Top Ten Trends that will Impact Automotive Supply Chains in 2014
I recently published my thoughts on some of the key high tech related industry trends for 2014, so now I thought I would follow up this blog with my predictions on what could happen across the automotive industry in 2014. The industry is going through an exciting period of change with significant global expansion, introduction of new technologies and a global desire to introduce greener vehicles.
So let me now outline some of the key supply chain and B2B related trends that are likely to impact the global automotive industry in 2014:
- Increased adoption of global vehicle platforms will simplify and consolidate supply chains – companies such as VW Group have proven that if implemented correctly, global car platforms can bring significant benefits to an automotive manufacturer. Despite the initial high investment, consolidated suppliers/parts/sub systems, simplified production systems and logistics flows all contribute to justify the investment. With the trend for global expansion growing, especially by Far Eastern automotive companies at the moment, I would expect more automotive manufacturers to start rolling out global car platforms or vehicle architectures during 2014.
- ‘Internet of Automotive Things’ becomes more deeply embedded within both vehicle and production environments – 2013 saw the ‘Internet of Things’ go mainstream. 2014 will see all participants in the automotive supply chain working to get their ‘machines’ connected to the internet. Production equipment, logistics networks, and aftermarket service infrastructures will become connected to a common enterprise platform to allow information flows to be analysed and acted upon. Every car manufacturer will begin to offer a ‘connected car’ within their respective range of vehicles.
- Automotive OEMs follow Tesla and BMWs lead by developing dedicated electric vehicle brands – exponential growth in sales of Tesla and BMW i-Series electric vehicles in 2014 will see many other vehicle manufacturers introduce dedicated platforms and sub brands for their electric vehicles. So far many car manufacturers have decided to enter the electric vehicle market by ‘electrifying’ existing vehicle platforms. From a packaging point of view many of these vehicles are not suitable for housing large battery packs or electric motors. To be successful in 2014, vehicle manufacturers will have to follow Tesla and BMW’s lead by developing dedicated, lightweight and ‘connected’ vehicle platforms
- China accelerates global expansion plans with acquisition of key suppliers and struggling western OEMs – China has so far failed to set the world alight with some of their own car brands. Lack of quality, limited brand awareness and having to compete against strong western brands has all contributed towards China’s limited global expansion of its domestic automotive industry. Increasing wealth in China will see a continued stream of western companies being acquired by Chinese manufacturers, the acquisition of Volvo Cars by Geely has shown how successful this can be. What if Chinese domestic OEMs could sign agreements in 2014 to use under-utilised production facilities in Europe and North America? This would serve to increase production levels globally, China would get a foothold in other markets and the whole supply base becomes rejuvenated.
- Adoption of Cloud B2B platforms accelerates due to continued consolidation of global ERP and legacy B2B environments – The continued globalisation of the automotive industry in 2014 will see stronger efforts to upgrade old legacy B2B environments. Continued expansion into the ‘2nd wave’ of emerging markets in 2014 will require an extension of IT infrastructures into North Africa, Vietnam and Thailand. Limited IT skills in these countries will see cloud based solution being deployed to allow all suppliers to be connected to a centralised B2B hub. The introduction of ‘connected plants’ to support strategies relating to the Internet of Things will see increased levels of consolidation amongst ERP instances to provide a single view of ERP information across multiple automotive plants.
- Automotive OEMs form alliance to lobby regional governments to invest in electric charging infrastructures – range anxiety is the number one barrier to electric vehicle adoption and the automotive industry is going to need the help of regional governments if they are to overcome this barrier. Cities such as Amsterdam have successfully implemented charging networks and even manufacturers such as Tesla have decided to fund the development of their own charging infrastructure to help drive electric vehicle adoption in the market. However if automotive companies are going to meet stringent government set emissions targets by 2020 then the government should be investing in regional charging infrastructure investment policies to provide an incentive for consumers to make the switch to electric vehicles.
- 3D printing technology matures and moves from conceptual design applications to limited use in production environments – this technology has been around for more than twenty years but in 2013 it was introduced to the general consumer. Automotive companies have been using 3D printing technologies for rapid prototyping at the concept design stage of a vehicle’s development for many years. Increased awareness of this technology will now see it begin to be deployed in certain production and aftermarket service situations where parts can be manufactured at a production or service centre location. Production of castings and housings will be one of the initial beneficiaries of this particular technology in 2014.
- More countries adopt global B2B communication and message standards to support international operations – increased globalisation of production has complicated logistics flows and supplier on-boarding initiatives. We are already seeing ERP and B2B platforms being consolidated to support these global operations. In 2014 we will see an increased interest in adopting global standards such as OFTP2 for communications and the soon to be introduced global message set being developed by the German automotive industry. In 2014 I would expect to see more regions follow Germany’s lead in using global standards. I would also expect regional industry associations such as AIAG in North America and JAMA in Japan to take a close look at the EDIFACT based global message set (which is being developed by manufacturers such as VW Group, BMW, Hella and Bosch) to see how they can be applied in their own countries.
- Strategic partnerships announced between high tech and automotive OEMs – Over the past few years we have seen a number of strategic partnerships being announced between for example Panasonic and Toyota, Ford and Microsoft. In 2014 I would expect to see a new generation of partnerships emerging thanks to the increased interest from consumers to connect their electronic devices to in-car entertainment systems. To date we have seen traditional consumer electronics vendors form partnerships with the automotive industry, moving forwards I would expect to see Google, Apple and other consumer centric high tech brands develop stronger relationships with the automotive industry. Will downloadable apps become common place in 2014?, will wearable devices interact with vehicles?, will Google’s Android and Apple’s IOS platform form the basis of future in car software platforms?
- Europe and other regions follow North America in rolling out regulations to minimise use of conflict minerals – North America is one of the first countries to try and significantly reduce the amount of conflict minerals flowing across supply chains. New regulations being introduced in 2014 by the Securities and Exchange Commission (SEC) in North America will require companies to demonstrate that they are not using conflict minerals as part of their supply chain operations. In 2014 I would expect Europe, Japan and other key industrialised regions to begin evaluating the implementation of their own conflict minerals reporting laws. AIAG in North America has already been working extensively with the automotive industry in North America, I would expect them to work closely with other industry associations such as Odette in Europe and JAMA in Japan to share key learnings and best practices. This will help to develop a unified approach to the removal of conflict minerals from global automotive supply chains during 2014.