Information Technology on the Automotive Sector


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UltraViolet Unlimited, the second coming of the original UV2 group presented this in the Introduction to Information Systems


Alvin Chan
Miroslav Jeliazkov
Natalie Kotikova
Keith Loo
Rafael Rosenzuaig
Manpreet Virdi
Leila Tabrizi

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  • Good evening everyone!
    Our group would like to present to you a view on how the Information Technology changed the Automotive sector.
    Every one remembers old movies about the manual labour in production plants. You probably know how Ford created a new production method of many people working on the same vehicle while it was lined up on a production line. You could order any color as long as it was black.
    Times have changed!
    Cars are designed and manufactured quicker, we have more than one choice of color. The quality improved drastically. People are more aware of the product and their demands increased.
  • The Information Technology has huge contribution as it changed the way vehicles are designed, build, sold, and enjoyed.
    Managers from each part of the process are concerned with internal and external factors to decrease cost and increase efficiency, flexibility and quality.
    The environmental impact is a government controlled issue as well as an ethical issue.
    Driver and passenger safety is controlled by laws. But at the same time people demand more then it is stated in the law
    The price of Lexus model RX originally was higher but it was driven down by customer demand, even if the car is one of the best selling in the segment
    Competition + customer expectations mandates good quality at lower price, which several years ago was assumed to be a controversy.
    Example: As you may know in 2005 the Toyota Corolla was the world’s best selling car and for the last 40 years in Japan it was most popular vehicle in 36 of them.
    On the other hand, technology is limiting the design as people want a Mustang that runs on batteries and has the same power as a regular one. Your batteries can not last to drive from here to Montreal. You still do not have infrastructure to support it.
  • Every manager in the automotive industry, no matter what part of the design or production process he is involved has to work with many internal constraints:
    Some of them for example are T-t-M = the vehicle design is a substantial investment and typically the design cycle takes 4 years. After that every design is actually used for 4-5 year before it has to be replaced with a substantially new vehicle.
    Scope of such project constantly expands. Customer’s demands are changing as the competition is enormous.
    On the other hand if the scope changes it reflects on the budget and schedule, cost and time. A design may be late even before you start it.
  • Alvin: - Automaker like GM use the teamcenter software to collaborate the design file around the world. It helps them to reduce the design cycles from 48 months to 18 months.
    Using the example of the Mecedes Benz Bionic concept car. In the past, automaker has to create the mock up vehicle and go through an extensive wind tunnel testing to improve aerodynamic. Today, with the information technology, automaker can use CAE technology to find the ultimum solution in the design phase. They can also share the information with other engineering center located in different region in order to leverage the strength of each engineering center and meet the customer’s need.
    (Need boxfish vehicle picture, mockup vehicle, aerodynamic testing and final vehicle).
    General Motors has slashed the time it takes to design new cars from 48 months to just 18 months
    Boxfish example – without virtual systems to test the car, testing the car would require an actual prototype (alvin)
  • Another key issue is receiving the design data on time for the production to start. Its updates and improvements usually take long time for approval.
    “How many of you work on projects?” – then you probably know how painful is the process of approval is and how many signatures need to be gathered before a document is released. Imagine now if you have to do it on paper.
    Another issue that the IS can help with is keeping track and synchronizing production plans (time and volume). It improves the processes in two ways:
    Decrease inventory by producing the necessary parts or products only
    Create company-wide performance measurement criteria
    If training is not centralized it is an issue – different trainers may use different ways of training the staff but a global online system will teach always the same way.
  • Alvin: Automaker now use virtual manufacturing technology to resolve the manufacturing issues (e.g. use virtual manufacturing to identify the ergonomic issues and identify the time cycle for each operation. It reduce the injury of the workers and utlimum health care premium that automakers that has to pay.
    Secondly, Automaker use JIT process to reduce the inventory level on both components and final vehicle. And automaker need a strong information system to collaborate between plants and suppliers in order to prevent any idle times due to components shortage.
    - Toyota use their information system to send the request to get the seat from the suppliers that is in the same area in U.S.. So the supplier deliver the parts in proper order in 2 hours to the assembly plant.
    (Post virtual manufacturing technology pics from Ford).
    Toyota vs. GM
    General Economy – nowadays, the recession demands that automakers cut costs at every step of their manufacturing process which leads to more robots and reprogramming tools (In 2004, Ford invested $1 billion CDN in its operations in Oakville, including 580 (up from 400) new robots that led to cutting of its changeover times from 26 weeks to 1 week and cutting production cost by $2 billion in the following decade2) of manufacturing processes and outsourcing of most of the IT function to lower wages regions of the world.
    PROJECT DESCRIPTION: Facing aggressive cost competition, Delphi's IT department spearheaded a plan to move to a managed service environment, cut global outsourcing contracts and reduce IT operating costs to industry benchmark levels. While IT was engaged in this transformation, the company filed for bankruptcy protection and the IT initiative became a key part of the corporate restructuring plan. In 2006, Delphi has saved $46 million in IT costs and expects $108 million in savings by the end of 2007.
  • “Guess what is the annual volume Toyota Camry sold worldwide” = 350 000 units
    – if you don’t have a system to deliver them to the proper dealerships it may be costly, frustrating for the customers and even impossible to handle.
    Information is now available online so buyers are more educated before they make a choice. It is not a matter of what information the dealer shares with the client, but what the customer knows and wants. This became a business for 3rd party information providers like Consumer report, Car facts, black book, etc.
    So customers demand more choice and often do not want to settle with a standard vehicle. They want to have more options, which on the other hand forces the dealers to order unique vehicles to be manufactured. They can not have a stock of cars and offer the ones they have on their parking lot.
    The sale now is more open process.
  • Alvin:
    Now these days, customer go to the automaker website to choose the vehicle that they want, and then go to the dealer for a test drive. They can get the quote of the vehicle or even have their financial approve in a minute when they want to lease or finance the vehicle. So automakers have put all the specification, all the details about their vehicle on the web.
    Toyota – use dealer daily. – when customer want to purchase a vehicle, even though the particularly dealer shop may not have the vehicle. They can locate the vehicle right away or identify how long it takes to order the vehicle for the customers. E.g. Toyota use the toyota dealer daily system to locate the car. This system actually increase the customer satisfaction level because they can pretty much buy the vehicle like grocery shopping.
    Use CRM to identify what customer wants – use important .
    Toyota – The “Dealer Daily”, TPS
    GM – SAP (Ask Alvin and Manpreet)
    CRMs and other IT systems such as telematics, give the consumer the impression that they are providing a service, such as Onstar, or real-time, or preventive reporting. Meanwhile the Auto-maker is actually collecting data and saving millions of dollars on warranty service
    Concerns: Requires investment and constant support and governance
    Toyota Dealer Daily – TPS
    Over the years, the consumer views of cars have changed dramatically. It is no longer a means of transportation but rather ‘a platform of entertainment while underway’. The development of this perception led to manufacturers including more and more ‘gadgets’ in their cars. From the first Motorola radio installed in mass production in 1930 to digital sound systems, GPS, flat-screen LCD displays and DVD players of today, this trend of car becoming an extension of the home-based entertainment zone continues and the information technology is at the heart of these transformations.5
    The automakers that can take advantage of this trend can gain an important competitive advantage. A good example is the OnStar service offered with all GM vehicles. This service provides for roadside assistance and other needs. In 2007, GM announced plans to expand its OnStar service into the Chinese market, with the result (given the size and growth of the Chinese market)that OnStar has the highest penetration of any TSP (telematics Service Provider) in the world.7
    Taking further advantage from this technological advancement, GMAC Insurance introduced discounts (up to 54%) to their customers who would use OnStar system to provide mileage information on their cars. Seeing insurance revenues as an additional stream of income for the automotive industry, it is clear that GM is ripping the benefits of its clever use of information technology.8
    ** internet
  • The relation between the customer and the manufacturer does not end with the delivery of the vehicle. During the warranty period the frustration from the problem has to be compensated. Now manufacturers understand that the brand loyalty is key for the customer retention.
    They realize it is important as the rate between new and old cars sold is 1 to 14.
    Example – you and I are poor now so we can afford only Corolla. 20 years from now Toyota wants us still to buy from them. They want us to buy Lexus.
    Every manufacturer must fight for the sale of each new vehicle. Especially in a time of crisis like now the source of income is mainly focused on post-sales support, additional services and after-warranty sales.
    Any information the company can gather about the customers and their way he make the decision to buy certain model is key. This has to be done without breaching his privacy.
  • Alvin:
    Automaker has to identify what the customer want before they design the next generation of the vehicle. So they use the CRM – customer relationship management system to find out what the customer’s requirements, what’s the customer concerns. E.g., say you buy a GM car, you will receive the customer survey after 90 days which you do it online. And you can comment on features or issues so GM can further improve on their vehicle and customer services in their dealer.
    Automakers also will do a competitive benchmarking to identify the improvement that the other automakers have made. Information like that will be shared globally so that the automaker can perform their continuous improvement on their product. E.g. automaker will tier out the engine and perform all kind of engine tests to see how good is it and have the technical expertise to see how they can improve their engine.
    CRM – customer relationship management.
    User Experience
    post sales to do benchmarking
    1 to 14 relationship (new to old)
    On star (insurance)
  • Information Technology on the Automotive Sector

    1. 1. Product Lifecycle Management Management Legislation Ethics Competition Customers Financing Technology
    2. 2. Research and Development Issues • Time to Market • Budget, scope, and schedule • Risk planning and Risk management
    3. 3. Research and Development Solutions • Team collaboration (GM - Teamcenter) • Design and 3D modeling (AutoCAD, Catia) • Virtual assembly and testing • Shared Information • Virtual Teams and Outsourcing (Globalization)
    4. 4. Mercedes-Benz Bionic Concept “Boxfish”
    5. 5. Manufacturing Issues • Reduce operations costs • Establish standardized global operational processes, practises, communication, and performance management • Improve personnel leverage and training • Reduce operational incidents and increase personnel safety • Establish consistent capacity management plan and
    6. 6. Manufacturing Solutions • Inventory handling – Just-in-Time Process • Virtual Manufacturing • Production process, QC & QA • Outsourcing (1st , 2nd , 3rd tier suppliers)
    7. 7. Sales Issues • Globally distributed dealership network • Online offering of goods, services, and information • Manufacturing and delivery based on orders • Financing of the sales/purchasing and insurance • Adding extra value
    8. 8. Sales Solutions • On-line information systems – New cars purchases (eBusiness) – Warranty and parts ordering – Knowledge base and information exchange (Q&A) • Dealer Communication System – Toyota Dealer Daily
    9. 9. Post-Sales Issues • Customer retention • Warranty handling • Information gathering, data warehousing, privacy and security
    10. 10. Post-Sales Solutions • CRM – Identify what customer wants! • Competitive Benchmarking
    11. 11. “As soon as the automotive industry coughs, a lot of other companies get a cold” ... the information technology and automotive industries have a symbiotic relationship. Alvin Chan Miroslav Jeliazkov Natalie Kotikova Keith Loo Rafael Rosenzuaig Manpreet Singh Virdi Leila Tabrizi Questions?