff, and partners.