Category Archives: automotive

Digital Leadership: Automakers Move To Procurement 4.0

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Automotive procurement leaders are facing challenges from both inside the procurement organization and outside, as impacted by other elements of the industry business.

Inside procurement issues, such as poor spend visibility, compliance, and value delivery are amplified by the overall strategic shift to digital processes and the scarcity of talent to drive procurement initiatives successfully.

Beyond the four walls of procurement, other teams, such as engineering, supply chain, and finance, are demanding more influence over the goals and objectives of procurement as product designs become more complex and connected, the flow of “material to money” receives greater margin scrutiny, and the industry shifts to Mode 2 manufacturing models. Combine this with expected tapering of automotive vehicle unit production in North America and globally, procurement leaders are in a nexus of forces few other executives in automotive companies are experiencing.

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A new role for procurement leaders

As a result, procurement leaders must augment their sphere of influence to source components and material when needed, where needed, and how needed to support Mode 2 manufacturing and virtual inventory goals. These are strategic. With the shift to strategic tasks, more operational tasks in purchasing and accounts payables will go away. Those tasks will need to be replaced with artificial intelligence and machine learning capabilities to deliver on tomorrow’s operating model.

The question we continually ask automotive procurement leaders: are you really leveraging procurement as a strategic weapon? Often the answer is no. We see several factors determining whether automotive companies are seriously leveraging procurement capabilities strategically:

  • Risk: Risk management currently implies compliance. In the future, it will include making risk-mitigating investments and risk-transfer pricing.
  • Talent development: Talent with specific non-core skills must be found and developed. New strategies must be driven outside the current business scope, and the skills to develop these new strategies are in high demand.
  • Innovation: Procurement teams need to expand their expertise in engineering and design, as next-generation procurement strategies are being developed based on outcome-based business models, 3D printing, and connected technologies.
  • Transparency: Social media is making procurement one of the most visible functions, not a back-office activity, as in past generations. As such, automotive procurement leaders need to talk to customers, regulators, and the press with one voice on behalf of the company’s strategic, 24/7, “always on” communications strategy.
  • A new relationship with financeThe global supply base is bringing new financial challenges to procurement. Procurement leaders need to develop financial acumen that rivals that of finance leaders and tighten their relationships with finance teams.

Only by reviewing these areas can procurement leaders honestly assess whether their organizations are prepared for the shift to digital business and operating models in their everyday work lives.

An opportunity to lead

With 62% of chief procurement officers unable to locate and/or develop the talent needed to address future procurement needs and challenges (Deloitte, 2016), automotive procurement leaders are at the tip of the spear to risk losing organizational influence and become a sub-function of finance or supply chain. Given the proper best practices, methods, and new digital capabilities, however, automotive procurement leaders can have a full seat at the executive table with strategic insights, foresight, and direction to maintain healthy working capital and cost of goods sold during the upcoming years of slow but tapered automotive vehicle volumes.

Learn more about automotive procurement and other industry digital advances at the Best Practices for Automotive event September 18-20, 2017, in Detroit. For more information visit the program website.

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Filed under automotive, Big Data, Business Analytics, Cloud Computing, Innovation, Operations, Procurement, Strategy, Technology

Enter the Digital Consumer, Driver, Services Buyer

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LinkedIn Pulse The driver consumer holds the keys to $1.5T in future vehicle enabled digital services.

 

Working with a number of our large automotive customers, it becomes clear that what it means to become digital – and to run a digital business – can take on many forms and meanings to different companies based on their organization and their position in the automotive value chain. I have written about the advent of connected platforms, whereby suppliers are moving to land grab specific elements of the ecosystem and lay claim to their use. This includes a number of scenarios about the enhancement and transmission of information from the individual consumer as a driver whether it be to the car, the home, the household appliance and mobile device. McKinsey estimates the market for vehicle enabled digital services to grow to $1.5T by the year 2030.

Understanding how the consumer will function as a services buyer, however, is an entirely different matter whether that individual is a personal vehicle owner, rideshare passenger, renter or simply a passenger in a friend’s car out to the movies and dinner. And while automakers are determining how to enable that customer experience one thing is clear: the driver consumer wants the same, easy to use experience to carry with them from one vehicle to the next, regardless of role or method of use of a vehicle.

What do I mean by this? Digitally connected customers move seamlessly across vehicles with their secured personal identity and profile available for the use and purchase of services. Vehicles maintain the most driver desired customer experience based on real time feedback to engineering designers, significantly reducing warranty claims and updating software during non-use windows. It shouldn’t matter if I’m a passenger in a rideshare or renting a luxury vehicle for the weekend in the big city, my wallet and profile move with me based on personal credentials, personal preferences (pre-sent entertainment, services palate, etc.) and secure on-board data connectivity.

Vehicles are maintained based in similar consistency. Soft service events – uploading software versions or even tuning firmware – occur in off peak times or as needed based on severity. Hard service events occur at low-use hours to reduce labor and operating expense while maximizing availability of vehicles during peak times. Parts are available as needed, at the quickest route to service locations.

Automakers are learning more about the advanced options to support consumer connectivity as drivers, buyers and passengers and the ability that secure data environments supported by SAP HANA can deliver.

This article previously appeared in LinkedIn Pulse and D!gitalist Magazine. Learn more about trends in autonomous and connected vehicles at SAPPHIRENOW in Orlando, Florida (May 15-19) and secure your spot today!

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Filed under automotive, Digital Content Strategy, Mobile Society, Strategy, Technology