WINNING NEW OEM BUSINESS IN A COMPETITIVE, DISRUPTIVE WORLD

TERRY ONICA, DIRECTOR, AUTOMOTIVE

As relationships change between Japanese automotive OEMs and their suppliers, you face new challenges and increased competition. In this new world, those who don’t see this change as a beginning might soon reach an end.

Clearly, long-standing automotive suppliers achieved success through well-managed supply chains, efficient production and world-class product quality. In the long term, those achievements should serve as a baseline for future success as you pursue new business around the world.

But as you look to grow beyond your traditional customer base, outside the keiretsu, the game changes. You’ll need to forge relationships with new OEMs and you’ll face immediate barriers to entry if you’re not prepared. You may already be behind because your competitors have earned preferred supplier status. And as the automotive industry moves from the internal combustion engine to electric and autonomous vehicles, the competition will be fierce because everyone is trying to diversify their portfolio.

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Can you imagine ...• < 50% of your business comes from

manufacturers from your own keiretsu

• Your EBIT is >10%

• Your profitability has doubled

Many Japanese Tier 1 automotive suppliers are very close to achieving those goals. Do you want to know how?

To compete and earn new business you must rapidly transform your existing approach to operations -- supported by modern, integrated enterprise business systems -- to meet stricter OEM compliance requirements.

Businesses must understand this and act quickly to become viable competitors. Otherwise, they will fail in their bid to attract new customers and lose the opportunity to replace revenue lost from Japanese OEM customers. You’ll need technology that not only allows you to position your organization for growth, but more importantly, helps you to quickly adapt to and remain profitable in the face of constant change and disruption.

Often automotive suppliers that are trying to grow revenue streams run traditional environments with multiple, disjointed enterprise business and technology systems. Typically, these ancillary systems were never effectively integrated, causing users to rely on “work-arounds” and manual processes outside of the enterprise systems to complete day-to-day operational tasks. Manual collection and correlation of critical data -- using spreadsheets, whiteboards, customizations of IT software, etc. -- causes errors and delays.

Those in turn often result in revenue and margin erosion through inventory imbalances and increased administration costs … but more importantly, many global automotive OEMs will not accept you as a preferred supplier if your organization operates in this manner.

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Typical Disjointed Tier 1 Automotive IT and Business System Footprint

Inventory Management

Error - proofed barcode printing

Pass Through

Parts

Planning

FG Inventory

Manufacturing Execution System

Quality Management

Tracking

EDI & Barcodes

Email Releases No ASNs

Email

SUPPLIERS

CUSTOMERS

INTERFAC

ED INTERFAC

ED

SPREADSH

EET INTERFAC

E

CORPORATE SYSTEM

Plant Maintenance

Product data management, parts, routings, BOM, costing

Inventory control, MRP

Accounting and Finance

Pricing

Fixed Assets

Supplier RFQ

Supplier Communications

Production Scheduling

Receiving Stocking

Kitting

Shipping

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In addition, these detrimental manual “workarounds” are driven by outmoded business systems that weren’t designed to adapt to new strategies and changing needs. Manufacturers running aging systems without maintenance, locked up in customizations, or with hardware, operating systems or databases nearing their end of life are at a serious disadvantage. Some are making do, trying their best to run their systems as well as possible despite personnel and budgetary restrictions. But this approach will cause your business to lose ground against competitors.

Suppliers relying on spreadsheets for planning and scheduling, emails with spreadsheets or PDFs for communicating supplier requirements, or manual entry of supplier shipments will not be compliant with requirements from organizations such as IATF 16949 and the Materials Management Operations Logistics Evaluation (MMOG/LE). Meeting these requirements is often key to earning new OEM business. (see Ford, FCA and PSA supplier requirements)

Many OEMs depend on a standard level of performance for material flow and quality throughout the supply chain. MMOG/LE is the standard they rely on for evaluating their global supply chain management processes against industry best practices. Likewise, IATF 16949 is the standard they require globally for quality. In fact, you will not be able to earn new OEM business without the ability to meet these two standards. Many suppliers who make the necessary systems investments in order to meet these standards earn preferred supplier status and therefore have reported doubling their sales with the OEM within a few years after.

How can automotive suppliers adjust to unfamiliar OEM requirements? Advanced Enterprise Resource Planning (ERP) platforms, or “postmodern ERP” as Gartner calls it, can offer a fast path to compliance.

QUOTE TO CASH

• Long-term Forecasting

• Scenario Planning

• Pricing

• RFQ

• Contract/Order Management

• Invoicing

• Payment Receipt

PROCURE TO PAY

• Supplier Add/Change

• Purchase Request/ Approval

• Procurement

• Supplier Experience (Portal)

• Quotations

• Vendor Selection

• Goods Receipt

• Invoice/3 Way Match

• Payment

MANUFACTURING

• Customer & Supplier EDI/ASN’s

• Planning

• Production Scheduling

• Receiving/Stocking/Kitting

• Bar Coding/Scanning

• Inventory Management

• Quality Management

• Kanban

• MES

• FG Inventory/Shipping

• Packaging

• Plant Maintenance/MRO

• Sequencing

RECORD TO REPORT

• MMOG/LE Compliance

• IATF 16949 Compliance

• Risk Management

• Global Trade/ Tariff Management

• Reporting

• Visibility

• Analytics

• Enterprise Financials

• Training

• Work Instructions

• Mapped Processes

PLATFORM | INDUSTRY 4.0 | APIs | LOW CODE/NO CODE

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CORPORATE JAPAN SYSTEMS

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HOW TO BE COMPLIANT AND GROW YOUR BUSINESS

Here’s a plan to help you update your system and put you on a path to fast compliance.

1. Ensure your ERP provider actively participates in global industry associations. You should be partnered with an ERP provider that participates in industry organizations, like AIAG, Odette, JAPIA and others, in developing standards for quality, supply chain and

electronic commerce,and then incorporates the resulting practices in its solutions.

2. Map best practices into your ERP solution. To comply with OEM requirements, it’s best to embed all the business process maps, work instructions and compliance points associated with MMOG/LE and IATF 16949 into your best practice flows.

Best Practice Fully Integrated Tier 1 Automotive IT Business ERP SystemBest Practice Fully Integrated Tier 1 Automotive IT Business ERP System

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Your automotive process maps and work instructions should offer direct insight into your organization’s business processes including: hundreds of predetermined best practices–based processes, work instructions,

compliance points and training courses. These maps then enable employee training for new hires and back-up personnel while ensuring current knowledge is not eroded. (see figure below)

Best Practice Automotive Process Map

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3. Take the Automotive Process Maps and use them as a basis for your global implementation methodology. Some ERP providers offer help to reduce your implementation time and total cost of ownership and increase your return on ERP investment. This can be a scalable solution consisting of predefined processes, predictable costs and industry-specific best practices for every company size and industry.

4. Even better, your ERP comes with a platform. You need the ability to upgrade in a rapidly changing environment in a modern user interface (UX). The user experience should also be intuitive, visual and foster collaboration in support of complex business processes, especially to accommodate the changing workforce -- a role-based and modern UX with personalization and embedded analytics. When users have an enhanced experience, it results in improved productivity, decision making and success. Insights gained through embedded analytics reduce uncertainty and provide a competitive dashboard for identifying and addressing disruption.

With the right platform, you can achieve greater levels of fit today while supporting the changes of tomorrow. You can extend and create new applications that are dependable and scalable without creating version lock-in. When upgrading is fast and easy, you can stay current and reduce the gap between your ERP and changing business requirements. You can also simplify the adoption of new capabilities and advanced technologies, pursue continuous improvement and adapt to future disruptions and changes as they occur in your business.

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5. Ensure your best practice solution is in a single-tenant cloud operating environment. Cloud ERP ensures rapid deployment, scalability, availability, disaster recovery and security, especially in a single-tenant environment. With the right provider, cloud ERP is simple to implement, manage and upgrade, allowing you to focus on strategic initiatives. There should be 24x7 support in multiple languages and related third-party solutions.

REDUCE THE TIME TO PROFITABLE GROWTH

Compliance with strict OEM supplier requirements is imperative to winning and maintaining contracts. Upgrading your business

systems not only offers a rapid path to compliance and speed to value, but that ensures adaptability for future strategy shifts and industry disruption.

Further, consolidated and standardized systems lead to greater efficiency and higher EBIT by enabling shared services across the enterprise. Centralized functions for finance, procurement and administration, for example, not only significantly reduce costs and increase productivity but also minimize risks. In this way, automotive suppliers save cash in order to invest more in R&D to transform themselves to be key suppliers as the global automotive industry continues to evolve.

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In today’s environment, managing your business as usual is no longer good enough. If your business is not undergoing transformation, you are going backward and may face extinction if you are unable to gain new business. Therefore, your organization needs to embrace and exploit change in order to take advantage of the market opportunity now and in the future.

But it’s a different world outside your existing business. Most OEMs have established strict requirements for suppliers, like MMOG/LE, IATF 16949, customer and supplier EDI and bar coding that now are table stakes for doing business with them. Suppliers that meet those standards will be best positioned to win contracts. Without the right systems, you are not even at par with your competition .

You need flexible enterprise business systems to provide the ability to earn new OEM business, to analyze data in order to predict the future, expand and contract your operations when necessary, manage supply chain risk and upgrade/extend business applications without waiting. Delayed action, or no action at all, will put Japanese suppliers even further behind the fierce global competition in a rapidly changing market.

1. Adopt new standards from industry organizations (e.g., MMOG/LE, IATF 16949)

2. Map best practices into your ERP system

3. Sync up process maps with your global implementation methodology

4. Invest in a business platform and OT/IT systems with modern analytics and UX

5. Ensure your ERP is operating in the cloud

Stay flexible and compliant with automotive industry requirements

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