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Winds of Change Buffet Automotive Supply Chain

Pat Waurzyniak
By Patrick Waurzyniak Contributing Editor, SME Media
SAP Digital Boardroom gives builders a snapshot of global operations.

The ongoing digital transformation of manufacturing comes baked-in with many uncertainties, and the automotive business is no exception.

Peaking auto sales, driverless autonomous vehicles, and alternative ways for consumers to buy new cars and trucks all play into vast changes for the automotive supply chain in the coming years. At manufacturing software giant SAP SE’s (Walldorf, Germany) “Best Practices in Automotive” conference held this week at the MGM Grand in Detroit, executives and attendees heard forecasts of gigantic disruptions to the way autos are purchased, serviced, and deployed in future years.

By employing the latest software and connected networks of the Industrial Internet of Things (IIoT), the automotive industry hopes to brace for many of these changes in the supply chain, and in manufacturing processes. The Best Practices conference, put on by SAP in conjunction with the America’s SAP User Group (ASUG), highlighted the many efforts underway in IIoT and digitalization underway by auto OEM and supplier companies including BMW, Delphi, Fiat Chrysler Automobiles (FCA), Ford Motor Co., Harley-Davidson, and GM.

In his talk, “Restructuring the Supplier Network,” Dave Andrea, executive vice president, Research, Center for Automotive Research (CAR; Ann Arbor, MI), described many of the changes that could dramatically alter the automotive industry.

The effects of “disintermediation” in automotive, defined as “the process of removing intermediaries from a supply chain, a transaction, or more broadly, any set of social, economic or political relations,” will profoundly change the industry, Andrea said, affecting auto OEMs to dealerships . “Costco, Amazon and Tesla are going to disrupt the supply chain—it’s going to come,” Andrea said. “There will be more change in the next five years than in the last 20 years.”

Disruptions are coming on the OEM side with squeezing of profit margins, he added, and will also heavily hit the service side, Andrea said. Congestion and driverless cars play into this equation, and it’s important to look at Vehicle Miles Traveled (VMT), Andrea said. “We’re not going to give up the car,” he said. “But I really think there’s going to be a lot of disruption on the service side.” All the investments into powertrain technologies like the new 10-speed transmissions, Andrea said “that balloon is going to get squeezed.” Automakers will take investment out of things like headliners and other areas, using commodity components to save costs.

Software and Digitalization

Innovations in software and the many other components of digitalization will help auto manufacturers and suppliers compete in the future. In his “SAP Innovation Strategy” talk, Christoph Behrendt, SAP executive vice president, Head of P&I Industry Custom Development, described what the SAP HANA Cloud Platform (HCP) can do for discrete manufacturing users. The enterprise resource planning (ERP) system is capable of handling very large clusters of data, up to 40 terabytes in size, he said, and SAP has 30,000 people working in development.

Digitalization with virtual reality (VR) and augmented reality (AR) is changing the face of manufacturing. Capgemini photo.

Global networking continues to grow exponentially, said René Deist, executive vice president, Applications, Robert Bosch GmbH (Stuttgart, Germany). Applications are becoming smart, he said, with sensors and intelligent devices, omnipresent communications, and artificial intelligence. “Devices become smart, and they’re connecting. User-centric digital services are evolving everywhere,” Deist said, with players including companies like Uber, Lyft, Apple, Spotify, Facebook, Amazon, Airbnb, and Zalando.

Connected systems offer manufacturers and users scalability, convenience, and added value, Deist said, and Bosch has decided that all of its devices will be connected by 2020. “Digitalization provides huge opportunities if you face the challenges,” Deist said. “Bosch is on the way, and it’s a huge step.”

With SAP’s ERP systems, manufacturers can get data fed off the shop floor in fractions of a second. “The value is getting data off the shop floor,” said Mike Lackey, global VP of Solution Management, LoB Manufacturing, SAP. Systems like SAP Connected Manufacturing get data off the shop floor in just 100 milliseconds, he noted, and into the hands of manufacturing operations managers and top-floor executives. The technology is used in wide variety of applications, including the National Hockey League, where one of SAP’s customers, the San Jose Sharks, uses it to monitor humidity levels for the ice at the Shark Tank, also known as SAP Center.

Connecting manufacturing shop-floor data to the enterprise, shop floor to top floor, is the focus of companies’ IIoT and Industry 4.0 approaches, leveraging factory data to make manufacturing more flexible, noted SAP’s Global General Manager, Discrete Manufacturing, Stefan Krauss. “Nowadays, it’s really connecting to the machine to run predictive maintenance,” Krauss said. “This world of IT and OT [operational technology] is coming closer together.”

Crown Equipment’s SAP Global CAD Leader Allen Heindel described the migration process of CAD data into SAP’s ERP software.

Migrating CAD into ERP

Integrating a manufacturer’s CAD data with ERP systems is no easy feat. Allen Heindel, SAP Global Process Leader for CAD, Crown Equipment Corp. (New Bremen, OH), described forklift manufacturer Crown’s migration of CAD data from a legacy PDM into SAP’s ECTR (Engineering Control Center).

A key goal with the migration was taking the company’s systems to the next level. “Can they support the company’s growth for the next 10 years?” Heindel said.

Among the lessons learned by Crown with the migration of its Siemens NX CAD data is “your data is more complex than you think it is … and your data is not as clean as you think it is,” Heindel said. Manufacturers embarking on such an undertaking should start early to identify and clean or enhance CAD data, he said, and to “estimate how much time’s needed for that data—then add 50% to it.”

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