Being successful in the automotive business means having a handle on suppliers, and it would be difficult to find a better example of this than Porsche Leipzig.
The midmarket process and IT consultancy Mieschke Hofmann und Partner (MHP) has been one of the main reasons why. Specializing almost exclusively in consulting for automotive manufacturers, suppliers, and dealers, MHP has become a major player in this industry in connection with SAP.
It also recently turned heads with its implementation of a logistics system at Porsche Leipzig that has streamlined production and enabled the company to virtually eliminate warehousing. SAP.info recently sat down with Dr. Ralf Hofmann, founder and CEO of MHP, at the company’s headquarters in Freiberg am Neckar, Germany.
SAP.info: Mr. Hofmann, what key developments have made your company what it is today?
Dr. Hofmann: Well, we commenced business activities in 1996 as part of job in which we provided Porsche with consulting on SAP R/3. Even then, we had an idea of what the structure of living, breathing IT would be like. In 1999, Porsche acquired a minority stake in MHP, which then increased to 74.8% in 2003. Since then, we’ve really focused on SAP consulting for the automotive industry.
SAP.info: How did this closer relationship with Porsche come about in 2003, and how does it affect your work with competing automobile companies?
Dr. Hofmann: Right – Porsche significantly expanded its holdings and now has a majority share in MHP. This gets even more interesting when you look at the developments at Volkswagen, which is about to make Porsche the 10th brand in its corporate group.
To the second part of your question: We also provide consulting to other car manufacturers in Germany and Europe that have nothing to do with Porsche. All of our clients benefit from the expertise and diverse experiences of our employees, and the competing automotive companies among them accept us as a neutral partner without reservation. We actually generate much more revenue on the external market than through Porsche.
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SAP.info: MHP now considers itself a supplier of processes. What exactly does this mean?
Dr. Hofmann: Today’s customers don’t just want a functional IT system; they need an entire process that runs perfectly, because that’s what it comes down to. It’s certainly possible to have an IT system that works just as it should, but a process that still needs revision or adjustment. At the end of the day, that’s what we’re responsible for. We’re not satisfied until the process is up and running in the client’s organization and the underlying IT functions as desired.
SAP.info: Coordinating centralized production and decentralized final assembly in global supply networks involves a barely manageable number of communications standards. What will automobile manufacturing be like in the future?
Dr. Hofmann: Today, it’s about a high degree of flexibility, and especially transparency. Current communications systems have proven up to the task – and while I wouldn’t say that we aren’t able to manage the different standards involved, having fewer would indeed make us more efficient. As far as future automotive manufacturing is concerned, you’re touching on the subject of e-mobility. I think we’ve yet to reach a critical threshold there.
SAP.info: What risks is the average automotive supplier currently facing with regard to the supply chain?
Dr. Hofmann: I see much more opportunity than risk. We’re noticing some supply bottlenecks right now due to the tremendous inventory reductions the crisis period has caused, but they won’t last forever. In the future, excellent supply-chain management will give companies the chance to gain more agility and flexibility – the business world’s answer to globalization.
Meanwhile, the trend toward incorporating vertical integration, value creation, and especially manufacturer responsibility into the supply chain is going to continue. Both suppliers and manufacturers will have to be up to the challenge with respect to steady supply-to-production, product and information quality, and in particular, efficiency. IT is an integral part of it all, from facilitating these globalized supply networks to coordinating production across company borders.
SAP.info: How transparent and efficient will value creation partners have to be in the near future to survive in the market?
Dr. Hofmann: Whether or not manufacturers and suppliers succeed ultimately depends on the success of their products with customers. In light of the increasing complexity of products, this means that intensive cooperation, communication, and a high level of transparency are necessary right from the point of predevelopment if you want your offering to dominate the competition all over the world. To answer your question: Transparency is a necessary element because it’s getting harder to tell where one company ends and another begins.
SAP.info: What developments are driving the advancement of processes and IT concepts?
Dr. Hofmann: I think there are several aspects. The advent of the Internet and “connected” vehicles are about to give manufacturers, suppliers, and service providers completely unprecedented services and business models the likes of which we can’t fully foresee even now. Mobile solutions are supporting and strengthening the trend toward workplace mobility and flexible working hours, giving people the ability to make faster management decisions and adjustments.
Then you have the emergence of cloud services, which I see as strongly related to the general topic of security and all its intricacies. There’s fundamental work to be done here – such as in building trust – and in business-critical mobile solutions. However, standardization still has plenty of potential at both the process and IT levels, as well as within and among companies.
You’ve seen the courses of action Volkswagen CIO Klaus Hardy Mühleck demonstrated, for example, in his keynote at the SAP Automotive Symposium. Some of those have already been implemented within the VW corporate group. Standardization increases agility by reducing complexity; I think our industry has plenty on its plate.
SAP.info: Does the automotive industry have anything to learn from other industries, or is it the gold standard of process efficiency?
Dr. Hofmann: That question isn’t all that easy to answer. I’d say that the automotive industry has the most demanding processes due to the combination of complexity and unit quantities, but maybe the public sector is worth a look. The German government, for instance, managed to establish a standard for electronic tax returns across all of the country’s 16 states. Today, every company communicates electronically with the financial authorities. In the automotive and manufacturing industry, we still have a lot of integration gaps that are hindering the transparency I’ve mentioned.
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SAP.info: Recalls – due to faulty brakes or airbags, for example – are a nightmare scenario for any carmaker. What possibilities do you think traceability offers in at least minimizing such incidents?
Dr. Hofmann: This is a clear case for effective advance efforts in preventive quality management and assurance. Ever shorter development cycles and the increasing diversity of products and variants make this a very complicated area that all too often gets squeezed out of budgets.
You’re familiar with the consequences: They’re very, very expensive, not to mention detrimental to a company’s image. End-to-end IT solutions and forecasting tools help identify errors early on, and decisive action can prevent them from ever reaching the customer.
SAP.info: Finally, there’s topic of electromobility. If the German automotive industry wants to avoid being caught napping on this trend in the next 10 years, major changes will be needed in its processes – particularly with regard to how vehicle systems interface with the Internet and the environment. Your thoughts?
Dr. Hofmann: I don’t think we can cross that bridge until we fulfill the need for a clean primary source of energy. The German automotive industry has invested decades of development into its modern vehicles. According to an ADAC study, a modern diesel engine only produces about 10% more CO2 than an electric vehicle generating the same output.
Electric cars are sure to win over market segments, however, especially in urban areas. This will entail new services that facilitate communication among drivers, vehicles, and networks of gas stations and other services. We’re already considering the resulting opportunities with manufacturers, energy providers, and cities, but I believe it will be a few years before the industry gets to that point.