What does agility look like for today’s auto industry?

Modern, cloud-based solutions help organizations thrive despite volatility 

The global disruption caused by COVID-19 has taught companies one indisputable fact: Agility is a valuable commodity. It is the secret to resilience and adapting to rapid changes, such as raw material shortages, supply chain bottlenecks, and escalating customer expectations. For the auto industry, the shortage of semiconductor chips caused about $210 billion in lost revenue. Over 11.3 million vehicles were put on hold, waiting for the necessary chips. Fortunately, modern technologies can help enterprises fully analyze potential risks like these, giving them the tools to respond quickly and with confidence. 

Automotive enterprises need to prepare for continued volatility, as economists predict the pandemic could delay another 7 million units in 2022 and 1.6 million in 2023. It may be 2025 before the wholesale car market reaches pre-pandemic and pre-chip crisis levels. Automakers, dealers, OEMs, and suppliers must turn to creative problem-solving, innovation, and out-of-the box thinking to overcome these jarring setbacks.  

The need for agility reaches far beyond supply chain issues. All manufacturers today need highly flexible, cloud-based technology to stay on top of global volatility, including disruption from the Ukraine crisis. Customer demands for electric or hybrid vehicles, changes in buying behavior, new user experiences, and assembly line innovations also place added pressures on the automotive industry to be nimble and fast-reacting, with the ability to pivot resources and reallocate funding to pop-up priorities. To support fast thinking and fast action, the commitment to agility must be an enterprise-wide strategy that starts at the top of the organization and is communicated down through channels.

Understanding the need

Despite the progress being made in addressing global volatilities and crises, the current speed of change shows no indication of slowing. This pace will continue or may accelerate as the recovery booms and pent up demand yields record high sales. Preparing for continuous change is a logical step for executive leaders, who should consider the role of agility across every department, process, and decision. An open-minded holistic approach that embraces change is necessary, and must be evangelized by the C-suite.

Unfortunately, the manufacturing industry is known for its traditions, steady rhythms, and continuity—rather than being early adopters of new technologies. Many CEOs and CFOs are risk-adverse, reluctant to jeopardize on-time deliverables and steady cash flow. Harvard Business Review recently asked, “Is Your C-Suite Equipped to Lead a Digital Transformation?” and suggested that some leaders were blind to the urgent need for modernization.

Indeed, many were slow to jump on board the digital train before 2020. According to Forbes: “Industry 4.0, as a concept, has been around for almost 10 years now, but not much of it has seen the light. Many Industry 4.0 projects hover in the realm of ‘pilot purgatory,’ a Dantesque term that encapsulates the fate of most Industry 4.0 initiatives, 70% of which never make it out of proof of concept (POC) to be deployed.” Proof of concept projects often absorbed much of the budget, leaving the IT team with disappointing results and giving C-level officers little confidence in digital theories and cloud promises. Capgemini research shows that in 2020, only 32% of manufacturers had adopted data-based decision making, while 38% continued to rely on paper-based systems to manage the shop floor.

In the auto industry, businesses that struggled with outdated legacy solutions were slow to adopt modern technology and less equipped to face sudden and drastic disruption.

Lessons learned

In the years since 2020, the value of cloud technology has been proven. Those pondering cloud deployment in 2020 suddenly needed it—and needed it quickly—to facilitate work-from-home strategies. IT teams learned the meaning of agility overnight.  

According to a McKinsey Global survey of executives: “Companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally-enabled products in their portfolios has accelerated by a shocking seven years. Nearly all respondents say that their companies have stood up at least temporary solutions to meet many of the new demands on them, and much more quickly than they had thought possible before the crisis.” 

The aftermath of the COVID-19 pandemic will likely be felt for years, requiring all business leaders to remain vigilant and sensitive to changes in the market as well as in working patterns. While some back-office tasks can be done remotely, assembly line tasks can’t be done via Zoom meetings. Workstations may need to be reimagined with robotics, enabling wider automation and requiring fewer on-site team members