Automobile: IT's Fast Lane

With the growing number of digital systems under its roof,
the automobile vertical is becoming one of the leading showcases of IT usage.
Besides streamlining the entire value chain, IT is also increasingly finding its
way into product innovation. According to Rajiv Nair, regional director,
Autodesk India, the interoperability and ease of collaborative use of multiple
IT systems (PLM, CRM, ERP) will become even more important.

Driving Factors

The evolution in IT in the auto sector is being led by the huge growth and
investments being made by auto multinationals in India. All the large auto
companies in the world are now in the country. Growing competition, in effect,
has led to increased pressure on squeezing the manufacturing lead time and
time-to-market, even while maintaining cost competitiveness and efficiencies.

Best Practices

Focus on IT consolidation and centralization Investments into collaborative systems and processes by integrating IT systems and processes across the value chain followed by spearheading standardization efforts Focus on the CRM system to reach out to customers and factor in their feedback more effectively Well automated and agile supply chain planning Processes for high visibility and agility towards customer feedback/demands Strong product development lifecycle management

The growing competitiveness can be gauged from the fact
that the number of segments is increasing and new product introduction within
each of these segments is also growing at a rapid pace. There are several new
products as well as variants of products, which are being launched frequently
within very short time spans as an answer to competition or to drive the edge
over competition. This, in turn, is not only increasing the complexity but also
constantly challenging the ability of the OEM to introduce a new vehicle as well
as new variants in the shortest possible time and market it.

According to Hilal Isar Khan, head, Information Technology,
at Honda Siel Cars, all this requires the product development lead time as well
as the supply lifecycle to be minimized and controlled more efficiently to react
as well as innovate faster. These are some of the fundamental market dynamics
that are warranting the need to move beyond the basic ERP (the initial wave of
significant IT adoption in the auto vertical) first and then move to a
collaborative system. Standardization of systems across the various partners is
an area of concern that auto companies are now beginning to address.

As Nair points out, the way the auto industry is evolving,
the supply chain (the suppliers) is now providing more value with complete
vehicle systems. The OEMs are learning that in order to share risk with the
suppliers, they must share innovation, knowledge, and profit as well. All this,
in effect, is leading to movement towards collaboration on the IT systems as
well.

Branching Out

The initial wave involved getting the ERP in place, the next wave is leading
to the extension of the automation drive to the partners (dealers and suppliers)
and customers through SCM, Dealer Management Systems (DMS), CRM, etc. While the
companies have already started extending out, there is going to be greater
mainstream adoption of SCM, DMS, and CRM applications in the coming years.

Rajesh Uppal, chief general manager (IT), Information
Technology Division of Maruti Udyog, touts CRM and SCM as the next big drivers.
“Going forward there is going to be more focus on CRM areas and integrating
the complete supply chain including logistics as the scale of operations are
increasing with huge variability and shortened product life cycles,” he
explains.

The auto industry is very heavy supplier and supply chain
dependent. Supply chain forms an integral part of an automobile manufacturer's
operations considering that a sizable chunk of the production costs is made up
of material costs. Therefore, inventory visibility, management and control are
key to driving efficiencies, driving the market for SCM applications.

CRM could be the next big thing in the auto sector. With
the basic supply chain systems in place, the next 'big' rollout area for the
companies will be CRM. Considering the growing market competitiveness, customer
orientation is becoming the differentiation factor. “Entire focus now is on
CRM and how do we listen to our customer and take the feedback to our operations
till product development. Thus, agility to change, based on the feedback from
customer and also anticipate and create, will be the key in differentiating from
competition,” explains Uppal. Within CRM, the trend is also gradually moving
from reaching out to the customer base through dealers and third parties to
directly reach out to the customers.

	"Interoperability and ease of collaborative use of multiple IT systems (PLM, CRM, ERP) will become even more important" -Rajiv Nair, regional director, Autodesk India
	"Owing to the demands of the challenging competitive environment, it has become critical for the auto companies to upgrade their IT infrastructure" -Shailender Kumar, MD, BEA Systems
	"The primary areas of interests in terms of upcoming technologies and solutions hover around ECU design and telematics" -Ajay Chamania, senior vice president, Product Engineering Services, Patni
	"The status of IT adoption in the auto ancillaries is not very high, investments are now being made and in the next 2 to 3 years, a lot of automation will be done" -Sanjay Agarwala, director, ESS
	"What we are now talking about is tightly integrating these various systems with the ERP, and considering CRM and SCM as an extended entity of the ERP system itself" -Hilal Isar Khan, head, Information Technology, at Honda Siel Cars

Collaborative Gains

Taking this a step further, the trend will eventually move towards
integrating the dealer, supplier and enterprise systems into one seamless system
and achieving some level of standardization across the partners and third
parties' systems. This essentially means integration of their IT processes
across the value chain to effective collaboration.

According to Uppal, in order for the auto industry to
succeed the entire value chain, suppliers, distributors and logistics partners
have to work like a well-oiled machine to deliver value to the end customer.
Inefficiency or failure in any one of the partners could affect the delivery
process. So it is important for OEMs to make the value chain agile to meet the
changing demand of the customers. One of the main challenges is to manage change
demanded by customers in the entire supply chain including suppliers and
distributors, which a collaborative environment can help overcome. These are
some of the market factors driving the move towards collaboration.

In the last five years, big auto giants had made their
internal IT infrastructure strong and stable which can cater to immediate
business requirements and good support to internal users through ERP. Today ERP
steps out into SCM and CRM as well. “Once they have put their house in order,
now they are able to think of collaborating with their business partners. Some
of them have already collaborated with their dealers' and vendors' systems.
In next 2-3 years, they will be making their business associates' systems
strong and stable so that in future their systems can be integrated with the
large enterprise system. Thereby creating a win-win situation for both,” says
Avnesh Jain, deputy manager, Information Systems, Hero Honda Motors.

According to Khan, in the past companies have been talking
about CRM, SCM and dealer systems on top of the basic ERP. “What we are now
talking about is tightly integrating these various systems with the ERP and
considering CRM and SCM as an extended entity of the ERP system itself. Thereby,
making it easier and faster to get an effective MIS for business critical
decisions,” he adds.

While the dealer management system at the dealers' end
has been connected to the company's enterprise systems and the materials
transaction system at the suppliers' end has also been connected to the
organization's ERP, the two sets, i.e. 'dealer and ERP' and 'supplier
and ERP' have been disjointed from each other. The market is now moving in the
direction of creating a real-time web based single end-to-end system.

Designed to Standardize

The collaboration theme is moving to the designing domain as well,
considering the growing pressure on the companies to shorten design life cycles
and bring products out into the market faster. Standardization is particularly
finding its way in the areas of design collaborations. The OEM and the supplier
needs to be on a single collaborative platform where they can share information,
collaborate on critical design decision and have online meetings to discuss
mission critical scenarios to arrive at the resolution in a real-time
environment.

According to Nair, the automotive sector tends to be moving
towards a theme of 'One'-one set of corporate strategies, one common PLM
solution, one set of metrics that drive the business. “There seems to be
universal theme of OEM and supplier businesses moving to single, networked PLM
solutions that all fall under one plan,” he adds. Furthermore, as more
companies are outsourcing part of their manufacturing and design work,
integration and standardization across the systems of these third party
companies is also becoming an issue that automobile manufacturers are now
looking at. All this is geared towards speeding up the production cycle and
reducing the manufacturing lead time. Khan also points out the emerging trend
towards integrating the PLM system with the ERP system.

Other Trends

Among the other trends, PLM is an area abuzz with activity. According to
Rohit Biddappa, marketing manager, Parametric Technology, supply chain firms are
being asked to deliver complete modules and systems to the OEM and not just
parts, sub assemblies and assemblies.

According to Shailender Kumar, MD, BEA Systems, owing to
the demands of the challenging competitive environment, it has become critical
for the auto companies to upgrade their IT infrastructure to provide real-time
assistance and concurrent service delivery. In case of manufacturing process,
technology aids in real time inventory management, which is critical in ensuring
timely product delivery and hence cost cutting. At the customer end, the key to
success is real-time access to information be it pricing, policies, auto loans
etc or for that matter tracking of goods flow between indirect channels. As a
result, some of the technologies that are fast gaining popularity in this domain
are RFID and technologies that enable web based solutions such as portals, Kumar
points out.

Riding on Innovation

With the convergence of advanced in-vehicle electronics, communication
technology and infrastructure and telematics, automobiles of today are on the
verge of getting a complete re-invention yet again. According to Uppal, the
automobile sector is moving towards resembling 'computer on wheels' due to
increased number of digital systems coming under its roof. This includes vehicle
control, engineering management systems, safety control etc. Automotive
electronics today accounts for 22% of vehicle cost, which is likely to go up to
40% in the next couple of years.

According to Ajay Chamania, senior vice president, Product
Engineering Services, Patni, the primary areas of interests in terms of upcoming
technologies and solutions hover around ECU design and telematics. IT is
increasingly finding its way into building intelligence in the automobiles.
Among the areas being worked upon include keyless entry systems, intelligent
navigation systems, temperature controls, etc. While today the average
telematics being used in the automobiles is around 7-10%, according to experts,
companies worldwide are already targeting to increase it to 70% over the next 10
years. The trend has already started to show the first signs of its visibility
in India and will gain ground over the next 2-3 years.

Every system and sub-system is constantly being driven by
electronic technology leading to configurable hardware in today's automobile,
says Chamania. Manifestations of these innovations are seen in a number of
upcoming automotive applications ranging from Infinitely Variable Transmission (IVT),
X-by-Wire (Control-by-Wire, Brake-by-Wire), Adaptive Cruise Control (ACC),
Collision Avoidance, Lane departure warning to convenience features like Driver
Assistance and Voice recognition

Stringent guidelines set by various government and
regulatory agencies on compliance of safety regulations and environmental norms
is pushing the demand for applications like intelligent airbags, advanced
restraint/safety systems, he adds further.

Manufacturers today also have to redesign their products
more frequently by reducing the time-to-market and introducing innovation. As a
result, model-driven software approach, verification and validation, PLM
services, and design simulation are typically the areas that automotive OEMs and
tier-1 suppliers are looking for.

Ancillaries Growth

According to Sanjay Agarwala, director, ESS, investments in auto ancillaries
are now being made and in the next two to three years, a lot of automation will
be done.

All the large auto companies are setting up auto
ancillaries or are providing more and more orders to the existing auto
ancillaries. All these multinationals insist that their ancillaries following
strict quality processes and automate their operations, explains Agarwala.

Also, the way market dynamics is evolving today, more
design and production outsourcing is going to the auto ancillaries, who are no
longer single part suppliers. As a result, they are becoming more prominent
entries in the entire value chain.

Shipra Arora


shipraa@cybermedia.co.in