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Industry: Email Alert RSS FeedTwists and turns: how automotive companies can travel the complexity highway
Automotive Design & Production, Oct, 2003
If one could only select a single adjective to describe the automotive industry, the most apt descriptor would likely be: complex. Here in automotive, market segments are large and diverse--from passenger and light vehicles to heavy trucks and equipment. Industry value nets are comprised of an intricate web of suppliers, automakers and retail dealerships. Not to mention that automotive is a global game--with design, manufacturing and distribution occurring on virtually every continent.
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And doing business in automotive has only become more complicated over time. Intense competition for market share generated a frenzy of mergers and acquisitions that frequently left larger companies with complex--if not unwieldy--organizations and infrastructures. Outdated forecasting practices coupled with inflexible manufacturing facilities and fast-changing business dynamics have resulted in substantial overcapacity and complicated inventory management practices that have sliced margins. To top things off, the innovation race has multiplied the technological complexity of vehicles and the processes used to produce and service them, thereby increasing time-to-market, lifecycle costs and the potential for quality problems. This can lead to safety issues and contribute to rising governmental regulation, which adds yet more time, cost and (no surprise here) complexity
It's hard to imagine that the auto business can get any more complex--but it will.
Complexity takes a toll
New vehicle development takes 32 months on average(1)
Excess global production capacity currently estimated at more than 20 million units(2)
Warranty costs now average more than $700 per vehicle in the U.S. alone(3)
Record number of mergers and acquisitions between 1998 and 2002(4)
To keep business opportunities from getting mired in all of this complexity, auto companies need a different approach--one that allows them to cost-effectively produce the innovation demanded by customers, team with partners to drive down development time and costs and enter new markets when and where appropriate.
Counteracting increased complexity requires business processes that are fully integrated--end-to-end across the company and with key partners, suppliers and customers--so that auto companies can respond with flexibility and speed to any customer demand, market opportunity or external threat.
This is business on demand
Doing business on demand: What it looks like
On demand automotive companies operate differently than others--they are much more responsive, resilient, variable and focused.
A responsive automotive company:
* Identifies and acts on changes in the market environment quickly
* Collaborates throughout the value net to build and maintain an all-encompassing customer profile
* Introduces new products and services to the market faster and with greater success
* Builds vehicles that customers are passionate about, with no need to add incentives
* Shares information freely among OEMs, suppliers and dealers
* Empowers the frontline to make fast, well-informed, customer-focused decisions.
On demand in action
At a meeting with the sales and marketing team for a newly launched model, several metropolitan dealers share stories of sales lost to a competitor's newly released model. Thanks to specific feedback from customers, they are able to suggest specific model changes that will make the OEM's vehicle competitive--and perhaps even superior. The manufacturer recognizes that changes must be made immediately. By integrating new features and options into its vehicle to compete with its rival within the current model year, the manufacturer recaptures lost sales and revenue for both itself and the dealer community.
A resilient automotive company:
* Possesses realtime knowledge of exposure to operational, market and governmental risks
* Maintains service levels and operational continuity even in times of turmoil
* Decreases the number of points of vulnerability or potential failure
* Shares risk with strategic partners
* Builds robust, "self-healing" capabilities (both process and technology).
On demand in action
An auto supplier monitors warranty and failure analysis data using electronic chips installed in its wiper motors and finds that a new model's motor is prone to failure under heavy downpour conditions. The supplier alerts the manufacturer, and together they identify and implement a solution before the condition can become widespread. The manufacturer is able to pinpoint the specific vehicles produced with the faulty motor and contacts those owners directly so they can replace the motor Quick action prevents a recall and significant warranty costs.
Can you envision building any vehicle anywhere at any time?
A variable automotive company:
* Builds capacity to handle an average load
* Supplements internal capabilities with out-tasking to support peak capacity
* Has the ability to produce virtually any vehicle in any plant anywhere, at any time
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