Running on All Cylinders

August 23, 2006 by admin

Few industries have undergone as many significant changes as the automobile industry. In a century that saw new technologies, styles, production methods, and government regulations, as well as increasing international competition, the industry had no choice but to keep reinventing itself. Over the past decade, these changes have occurred at an unprecedented rate, quashing traditional ideas about mass production, economies of scale, and profitability.
In the harsh reality of the global automobile market, no firm is an island. New vehicle models and new production technology might provide a competitive advantage, but only temporarily; within an average of 12 months, the competition will have copied and incorporated any new ideas into their own products and processes. Just-in-time production – a radical innovation 40 years ago – has long since become a fundamental in car manufacturing plants from North America to Japan.

Ahead of the competition

Today, automobile manufacturers seek to differentiate themselves from the competition by developing new and existing products – giving customers exactly what they want, when they want it. As the market becomes increasingly fragmented, the industry has to continue delivering new designs and ranges – from rugged SUVs to luxury saloons and sport coupes.
Product development on this scale requires automobile manufacturers and suppliers to work particularly closely together. It also requires a common platform upon which product development, purchasing, logistics, and quality management can be perfectly synchronized. With SupplyOn – a virtual network for the automobile industry based on SAP NetWeaver – this platform has become a reality for approximately 9,000 companies and 25,000 users. SupplyOn is an online platform that facilitates a new kind of cooperation between automobile suppliers and their vendors on a global scale.
“The days when the automobile industry had product cycles of seven or eight years are long gone,” says Jörg Mieger, chairman of the board for SupplyOn AG, the platform provider. “The customer wants new models with new features. For the supplier, this means extremely short product life cycles and reduced numbers of units. They need IT tools and processes to aid cooperation and optimize flexibility.”
SupplyOn AG was founded in 2000 by the leading suppliers to the automobile industry, including Bosch, Continental, INA Schaeffler, Siemens VDO, and ZF Friedrichshafen, together with SAP. Its 70 employees serve customers in 70 countries.

IT for innovation

The automobile industry is not alone in facing radical changes to business processes. Managers from a broad range of industries are hoping to secure the competitiveness of their organizations through information technology. According to a study, “Business 2010 – Embracing the Challenge of Change,” carried out in 2004 by the Economist Intelligence Unit, 82 percent of the managers responded that IT innovations are essential to adapt the business model and implement new strategies.
Of those asked, 45 percent felt that data management and data analysis would have the greatest influence on an organization’s ability to innovate by 2010. In the automobile industry in particular, IT plays a central role in manufacturers’ and suppliers’ competitiveness.
At first glance, the SupplyOn processes appear incredibly simple. Behind the user-friendly interface of the SAP NetWeaver-based portal, however, lies a highly complex system of hardware, software, and network technology that allows supply chains to be integrated.
If a new car is produced, for example, the manufacturers expect their suppliers to deliver complete seats, not just the various individual parts. A typical seat for a modern sport saloon consists of hundreds of components, such as moldings, covers, fasteners, polymers, electric motors, and switches.
Publishing the specifications, requesting quotations, and submitting offers for each of these parts requires considerable cooperation and intensive negotiations. Projects that formerly involved long, drawn-out authorization processes, with numerous blueprints and faxes, are now seamlessly integrated on the SupplyOn platform, making them considerably faster. Automobile manufacturers and their suppliers profit from the increased transparency and efficiency.

Seamless integration

With SAP NetWeaver, SupplyOn offers customers a range of applications that connect manufacturers and their suppliers in an integrated logistics chain. When the seat supplier receives an order, for example, it logs on to SupplyOn and calls up a list of suitable vendors from the company directory. The seat supplier then sends the request for quotes to its suppliers. In this way, it can integrate all the relevant documents, such as tenders, standards, and specifications, using the SupplyOn Document Manager, and all the offers are received electronically.
Once the contract has been awarded, SupplyOn handles the logistics processes, such as the delivery schedule and dispatching supplier and transport data. Similarly, SupplyOn deals with the financial and quality management processes, such as delivering the supplier evaluation data.
The Vendor Managed Inventory (VMI) solution optimizes the slotting procedure, putting the onus on the supplier to know when and how many specific components have to be in stock. The VMI monitor can be used by both sides as a planning tool on the SupplyOn platform. With standard parts, where price is decisive, the supplier can hold online auctions for selected suppliers. These auctions are more transparent than classical price negotiations, and a supplier can see where its offer stands compared to the competition.

Providing stability in the face of change

SupplyOn’s vision of developing a new business model for cooperation and collaboration in the automobile industry has proven a resounding success. The company – based in Hallbergmoos, near Munich, Germany, with a subsidiary in Detroit, United States – now sees growth opportunities in Asia. In an industry continually confronted by radical changes, the combination of SupplyOn and SAP NetWeaver offers great stability. “We don’t know what business processes in the automobile industry will be like in ten years,” says Jörg Mieger “but with SupplyOn, the industry definitely has the right platform to handle whatever comes next.”

Jeff Reich

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