In this Q&A with the Business Value Exchange, Martin describes the nature of DXC’s work with NEVS to build plants in Trollhättan, Sweden and Tianjin, China, and the future of connected manufacturing.
What is the landscape today for the auto manufacturer?
ML: Auto manufacturing is probably the most disruptable business around, susceptible to volatile markets and price fluctuations of materials, and a shifting regulatory landscape. Rising fuel prices and growing environmental concerns among consumers are encouraging car manufacturers to expand their portfolios of cars and shift production to hybrid electric or green energy automobiles. The emergence of the connected car is another factor for change, enabling a shift in the marketplace or traditional consumption pattern towards subscription and car sharing solutions. In the near future, car companies may not sell the car as a commodity product but as a custom mobility service for a particular profile of usage, whether as a commute or a leisure trip. Car users will care less about ownership than simply being able to transport themselves in the optimum fashion, and this will extend the business model out to something new.
I think many European auto makers would like to do what NEVS is doing, and take the opportunity to build a modern, state-of-the-art integrated platform – but it’s expensive and complex if you have a large operation ongoing at full speed with big legacy system dependencies. The end goal is to have everything supported out of few integration systems from the initial order of a car to the final sale and transportation of the vehicle. Every input is automatically collected through the Order-to-Delivery and production processes, to be visible to management in financial and controlling systems instantly. The potential of new levels of integration enables real-time business insight and value chain synchronization for a quick ‘Sense and Response’ business capability, as part of the effort of NEVS next generation connected manufacturing vision.
What is the scope of the NEVS project?
ML: We began the partnership with NEVS in 2012, having deep local knowledge of the Saab legacy, of the business, the processes and the systems. That Phase Zero piece of work consisted of plugging gaps in the legacy platform for procurement, manufacturing and logistics and at the same time getting financial systems in shape for the initial needs in the early days of NEVS. After NEVS acquired assets from Saab Automobile in 2012, there were a lot of holes in the chain of processes: many departmental systems were off limits because the intellectual property belonged to General Motors, the former parent of Saab Automobile. The first phase of the SAP implementation was to establish those initial steps on the integrated end-to-end roadmap.
The new phase and the remit of the latest DXC-NEVS partnership is to execute on the roadmap and together modernize and make the Swedish plant operational, and to establish a brand new plant in Tianjin outside Beijing. In between the first and second partnership deals with NEVS, there’s been a rapid development of SAP as a product from a technology standpoint. S/4HANA, and the modern database technology with in-memory computing capabilities is the de facto standard. HANA brings many advantages that we can capitalize on when operating in the high volume, high complexity product arena that characterizes the environment of the automotive manufacturer.
What is the biggest differentiator of DXC Technology in the auto sector?
ML: We have an important IP offer around the implementation of the SAP suite for the auto sector. While many use a standard version of SAP for manufacturing, we at DXC Technology had defined specific templates for SAP processes that ensures a proven and robust implementation and tailored ways of working specifically for automotive manufacturing sector. These templates derive from our deep knowledge of working with primarily Asian and European auto makers and are a real differentiator. The majority of new car plants have been built in China and India over the past 10-15 years and our automotive team have been involved in a most of them. These types of solutions are tailored for the high volume, high complexity environment of vehicle manufacturing; many using standard SAP ECC implementations have experienced problems once production volumes and complexity get ramped up. Additionally, with S/4HANA we leverage SAP’s Fiori front-end capabilities for personnel and management to make them mobile and able to handle simple transactions such as approving a purchase requisition in a quick and routine fashion.
What are the benefits of using the manufacturing-tailored SAP solution from DXC Technology?
ML: The automotive industry-specific version of SAP and the integrated end-to-end process coverage that rolls up all data points into the financial system gives instantaneous control of your business performance, and makes it easier to keep up with the shifting landscape. If there‘s a regulatory change, for example on electric vehicle subsidies from central or local government in China, you are able to determine the direct impact to your operations and profitability right away and take appropriate action. For any aspect of cost management, to projections of sales volumes, and its impact on the procurement cycle, you have more visibility and a detailed control mechanism. Being able to quickly understand what goes on around you and in the marketplace and to tune your cost base, whether people, assets or materials, is invaluable.
What difference does end-to-end integration of manufacturing make?
ML: What every large company wants to know is: “How can I flexibly adapt to changing customer requirements and market conditions, and at end of day, improve sales and profitability, not only for the company, but preferably the entire ecosystem?” Once all data points along the manufacturing and supply chain have been integrated, this question can be answered with no surprises. Coupling with sophisticated analytics and big data management capability, suitable business outcomes can be simulated with precise predictability.
What part does customer experience and connectivity play in end-to-end manufacturing?
ML: Customer experience and a bigger role for Big Data and analytics is also on the roadmap for all existing and aspiring car makers. The future ability to connect in-vehicle data from the consumer’s connected car offers huge potential value for car makers. Customer data, whether entertainment preferences or driving style, can feed into R&D and manufacturing processes in a continuous improvement loop: how the product is used, what can be improved and gradually upgraded over a year will all become much more important. Just like a smartphone, a connected car starts its life with a ‘vanilla’ set of features and then adds to its abilities with personalized data and apps: it actually improves with age as it is wirelessly updated by the driver or by the car, a completely different proposition to the current generation of cars.
For car makers to continuously improve its product, both in development and on the road, requires a lot of integration with backend systems, of course. The softer feedback – what is being said about brands and products – needs to be understood and captured by social media analytics and combined with ERP, manufacturing and R&D information. Data will be there about all the activities but converting this into useful information to improve on products, increase efficiencies and, for example, employing predictive analytics and avoiding product recalls will be key to standing out against the competition.
Robust, telco grade connectivity or IoT solutions are, of course, also the foundation for one of the other mega trends in the auto industry – autonomous drive. That will come to the market much faster than most car makers had envisioned only a year ago.
What makes this a successful partnership?
ML: You cannot overemphasize the importance of openness and transparency. There needs to be open communication between the customer’s business, the customer’s IT people and the partner, and the project needs clear and outspoken sponsorship from top management at the client company. This ensures that everyone has the same understanding of the company’s ambitions and primary business objectives, what the business can afford to do at a certain time – and equally important – what not to do.
We have to be open and transparent about how we want to work together and what the cost drivers are both for supplier and customer. This means we can compare notes as the project develops and it’s not a ‘black box’ exercise where everything is agreed and committed in a silo. Instead, we have to be agile and go with the motions and continuous evolution of business goals in a Continuous Improvement Programme. You have to make people feel like they are being listened to and that we are picking up the good ideas that start to flow once the business is given the opportunity to engage and explore options and seriously think how they want conduct their business in the long run.
As the business makes decisions and market circumstances change, it’s a case of understanding new business concerns and opportunities but not breaking the schedule; so you need the ability to pick up new ideas, evaluate the urgency and business case and put them on the execution roadmap.
Author: Helen Beckett
Helen Beckett is the Community Manager of the Business Value Exchange. She has been a writer and editor for over 20 years and takes a particular interest in the challenges facing the CIO in today’s business climate.
Author: Martin Larsson
Martin Larsson is a DXC Technology account executive for the automotive sector.