Product differentiation has been the lifeblood of the automotive industry for more than a decade. While this still holds true, automotive companies are struggling with the internal complexity caused by the growing diversification and the challenge of keeping the build of bespoke solution profitable.
Besides product complexity, there are several other hurdles that automotive companies need to overcome to stay competitive. Looking at the area of manufacturing and supply chain management, there are several trends and demands from consumers, governments and investors that are shaping the way of designing and producing products in the future.
One is the topic of sustainability where there is a huge push from society, regulations and even investors to transform on one hand into sustainable, carbon neutral manufacturing companies and on the other hand to develop zero emission vehicles with a low CO₂ footprint. Take automotive investor events according to Capgemini’s “The Automotive Industry in the Era of Sustainability report”, the number where the topic of sustainability is discussed has more than doubled in the last five years.
A growing number of variants paired with a big number of environmental and other regulations mean increasing complexity and cost. To meet customer expectations and comply with regulations, car manufacturers and suppliers must re-evaluate their products and value chains to decide where significant investments will be required. PWC, in their sustainability in the automotive report, argue that keeping the balance between meeting customer demands and complying with legislative regulations while keeping supply chain and manufacturing costs within reasonable limits will be one of the greatest challenges for automotive companies.
The importance of cost-effective manufacturing should not be underestimated. According to McKinsey, OEM need to even tighten annual cost improvement beyond 3 to 4 percent to stay competitive.
This is a big challenge for automotive companies.
How are automotive companies trying to solve this challenge?
Leading automotive car manufacturers and suppliers are investing into smart factories and applying Industry 4.0 principles to reach a new level of productivity. The transformation into smart factories and applying Industry 4.0 principles will pay off, for example Capgemini expects a productivity gain of 19.5% in the automotive industry due to smart factory initiatives by 2023.
But let’s be realistic. Most automotive companies are still at the beginning of their industry 4.0 transformation journey and among those who have invested in smart factories already, only 10% of have realized the full potential.
What’s SAP view?
Since 2011 where Industry 4.0 was an academic discussions, intelligent technologies and Industry Standards have evolved. We at SAP are convinced that Now is the time to act and to seriously push the transformation journey towards Industry 4.0.
However, to tap the full potential of Industry 4.0, we believe that it is not enough to just focus on smart manufacturing. Let me explain:
Vehicles today are equipped with all kinds of sensors and electronics, they measure tire pressure, average speed or battery charging level, but also recognize rain, driver drowsiness or traffic signs. This data is either used to send out warning signals e.g. in the case of low tire pressure or trigger immediate actions such as automatically switching on the windshield wiper in case of rain or applying the brakes if something is detected in front of the car.
If vehicle usage data is also integrated into the car manufacturer’s horizontal business processes, where the usage data is analyzed and mapped to vehicle master and transaction data, the gained insights can be used to improve components or the entire vehicle design.
Integrating usage data with a company’s horizontal business processes can even enable completely new business models. One good example is Exide Industries Ltd. Operating in India’s crowded storage battery market, Exide Industries needed to differentiate itself from the competition. To achieve this, the battery manufacturer developed a smart battery service based on IoT technology from SAP to give customers and Exide technicians insights into the status of individual battery units.
As a result, homes and businesses across India now have a backup power supply they can trust, and customers provided with an enhanced service are staying loyal to the Exide brand.
“By remotely monitoring battery health, we can identify performance issues at an early stage,” says Gautam Chatterjee, Managing Director and CEO of Exide Industries. “We can then offer appropriate maintenance services to resolve the issues, prolonging battery life and improving the reliability of customers’ power supplies.” Another key objective of this connected battery approach is to reduce costs associated with warranty claims. If warranty costs can be reduced through the early intervention by Exide technicians not only customer satisfaction but also profitability can be improved.
This is one example that shows the big value that can come from Industry 4.0 when operational data is collected along asset, machine and product lifecycles and transformed into intelligent insights.
The Exide Industry example also shows why we believe that a focus on end-to-end processes is required to realize the full potential of Industry 4.0. Therefore, SAPs approach for Industry 4.0 is to embed intelligent technologies and process automation into business processes to enable new ways to solve business problems, generate new revenue streams and offer digital services that help you satisfy your customer.
SAPs Industry 4.0 initiatives allow customers:
- To build Intelligent Products that are designed to monitor and maximize performance over time, while meeting customers’ precise and unique configurations
- To build up Intelligent Factories, that use data and intelligence to run as autonomously as possible, while delivering both mass-produced and individualized products at scale.
- To leverage Intelligent Assets, linked to each and every process and dynamically maintained.
- And to Empower People that are equipped with the tools and information they need to do their best work.
To find out more please visit our Industry 4.Now page at sap.com.