The global economy has been turbulent for the last couple of years but the automotive industry, in particular, has been encountering the most challenging environment. Market dynamics are changing rapidly, thus forcing the auto makers to change their business strategies and to implement them successfully in order to stay competitive. Auto parts makers are further squeezed as they need to satisfy more diverse product requirements with low room for errors in a relatively much shorter time span. As radical technological trends are inevitable, harnessing this opportunity will enable companies with innovative products to gain market share.
The following key trends have been shaping the auto industry:
Auto-crisis: The latest crisis led to excess inventory and massive debt accrual for a number of big automakers in the US and Europe. At the same time, strong growth and a healthy economic outlook in BRIC nations has helped their local companies make headway into local as well as international markets. The financial landscape is forcing the big auto companies in the US, Europe and Japan to rapidly shift their strategy and to innovate faster in order to compete with the Asian auto and auto part makers.
Globalization: The opening of the international trade boundaries has helped companies expand into new growing markets such as Asia; however, it adds to the complexity of satisfying different types of local customer requirements making auto development complexity increase manifold.
Alternately, globalization is also increasing the threat of serious competition from Asian OEMs that are buying the anemic divisions of western OEMs thereby leapfrogging into gaining intellectual capital that can be easily exploited in conjunction with their cheap labor.
Quality, reliability and product differentiation to suit the local market at lower prices are becoming essential to a successful product portfolio. While protecting intellectual property rights, internal collaboration as well as that across the global supply chain has become paramount.
Regulations and sustainability: Increasing focus on pollution and fuel economy regulations is forcing companies to look beyond gas engines as there is a limit to reducing the emission and increasing fuel efficiency using conventional engines. With the maturity of battery technology, electric cars are changing the landscape rapidly and may even make the hybrid cars less relevant in the coming years. Safety issues can lead to costly legal battle and product recalls for the auto manufacturers. Companies need to exceed the government controls standards for their own good.
Technology: The vehicle landscape is changing rapidly. Newer technologies in auto battery, increased numbers of electronic components and control systems, software/hardware integration etc. are redefining the marketplace. Increased technological innovation along with shrinking product development cycles is overburdening the auto industry.
Cost: One of the biggest challenges is to lower the cost while maintaining high quality with a faster rate of product innovation in global marketplace, increased number of product types to suit local markets, and compliance with multiple set of regulations in different markets.
How does Product Lifecycle Management (PLM) help?
To address the automotive industry challenges brought about by the pace setting trends, companies need an in-depth understanding of trends impacting their specific business areas as well as a disciplined system and non-system based strategy formulation and execution strategy.
For the system based strategy, a complete solution must be flexible, robust and integrated utilizing Customer Need Management, Customer Relationship Management, Quality Management, Supply Chain Management and Product Lifecycle Management. A holistic system management approach is the right roadmap for auto companies but since business revolves around the products or services a company offers, PLM could be the single most rewarding area to focus on in system implementation.