Many industries have been affected by COVID-19, but the automotive industry was hit particularly hard. The impact has stretched from the supply chain all the way to the demand chain and has affected everything and everyone in between. The industry has faced challenges both in its customer-facing operations, as well as its back-end business processes.
As a result of the changing business landscape, many automotive organizations have not been operating at normal levels since COVID-19 made waves. In fact, according to ASUG research, 75% of organizations within the auto industry are currently operating below normal levels, and many are postponing some or most of their planned technology investments. We have also seen automakers shift gears, so to speak, and go into different markets such as producing complex medical equipment as well as personal protective gear.
During the ASUG Best Practices: SAP for Industries virtual experience, we heard from industry experts, customers, and partners who put the road ahead into perspective.
Digital Drives the Auto Industry
History has taught us that the auto industry is a resilient one. It has survived recessions and countless other challenges, always coming out stronger on the other end. The challenges of 2020 have posed their own obstacles, but even before that, the automotive industry was undergoing disruption as a result of electrification of vehicles, mobility, ongoing regulatory changes, and shifting customer behavior. By leaning on technology, automakers are better equipped to solve today’s problems while planning for tomorrow’s challenges.
Nick Ostergaard, manager of Toyota Materials Handling, along with Rick Baily and Kevin Foster, senior managers from Deloitte Consulting, shared what it means for the auto industry to be human-experience-focused and how to design a system that is built to evolve along with changes in the marketplace. Toyota started on a journey four years ago to change the way it interacted with its dealers and its customers as it moved to a digital platform. “We saw generational shifts, and that customers in the business world were going to want more consumer-led experiences,” Ostergaard said. “Over the last year, COVID-19 certainly has been a piece of that, and things have accelerated. We're looking at our industry now and watching as customers are coming in with new expectations. The ease of doing business is now a competitive advantage, and digital creates that.”
The three discussed the importance of creating a network, recognizing that each dealership is an independent entity. “Most, if not all, of our dealers have come along for the ride,” Ostergaard noted. “It’s because of that ecosystem that we’re creating. It’s that partnership where we have a centralized customer experience through digital channels both in the U.S. and globally.” By having a centralized model that can be used for service agreements, leasing scenarios, financing, and much more, Toyota can streamline everything and provide an end-to-end customer experience no matter where a customer is located or how they are engaging with the brand.
The Workforce Is the Engine Behind Everything Automotive
As the pandemic swept through the world, the automotive industry found itself in an unusual situation—sales of traditional medium-sized vehicles were already slowing pre-COVID-19, but the onset of businesses shutting down and calls for safeguards in the workplace put the brakes on the industry. Some automakers adjusted their products and began to produce medical equipment as well as personal protective equipment (PPE), while others needed to completely reimagine manufacturing plants, workflows, and so much more.
Keith Combs, director of global indirect purchasing at Ford Motor Co., discussed how the company created a COVID-19 playbook that helped it quickly adjust manufacturing and production to conserve cash and focus on overall 2020 production volume. He addressed how today’s reality has affected almost every business and has forced innovation and adaptability on everyone involved. “It’s an understatement for me to say that in my 38 years in this industry, that this is a unique time,” Combs said. “Who could ever have imagined that we would have all of our industry’s facilities, and even other industries, shut down at the same time for such an extended period of time?”
Ford took initial steps of identifying employees who were considered workplace dependent and those who were able to work from home. For each group, the organization created a playbook that outlined health and safety measures in addition to action plans for a variety of scenarios. “We leveraged a lot of technology throughout every step of this process,” Combs said. Ford didn’t stop short of just implementing these changes internally. “We wanted to make sure that we were serving society as a whole by sharing best practices with other manufacturers as well.” Ford was able to step forward and add to its production capacity by manufacturing face masks, face shields, ventilators, and other medical supplies.
“We are an ongoing business,” Combs said. “It’s great that we can serve society, but we also have to be able to maintain viability.” Combs and his team are working diligently, under constantly changing circumstances, to remain agile, do the right thing, keep the business running, and, most importantly, keep the workforce at the forefront of decision-making. “Put people first,” Combs said. “It’s the most important metric and it will allow us to come back strong.”
The Auto Industry Revs to Move Forward and Quickly
There were a lot of stories from customers regarding challenges they have been facing during COVID-19, as well as before, and how they are working to adapt to constant change. There also were sessions that highlighted how partners are co-innovating with customers and SAP to help address those challenges. Throughout the two-day virtual experience, SAP also demonstrated its commitment to the industry and highlighted its road map and strategy.
Hagen Heubach, global VP of the automotive industry business unit for SAP discussed the digital supply chain and smart manufacturing. He put an emphasis on the SAP industry cloud solution for the automotive industry and how the SAP Intelligent Enterprise Framework can enable innovation for automotive companies. “We’re learning how to run traditional and profitable automotive companies during a crisis, while at the same time disrupting in a future of mobility with new services and business models, and processes,” Heubach said. “In the end, it’s all about the framework of the intelligent enterprise and innovating together.”
The Road to SAP Industry 4.Now
David Dreyer, senior solution principal of digital manufacturing/COE at SAP, provided highlights on trends and priorities in the automotive industry today and how SAP Industry 4.Now will address them. “No matter where we are in the supply chain, it is critical that we are focusing our energies and our capabilities on our customers,” he said. Dryer identified the top business priorities from manufacturers as product innovation, supply chain performance, manufacturing operational excellence, customer-centricity, and digital thread capabilities.
“The SAP Industry 4.Now strategy can help automotive companies move from proofs of concepts to becoming a strategic differentiator,” he said. “To remain competitive, you need to have visibility, transparency, and predictability.”
Dryer introduced the audience to SAP Design to Operate, which aids in designing a product, planning for material and supply chain, manufacturing and assembling, all the way to delivery and of course, what intelligence can be gained about the customer along the way to help improve the entire process. “Everything that we’re doing with Industry 4.Now is wrapped around what adds value to the customer.”
Watch all of the automotive sessions on demand, along with the rest of the ASUG Best Practices: SAP for Industries.