Revving up for success: making the optimal targeted investments in automotive

Mar 29, 2023

IT
automotive
SAP

From the worldwide surge in EV adoption to severe supply chain disruptions and rampant inflation: the automotive industry is entering an era of transformation not seen since the invention of the assembly line. The impact is being felt by OEMs and suppliers alike. For emerging players, the decisive factor for long-term success will be to continuously make the right investments at the right time. Here’s how they can identify those.

In January 2023, a team of delaware experts crossed the Atlantic to CES, the annual trade fair for consumer electronics in Las Vegas to meet up with both new and well-established OEMs and suppliers. The objective? Validate their vision of where the automotive industry is going, what its specific pain points are, and what today’s key success factors are.

From momentum to value investing

“Overall, major players like Mercedes and GM are doing pretty well,” says senior consultant automotive Xander Verplancke. “Yet, in an effort to protect their margins, they are more than ever looking to reduce their costs. As a result, these OEMs are putting a lot of pressure on suppliers to bring component prices down. Meanwhile, these suppliers desperately need sufficient profits to reinvest in innovation, ensuring they remain both relevant and competitive.”

At the same time, numerous emerging OEMs are struggling to get the necessary funding to establish a sustainable business. “Attracting investment is challenging in the current economic climate,” adds solution lead automotive Tim Busschaert. “In the past few years, there’s been a clear shift from ‘momentum’ investing to ‘value’ investing. What this means is that younger companies are forced to contain spend and prove their profitability with the resources they currently have. That’s a challenging position.”

Race for standardization

‘Doing more with less’ or ‘making optimal targeted investments’ – whatever you want to call it, suppliers and emerging automotive brands will have to reach unprecedented levels of efficiency to survive in today’s automotive industry, where the expected level of professionalism is high, and legal requirements are incredibly strict.

“Even as a newcomer, you need to adhere to standardized industry-specific processes meticulously,” says Xander. “This includes best practices for assessing parts quality, preparing for vehicle testing and validation, clearing customs during transportation, all the way to providing top-notch aftersales services. As it’s impossible to immediately excel in each of these areas from the get-go, making the right investments at the right time is absolutely critical.”

IT – and business – at the wheel

When it comes to ensuring compliance with these high standards in an efficient way, Xander and Tim both see a key role for IT. Tim: “Take recall campaigns, for example. These involve almost every department in the organization. For this kind of extensive collaboration, the support of strong, integrated IT tools is an absolute must. Similarly, if you’re a Tier 1 supplier, having an IT system that incorporates industry best practices can be a strong selling point for OEMs to see you as a dependable partner.”

So, should emerging OEMs and suppliers, who are already struggling to keep costs low, invest head-first in expensive IT packages? “Based on what we heard at CES, our advice is to move incrementally while keeping track of your overall objective,” say Xander. “In other words: pick your battles and focus on what’s essential instead of spending money on nice-to-haves. Identify the most critical hurdles and invest in solutions that help you clear those.”

Deploy as you grow

To forge ahead, Xander and Tim propose a step-by-step approach.

Start by mapping your challenges and medium-term objectives.
Determine the processes you need to get there, and the stakeholders you’ll need to involve. Tip: don’t make this an IT-only party but involve people from the business as well. They are the ones with the concrete problems that need solving.
Establish which tools and applications you’ll need at each step along the way, depending on your business requirements and processes. Be as technology agnostic as possible, and keep in mind that the idea is to build an IT landscape that will serve you both now and in the long term.

A pit crew for your automotive company

While many young automotive companies have great product designers and marketing teams, operations are often one step behind. But the pressure is on: “For a lot of emerging players, this feels like their final chance for success,” adds Xander. “Now is the time to act and get noticed.”

“At delaware, we’re very familiar with the automotive sector’s operational challenges and pain points. Based on our extensive experience, we’ve developed a FAST Automotive SAP template. Packed with industry best practices, it allows companies to get started quickly with a minimum investment, while laying the groundworks for long-term success. Instead of trying to tackle everything at once, FAST Automotive’s modular build starts from basic process support and enables you to catch the low-hanging fruit first.”