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Using the Crisis as an Opportunity

The assembly lines of the automotive industry are rolling again. It's time for increased, consistent digitization. 

July 01 2020Frank Gaßner

Dare to digitize more

Hard times for the automotive industry. In the middle of a huge upheaval phase, the Corona crisis caused sales to collapse overnight. Industry experts expect a decline in sales of around 20 percent. Suppliers such as ZF announced that up to 15,000 jobs will be cut by 2025. In addition, the government's economic stimulus package is disappointing from the perspective of the automotive industry. 

Becoming more flexible

Bridge with a gap

Given this, the suggestion of increased digitization could be dismissed by the companies as naive and a bit know-it-all and not very well received. How is digitization supposed to make an industry fit for the future, which is simultaneously struggling with such massive problems? Discussions with managing directors and IT managers at car manufacturers and suppliers, however, show that even if the digital transformation does not protect companies from massive sales slumps in the short term, it can significantly increase efficiency and flexibility and reduce costs in the medium term – and thus contribute to a greater competitive edge. 

Greater transparency in the supplier pyramid 

Companies have used the lockdown period to find starting points from which they can better position themselves in the future. The crisis has revealed weaknesses which are often related to a lack of transparency or flexibility. The supply chains in the automotive industry are almost perfectly coordinated. However, if a small link in this chain fails, this will affect large parts of production. One of the main causes for this is a lack of transparency in the multi-tiered supply pyramid as well as unexpected events such as weather, political decisions, etc., which cannot be influenced but have an impact on global supply chains.

These correlations, i.e. the interrelationships between events, can not only be described with the help of data and their analysis and with IT tools from the cloud, as they can also be used to make predictions. In logistics, for example, complete supply chains and their connections can be displayed at a glance. A control center for all logistics parts, known as the supply chain control tower, is created. It is an important component and preliminary step to self-organizing and autonomous logistics.

IT increases agility

A man writes on a tablet with several orange robot arms in the background.

This example alone shows how much the automotive industry depends on IT today: from development, production and logistics to aftersales – IT not only controls all processes, it determines how flexibly and agilely a company can react in times of crisis, as well as in boom periods. This was evident at the beginning of the crisis through the ability to work from home, which was at least able to secure off-site operations. In some companies, despite modern workplace concepts, the IT systems were not designed to enable working from home, neither in terms of software nor hardware. 

Advantages were enjoyed by those whose ITC infrastructure relied more heavily on cloud services, such as for accessing enterprise applications such as SAP or PLM. In addition to technical aspects and high flexibility, the “pay per use" model is a crucial aspect. Those who had less demand could immediately adjust their costs in line with demand. On the other hand, those who operate their own data centers cannot avoid certain basic operating costs. It's not without reason that the vertical range of production at car manufacturers is very low, whereas in IT many are holding on to their own data centers. 

IoT, big data, and AI

The opportunities offered by digitization go beyond traditional IT. Industry 4.0 and the smart factory enable the horizontal and vertical integration of all processes and make companies more flexible and efficient. The components are here and ready for broad application: big data and AI, IoT, 5G, AR and VR, or edge computing. 5G campus networks allow us to rethink use cases. IoT and big data analytics paired with AI methods detect weaknesses based on data, thus revealing previously unidentified potential for improvement. They will all have a massive impact on the manufacturing industry, speeding up and improving production processes and making them faster and less expensive.

Cooperation between companies must be strengthened in the future. This is simply necessary and overdue."

Wolfgang Bernhart, Roland Berger


Time for more digitization

A market analysis by Oliver Wyman management consultancy came to the conclusion long before the crisis: the digital transformation is putting the automotive industry under pressure. A Bitkom study from 2017 shows that 88 percent of car manufacturers and suppliers see digitization as an opportunity. And KPMG's "Global Automotive Executive Survey" sees networking and digitization as the top trends in the automotive industry. On the other hand, a brief study by the consultancy Simon Kucher & Partners gives cause for concern, stating that only just over a third of suppliers see a direct opportunity in digitization. 

The crisis has now revealed where digital transformation could support and accelerate business processes. The new norm in the automotive industry will be radically digital – and it needs to arrive faster than was previously stated on the agenda. Economic experts therefore warn against putting off the digital transformation and stopping the digitization roadmap in view of the financial difficulties.

About the author
Frank Gaßner

Frank Gaßner

Vice President Client Consulting Automotive & Manufacturing Industries, T-Systems International GmbH

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