The automotive challenge ahead

In 2008 the automotive industry faced drastic challenges stemming from rising oil prices, increased material costs, and shifting consumer preferences. Sales expectations in mature markets, such as the US, Japan, and Western Europe, had to be revised downward, although emerging markets such as Russia and China continued to grow.

While consumer demand in mature markets will remain soft during the next 12 months, automotive companies must prepare to take advantage of future demand when consumers are ready to replace aging vehicle fleets. For example, many consumers are waiting for automakers to launch more-fuel-efficient vehicles – especially new electric and hybrid vehicles – before making their next purchase. Most automakers plan to launch such offerings in 2010 and 2011, which will cause a spike in consumer demand in the near term. In emerging markets the automotive companies must focus on operational agility to react quickly to market opportunities, and to maximise revenue and profit goals.

To lay the foundation for success in 2009 and beyond, automotive executives must focus on reducing departmental silos, in addition to traditional cost-reduction and efficiency goals. Dealer collaboration, together with advanced sales and demand-chain processes, will enable automakers to grow market share in a softening economy. Integrating marketing and sales-related processes with activities aimed at improving manufacturing processes will enable much needed synchronisation of demand and supply, which will maximise profit margins.

Enabling this synchronisation requires automotive companies to leverage product lifecycle management (PLM) beyond common engineering and simulation areas and to use it as a guiding principle for all departments across the organisation. The success of new automobiles will not be limited to how well they address consumers’ basic transportation needs. Instead, automobiles will be expected to offer functionality that allows the owner to connect the vehicle to the home or office to improve scheduling and maintenance tasks. In the long term this will affect business models, technology selection, and partner networks.

Automotive companies’ business and technology leaders have the opportunity to drive product, service and process innovation via the use of technology and new business strategies throughout the manufacturing, sales, and aftersales phases to realise the following key objectives in the next three years: 1) Defining, developing, and executing strategies for vehicle-centric information and communication technologies (vehicle ICT), telematics, and location-based services. 2) Providing consistent, positive customer experiences by embracing customer-centricity throughout the product and customer lifecycle. 3) Promoting holistic customer and product data analysis that will drive superior segmentation and marketing insight across all operations. 4) Integrating process and technology improvements in the after-sales segment to increase efficiency for parts, service, and diagnostic solutions. 5) Accelerating product and brand diversification by developing a better approach to PLM and portfolio management solutions. 6) Improving plant efficiencies by deploying innovative manufacturing operation management 7) Leveraging business information management to create real-time supply- and demand-chain synchronisation.

Establishing and executing vehicle

ICT, telematics, and location-based service strategies After nearly 10 years of development, automotive companies are getting serious about implementing vehicle ICT and telematics offerings in upcoming products. Advanced-technology solutions, a better understanding of consumer needs, and a growing supplier base are giving vehicle manufacturers the tools to create successful solutions and business models.

In-vehicle technologies will split into two categories: embedded technologies for safety, security, and powertrain applications; and device-to-vehicle integration technologies. To make the right investments at the right time, automotive companies, consumer electronics manufacturers, and content providers must understand how technologies, business models, and value chains will evolve.

Customer-centricity as an organisational foundation Historically, automotive companies have leveraged customer-relationship-management-related applications to support sales and retention targets. However, in most cases, CRM processes and tools have not provided the expected return, primarily because CRM departments typically have a supportive role in an automotive organisation, instead of a leading one.

To manifest a customer-focused process structure for the entire organisation and its external partners, automotive companies must replace traditional CRM objectives with a customer-centric strategy that provides a foundation for all parties involved and focuses on connecting separate IT applications, such as CRM and customer data management tools.

Integration of core manufacturing processes: PLM as a guiding principle Traditionally, product lifecycle management (PLM) has been limited to engineering-centric disciplines. In 2009 the automotive industry will continue to expand its efforts to set a foundation for using PLM as a portfolio management tool that balances and prioritises activities across product lines and operational activities (for example, ERP, manufacturing operations management [MOM] and CRM).

The auto industry has expressed interest in analytics that capture the customer experience and product performance to continuously improve product quality. In addition, regulatory compliance is becoming more important, while issues of occupant safety and vehicle recycling continue to gain more visibility. The goal is to increase product appeal, to shorten development times, and to capture the entire product lifecycle, including aftermarket-focused initiatives. This will require automotive companies to make management, strategic, and organisational changes.

PLM will also play a significant role in developing and deploying 'green' technologies and products. PLM technology providers will need to expand the functionality and focus of their solutions to address these future requirements.

Tearing down organisational silos Automotive companies must ensure that the processes needed to design, develop, manufacture, market, sell, and distribute vehicles and parts will be as efficient as possible. In addition, they must ensure that all information needed to influence business decisions related to these processes will be communicated clearly and ideally in real time.

However, current processes in the automotive industry operate in virtual silos, using disparate systems and multiple data sources (for example, OEM versus dealer customer data). The convergence of previously disconnected processes (such as warranty management and CRM) and the use of enterprise information management provide a conceptual and technological foundation for establishing a superior flow of information.

Using enterprise intelligence effectively across the organisation Vehicle manufacturers, suppliers, and dealers are collecting massive amounts of data about demand- and supply-chain-related activities. Aggregating this into central data repositories has been the industry’s focus in recent years.

In 2009 companies will accelerate the development and deployment of analytical techniques to make more effective decisions, based on this information. Initial focus will centre on customer, sales, and advertising data to reverse mounting marketing spending and increase market share.

As a consequence software applications will have to offer analytical functionality, which can be aggregated across the value chain and diverse software platforms (for example, dealer management and communication systems).