It’s clear that connected, automated, shared and electrified (CASE) driven digital transformation is upending the automotive industry. Linear, product-focused business models built on structured data are being replaced by collaborative, data-driven business ecosystems with diverse data types and stakeholders.

The new frontier for value creation is no longer just about product; it’s about providing a differentiated customer experience.

The challenges facing the automotive industry in this new frontier sort into five main areas:

  • Product and service innovation
  • Business collaboration
  • Supply chain management
  • Operational excellence
  • Digital transformation

While all these challenges are significant, they also bring opportunities. Many of these can be transformational, such as potential new revenue streams from “as a service” business models (e.g., transportation as a service, software as a service, software-defined product features and upgrades). In addition, automakers and suppliers need to be agile and adaptable enough to take advantage of new propulsion technologies, and continue producing “traditional” offerings such as internal-combustion-engine vehicles and components – while complying with increasing sustainability and regulatory demands.

Key to all this talk of change and opportunity is the critical role of manufacturing – specifically, smart manufacturing (aka Industry 4.0) – in producing products customers will want to buy (and buy again) and are at the heart of a positive customer experience. Whatever one’s role in the automotive ecosystem, ultimately a customer’s experience with the end product (i.e., the vehicle) and its related services is the foundation of success. Hence, it behooves automakers and suppliers to optimize their manufacturing processes for quality, efficiency, agility and speed. Smart manufacturing is the “secret sauce” in the recipe and the defining characteristic of the factory of the future.

The concept of smart (aka connected) manufacturing emerged at the turn of the millennium, introducing IoT-enabled cyber-physical systems to share, analyze and guide intelligent actions for various manufacturing processes. Connected manufacturing improves overall equipment effectiveness and uses data analytics to optimize the supply chain, logistics, demand forecasts, production planning and scheduling, quality control and capacity utilization.

This data-driven digital transformation offers the potential to redesign and optimize the entire global automotive manufacturing footprint, positioning factories closer to markets, reducing logistics nightmares and increasing the visibility between ecosystem partners including manufacturers, suppliers and customers. Furthermore, in a capital-intensive industry such as automotive, smart manufacturing technologies can have a significant positive impact on return on invested capital (ROIC) and profitability.

Despite their benefits, many manufacturers are only just starting to embrace the true potential of smart factories, which includes:

Improved customer experience: Consumers increasingly are demanding customized products. Smart factories provide the manufacturing agility, flexibility and efficiency to offer personalized products and services, thus increasing brand loyalty, satisfaction and profitability.

Production close to market: To reduce delays and transportation costs, manufacturers are building smaller, smarter factories closer to the customer. Redesigning the manufacturing footprint is especially imperative for the automotive industry, with its notoriously complex, fragile and logistically challenging global operations and supply chain.

Integrated operations: Manufacturers are under increasing pressure to tightly integrate and streamline processes across demand management, shop floor operations and supply chain to realize efficiencies and maximize profitability.

Global operational visibility and control: Smart manufacturing is defined by global operational visibility and control, enabling management to quickly react to and anticipate supply chain and other operational challenges.

Achieving the goals of smart manufacturing is no easy task, especially from a technical perspective. Broadly speaking, automakers will need an integrated information system encompassing the entire value chain, including a single view of orders, shipments and inventory. This system must also provide timely visibility to supply chain disruptions and a rapid response capability to address them and improve supply chain performance over time.

Peter Mathiel (002).jpgAdditionally, an advanced digital foundation will enable greater levels of intelligent automation by leveraging data using artificial intelligence and machine learning to glean insights and drive actions, further improving the end-to-end manufacturing process. These technical features cannot, however, exist in a vacuum; business process improvements and change management are the other two levers of the people-process-technology engine that will drive the transformation.

In this post-pandemic world, there is increasing urgency to reimagine all aspects of an enterprise’s value chain, with the customer experience at the center. The true winners will be ones that enable real-time, dynamic business and manufacturing processes and decision making – the central nervous system of the intelligent, connected automotive enterprise.

Peter Maithel (pictured, above left) is industry principal for the automotive sector at Infor. He has extensive automotive sector experience in various leadership roles with Deloitte, Ernst & Young, Accenture and Cognizant, and has delivered global technology-enabled business solutions to OEMs and tiered suppliers including General Motors, Ford, Stellantis, Volkswagen, Trelleborg and Continental.

By Tara