This week in Chicago I was asked by my colleague Chet Harter on the Automotive team to provide my perspective in the growing trends around Automotive 4.0 to our mid-year industry breakout sessions.  Based on what we are seeing in the manufacturing and automotive industry we can point to three key areas which we presented recently at the SAP Manufacturing Industry Forum (#SAPMIF15):

  1. Serving the Segment of One. Syncing process and data across make, build, service value chain components and across sectors.
  2. Connected Value Chains. Move from batch to real-time to full platform integration.  MRP > ERP real-time data > ERP real-time process while leveraging device communications (internet of things, IoT).
  3. Design Lifecycle Integration. Linking telemetry data with operational and service data. Complete visibility to lifecycle and usability costs.

These trends are being reinforced by concepts that SAP clients are discussing with us to create transformation and disruption in their companies and their markets.  As we prepare to move from Automotive 3.0 – generally referred to as the “globalization stage” of the industry – and moving to Automotive 4.0 – the convergence of automotive, tech and high value content to create a new, autonomous vehicles with shared community mobility – organizations need to modernize their processes, supporting infrastructure, and product definitions to transition into the new industry era.

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The Segment of One is an interesting area.  While movement continues from Engineer to Order (ETO) companies are commoditizing to move to Make to Order (MTO) operating models, premier brand makers – including American icon Harley Davidson – are moving from customized “Order to Customer” models to specific MTO “Make to Customer” personalization options. Dedicated lines are created to then take the customized orders into a customized line.  The other aspect of the Segment of One is the increase in rates, options and service areas in the spare parts space where automotive suppliers and OEMs need to move to “high volume” (MMs parts x 000KKs orders x 00 locations daily).  This Build to Volume (BTV) space is needed to give customers the choice of what parts they need, where they need it and when they need it in the most economical and logical way.  Early high BTV environments suggest a need to move to both volume of data as well as process, a great model to consider S/4HANA as the base road map target to enable customer service personalization.

Connected Value Chains is most notable around the integration of telemetry and IoT areas, what most refer to as device communications or machine-to-machine (M2M) communications. Where IoT gets interesting from the perspective of automotive customers is the growing cases of what KPMG Consulting calls Internet of Behavior (IoB) or the additional step of consumer decision making based on M2M (so M2M2C).  Returning to the spare parts scenario, automotive companies are considering IoB aspects such as predictive notifications to automotive owners based on expected use versus real use and incentives to purchase official brand replacement parts at certified dealerships.  This alerts owners to consider a service event sooner, with a discount, using approved OEM spare parts (versus third party parts).  The rationale here is the need for greater supply planning transparency and integration to demand forecast.

Finally, Design Lifecycle Integration gets extremely interesting when we consider where the vehicle ownership model is heading based on trends in the industry.  The change in individual ownership of the passenger vehicle will shift into communities of use – like today’s car rentals, ZipCar, Uber – which will define the new design of the product and how it is used.  In this case the “fleet will become the market” in specific segments and how and when Millennials will adopt, own and use the car – in a very different way than what we see in today’s market.

For more information on how your organization can position in response to these trends and best practices, please feel free to contact me through SCN or email.

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