Opportunities & Challenges for Today’s Automotive Manufacturers
6TH ANNUAL
Participants in a recent global survey of nearly 300 manufacturers, including 80 automotive manufacturers, recognized the importance of smart manufacturing for agile decision making, process automation, and greater efficiency.
This study from Plex Systems, in collaboration with Hanover Research, explores how automotive manufacturers can use technology to address today’s challenges and take advantage of long-term opportunities.
The data reveals a clear need for smart manufacturing technology in order to address current challenges, especially those created or heightened by the COVID-19 pandemic.
• Most automotive manufacturers are currently using at least some components of smart manufacturing to achieve their business goals.
• Technology investments for auto manufacturers are determined predominantly by tangible ROI. The data shows a need for emerging technologies, but auto manufacturers must clearly understand the value cases in order to drive adoption.
• Automotive manufacturers are pragmatic and tend to favor smart manufacturing technologies that complement their existing operations while enabling them to scale and expand over time as new challenges arise.
SMART MANUFACTURING:
The intelligent, real-time orchestration and optimization of business, physical, and digital processes within factories and across the entire value chain. Resources and processes are automated, integrated, monitored, and continuously evaluated based on all available information as close to real time as possible.
MESA International
INTRODUCTION
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RESPONDENT DEMOGRAPHICS
INTRODUCTION
In which of the following areas does your organization operate?
Parts & supplies Passenger safety systems Electronics Coating & painting
KEY SOLUTIONS
Enterprise Resource Planning (ERP): Automates front- and back-office processes, including financial management, revenue management, human capital, order management, billing, and inventory
Manufacturing Execution Suite (MES): Tracks and documents the transformation of raw materials into finished goods, providing real-time production management to drive enterprise-wide compliance, quality, and efficiency
Quality Management System (QMS): Standardizes and automates quality documentation, processes, and measurements
Supply Chain Planning (SCP): Combines data from multiple departments across the business to sync demand and supply forecasting to improve inventory accuracy and production management
Industrial IoT (IIoT): Combines process, operational, and machine-level data to improve business performance, automate production and business processes, and increase plant floor production efficiency
Manufacturing Analytics: Provides systematic analysis of data to discover deeper insights, make predictions, or generate recommendations
18% 20% 29% 67%
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SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
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SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
THE VALUE OF SMART MANUFACTURING
of automotive industry professionals feel smart manufacturing is very important to their future success.
Though many manufacturers are actively using smart manufacturing technologies, automotive manufacturers are slightly behind other sectors in adoption.
Despite this lag, many auto manufacturers say they are actively evaluating smart manufacturing solutions, and very few have no plans to adopt.
78%
To what extent is your organization using smart manufacturing?
Auto All other
5% 5%
15%15%
Do not use and do not plan to
Do not use but there is interest
15%15%
Actively evaluating solutions with intention to invest
47%37%34%
Use some components but not a fully integrated solution
23%
Use a fully integrated solution
10%9%
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Cloud adoption among manufacturers is at an all-time high, laying the foundation for future smart manufacturing initiatives.
Nearly two-thirds of automotive manufacturers are running the majority of their enterprise software solutions, such as ERP and CRM, in the cloud, slightly outpacing the rest of the manufacturing industry.
How much of your enterprise software is in the cloud vs. on-premise?
Auto
All other
All in the cloud
Mostly in the cloud
Equally in the cloud and on-premise
Mostly on-premise
All on-premise
54%
30%
4%
1%
10%
48%
28%
7%
3%
14%
“The only work involved in rolling Plex out to employees was to set up a new computer with an internet connection. We quickly gained the ability to use an integrated system with no manual recordkeeping and easy access to data for everyone.”
integrated system
Cathy Cuneo
Quality Manager at Horizon Technology
SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
PROOF POINT:
HORIZON TECHNOLOGY
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Auto manufacturers generally place higher value on smart manufacturing components that are closer to the plant floor and considered core to manufacturing operations.
Auto manufacturers place slightly lower value on smart manufacturing components they view as having less clearly defined value cases, suggesting a need to better understand the potential ROI of these technologies and their ability to solve business challenges.
SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
View as very or extremely valuable:
89%
Manufacturing
execution
systems (MES)
81%
Quality management
systems (QMS)
76%
Manufacturing
Analytics
66%
Industrial IoT (IIoT)
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OVERCOMING BARRIERS TO
CLOSE THE ADOPTION GAP
Companies are looking to adopt smart manufacturing solutions but face some roadblocks. Cost and lack of clarity around value are among the top barriers to adoption—when the value is not understood, the cost is perceived as high.
• Concerns around cost and employee adoption are notably higher in the automotive sector. This is likely due to auto manufacturers’ pragmatic approach to investing in technology that aligns with clearly defined business value and addresses widespread workforce challenges.
• Focusing short-term on their core production business while failing to innovate could hurt auto manufacturers long-term.
SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
What are the barriers to adopting smart manufacturing?
Cost/Expense
Employee resistance to technology adoption and change
Lack of clear definition of smart manufacturing value
Lack of skill set to manage smart manufacturing implementation
Lack of skill set to take advantage of smart manufacturing technology
Auto All other
51%
39%
32%
26%
32%
27%
46%
37%
33%
33%
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SMART TECHNOLOGY IN AUTOMOTIVE MANUFACTURING TODAY
While automotive manufacturers favor smart technologies in core manufacturing operations, multiple points of entry to smart manufacturing are possible with a lower initial investment that scales over time, including quality management, machine integration, process automation, Industrial IoT, manufacturing analytics, and supply chain planning.
• These investments help manufacturers decrease waste, improve resource efficiency, and enhance operational performance — thereby improving customer satisfaction and market competitiveness.
• Early wins help build the business case for additional investment and scaled expectations.
PROOF POINT: MOTUS
INTEGRATED TECHNOLOGIES
“When we launched Plex in our production facilities, it brought with it a foundation of change and visibility. We gained a better understanding and control of our inventory and increased our operational efficiencies.
We’ve also reduced human errors, decreased our scrap rates, and increased the quality of our product by identifying production errors earlier in the process.”
Garn Evans
CIO at Motus Integrated Technologies
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ADDRESSING
CHALLENGES
HEAD-ON
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The automotive industry is experiencing major shifts. Consumer purchasing behavior is changing, and governments around the world are pushing the auto industry to reduce carbon emissions and adopt sustainable operational practices, causing auto manufacturers to assess both their financial operations and social responsibilities.
The past year has particularly tested auto manufacturers’ preparedness to navigate major disruption that heightened workforce challenges and increased competition
in a volatile market.
What are the biggest obstacles to your organization’s growth?
ADDRESSING CHALLENGES HEAD-ON
66%
42%
39%
Impact of COVID-19 pandemic
Competition
Supply chain disruption
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ADDRESSING CHALLENGES HEAD-ON
NAVIGATING SUPPLY CHAIN DISRUPTION
Unsurprisingly, automotive manufacturers have been impacted by supply chain challenges due to the COVID-19 pandemic. This disruption has emphasized the need to develop a more agile supply chain and contingency plans for unforeseen shutdowns. Forced closures in some regions and reduced staff per shift no doubt contributed to some supply chain fluctuation.
How has the COVID-19 pandemic affected your organization?
Increase efficiency with smaller workforce
Greater interest in developing more agile supply chain
Developed contingency plan for widespread disruption
Restored confidence in ability to plan for business disruption
Complied with COVID-19-specific regulations
Reprioritize investments
Unable to produce at capacity due to lack of qualified workers
Organization has diversified (e.g., industry, product)
80%
71%
67%
66%
66%
62%
56%
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ADDRESSING CHALLENGES HEAD-ON
While nearly three-fourths of automotive manufacturers feel supply chain planning is very or extremely valuable, they rely more heavily on error-prone manual or homegrown supply chain planning solutions than the industry as a whole.
71% of auto manufacturers use manual or homegrown solutions compared to 51% of manufacturers across all other sectors.
Only 10% of auto manufacturers use connected supply chain planning solutions compared to 27% of non-auto manufacturers.
Connected supply chain planning solutions that are cloud-based, scalable, and able to connect business and operational data enable manufacturers to:
Navigate supply chain disruption
Remain steady amidst a changing market
Use data to understand where and how to pivot their operations
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ADDRESSING WORKFORCE
CHALLENGES
Compared to the manufacturing industry overall, automotive manufacturers have felt a stronger negative impact on their organizations’ internal operations due to the pandemic, such as production output and ability to meet market or customer demands.
ADDRESSING CHALLENGES HEAD-ON
91% have experienced adverse impact compared with 74% of other manufacturers.
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ADDRESSING CHALLENGES HEAD-ON
Key areas of automotive manufacturers’ operations have been affected by the COVID-19 pandemic to a greater extent than the industry overall:
80% of auto manufacturers see a need to increase their efficiency with a smaller workforce compared to 69% of other manufacturers.
62% of auto manufacturers say they haven’t been able to produce at capacity due to lack of qualified workers compared to 53% of other manufacturers.
To address these needs, auto manufacturers are turning to automation.
• Auto manufacturers lead other sectors in automation, with nearly three-fourths using software and/or hardware to automate processes.
• Compared to the industry overall, auto manufacturers place slightly greater importance on technologies capable of automating business processes and automatic machine control.
• 43% of auto manufacturers plan to increase their future spend on automation.
80%
69%
62%
53%
Auto
Auto
All other
All other
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Automation affects workers’ skills in two ways depending on how and where it is implemented in an organization’s operations:
ADDRESSING CHALLENGES HEAD-ON
While smart technologies can reduce the number of workers on the factory floor, they can provide career growth opportunities as employees learn critical new technical skills.
Automation can also reduce complexity, making it easier and faster to hire and onboard lower-skilled employees.
WORKFORCE INSIGHTS FROM PLEX
As manufacturing production recovered during the latter half of 2020, the number of unique users logging into Plex increased by 8% while the production rate increased by 18%. Despite a lower workforce volume, Plex customers are able to meet high levels of production through investments in automation tools and smart technologies in addition to traditional measures such as additional shifts.
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ADDRESSING CHALLENGES HEAD-ON
COMPETING IN A VOLATILE MARKET
The COVID-19 pandemic has increased competition and elevated the need for manufacturers to address gaps hindering their success. Compared to other sectors, auto manufacturers see a greater need for technology and access to/ability to use data effectively in order to gain a competitive edge.
Which of the following does your organization lack that would help outpace the competition?
Given the self-identified need for both technology and access to data in order to compete, it’s not surprising that automotive manufacturers are significantly behind in leveraging technology for use cases that require the collection, connection, and analysis of data from throughout the organization.
Which operational activities are you currently supporting with software and/or hardware?
Technology Skilled workforce Access to data
35% 32% 31%
25%
14%
22%
Auto All other
69%
72%
75%
70%
61%
72%
65%
58%
52%
51%
Automating processes
Tracking corporate data (e.g., financials, human capital management)
Connecting people, systems, machines, and supply chains
Leveraging analytics for insights into the business
Tracking plant floor production data
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ADDRESSING CHALLENGES HEAD-ON
Though they ranked Industrial IoT and manufacturing analytics slightly lower in importance than the rest of the industry, auto manufacturers have a very real desire to capture and use data more effectively. To accomplish this, auto manufacturers have the opportunity to expand their use of connected devices, which harness valuable production data close to the source.
38% of auto manufacturers are using sensors in their operations compared to 48% of other manufacturers.
42% of auto manufacturers are using consumer devices like mobile phones compared to 52% of other manufacturers.
PROOF POINT: COASTAL AUTOMOTIVE
“We had no trouble getting people excited about Plex because it means they’re not tethered to individual work carts anymore. When you put a wireless smart scanner in their hands, they can be much more mobile and get jobs done more quickly as inventory moves through our facilities.”
Jeff Bender
Materials Manager at Coastal Automotive
Using smart technology to capture and analyze valuable production data—especially on the plant floor—will increase manufacturers’ visibility into their operations and support data-driven decision making to improve their organization.
Nearly half of auto manufacturers currently collect data to monitor specific operational areas such as sales performance and supply chain risk, but there is huge opportunity to adopt smart technologies that can connect and analyze enterprise-wide data to achieve greater visibility, efficiency, and agility.
ADDRESSING CHALLENGES HEAD-ON
How does your organization use data collected from the technology, processes, connected devices, etc. you currently have in place?
BETTER SERVE CUSTOMERS
INCREASE OPERATIONAL EXCELLENCE
IMPROVE HEALTH OF SUPPLY CHAIN
MITIGATE RISK
AUTO OTHERS
AUTO OTHERS
AUTO OTHERS
AUTO OTHERS
Sales analytics 48% 41%
Sales and operations planning 41% 45%
Improve/monitor product quality 29% 42%
Inventory forecasting 20% 42%
Process optimization 42% 46%
Management dashboards 42% 33%
Artificial Intelligence/ Machine learning 34% 41%
Production planning/ scheduling 33% 48%
Predictive maintenance 28% 35%
Monitoring or managing supply chain risk 46% 40%
Supplier performance 29% 38%
Supply and/or demand planning 25% 41%
Evaluating critical suppliers 51% 45%
Backing up data 44% 46%
Ensuring data accuracy for reporting and informed decision making 37% 42%
Isolating supply chain problems 30% 41%
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LOOKING AHEAD TO FUTURE OPPORTUNITIES
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LOOKING AHEAD TO FUTURE OPPORTUNITIES
Given the level of disruption caused by the pandemic, it’s no surprise that COVID-19 has shed light on the need for smart manufacturing processes and technologies across industries.
Although 2020 posed several challenges for the automotive industry, it also accelerated digitization across several operational areas.
87% of auto manufacturers agree that the COVID-19 pandemic has increased the need for smart manufacturing processes and technologies.
71% of auto manufacturers say the COVID-19 pandemic has made investing in smart manufacturing technology
a higher priority
70% of auto manufacturers with plans to adopt smart manufacturing will do so within the next 12 months, outpacing the industry overall.
When does your organization plan to adopt smart manufacturing?
Within 12 months
1 to 2 years
More than 2 years
Auto
70%
22%
2%
57%
30%
6%
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Auto manufacturers are especially ready to invest in cloud technology and automation, which help make for better, higher-quality products while supporting productivity improvements.
Where do you plan to increase tech spend in the future?
LOOKING AHEAD TO FUTURE OPPORTUNITIES
Cloud technology
Automation
Quality management
Supply chain planning (SCP)
Industrial Internet
of Things (IIoT)
Smart/connected
tools & equipment
43%
43%
37%
30%
30%
30%
41%
36%
36%
37%
36%
27%
Auto
All other
22
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LOOKING AHEAD TO FUTURE OPPORTUNITIES
Auto manufacturers have perhaps the greatest opportunity of any sector to capitalize on Industrial IoT in the coming year as a pragmatic solution to business challenges. The impact of these initiatives can extend beyond the plant floor to include both cultural and strategic business transformation. Companies that reimagine their operations and build a culture of continuous improvement stand to gain a significant competitive edge.
There’s reason for auto manufacturers to be optimistic. Adopting smart manufacturing technology can address business challenges by connecting systems, tracking data, enabling remote access, and creating process efficiencies.
Systems
Networks
Devices
Analyze data
Identify gaps
Improve business
processes
Create value
efficiently
CONNECTING
IN ORDER TO
“Industrial IoT presents an opportunity to look at the business and say, ‘How can we change? What can we do better? What can we impact in a positive way?’ At MPI, we targeted reducing gap time on heat treat furnaces. We’ve seen up to a 10% increase in revenue during our busiest times simply by increased productivity of our assets.”
Robert Bierwagen
VP of Digital Strategy at MPI Corporation
The Value of Industrial IoT
PROOF POINT: MPI CORPORATION
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TAKING ACTION
TAKING
ACTION
Smart manufacturing adoption is driven by business challenges, including competitive threats, fluctuating demand, and workforce availability. Manufacturers need to pragmatically invest in technology and build towards a culture of data-driven operations in order to boost ROI and adapt to ever-changing conditions.
“The digital world has enabled a new reality. It will be the companies with the right mix of talent and software tools that will be best able to recover and thrive in these changing conditions.”
IDC MarketScape: Worldwide SaaS and Cloud-Enabled Medium-Sized/Midmarket Business ERP Applications 2020 Vendor Assessment (doc #45972120, July 2020)
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THE WAY TO
MANUFACTURING SUCCESS
Smart manufacturing is essential for future success. Manufacturers will be able to adapt in a changing market and unlock long-term opportunities by connecting and automating their business.
• Incremental adoption of smart technologies can help manufacturers gain value over time.
• Many possible entry points to smart manufacturing exist, and manufacturers should weigh their options and prioritize improvements that will yield the greatest value.
STARTING YOUR SMART
MANUFACTURING JOURNEY
What are the operational challenges you’re trying to solve?
Identify challenges with the greatest financial and productivity impacts, then prioritize those that are highest in value and attainable through technology.
Where are your information gaps?
Identify the essential information you need to solve your operational challenges and develop key use cases to collect and analyze that information.
Which use cases offer the right balance of value creation and time-to-value?
Invest in the smart manufacturing solutions that deliver results for your highest-priority use case.
TAKING ACTION
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MAKING THE BUSINESS CASE FOR SMART MANUFACTURING
TAKING ACTION
Efficiency
• Production efficiencies through process automation
• Human resource efficiencies from a single source of accurate, trustworthy data
• Continuous operational improvements driven by real-time, data-backed insights
Achievable ROI
• A pragmatic, stepwise approach lowers adoption risk while providing returns to fund future smart manufacturing initiatives
Risk Mitigation
• Reduced exposure to IT vulnerabilities including system downtime, security breaches (cyber attacks), and application currency
Smart manufacturing provides the following key benefits:
Making a business case for smart manufacturing can help communicate the benefits, gain approval, and accelerate adoption and time-to-value. Plex can help.
ABOUT PLEX
Plex Systems, a Rockwell Automation Company, is the leader in cloud-delivered smart manufacturing solutions and has been helping manufacturers improve their businesses for decades. Plex has resources and deep industry expertise in defining business value from technology, and we’re ready to assist manufacturers in adopting smart manufacturing technology and processes to achieve their business goals.
Learn how to achieve your business goals using smart manufacturing at Plex.com
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