Automotive Industry Analysis of the Big 3

8,191 views

Published on

During a course at the Kelley School of Business at Indiana University, we were tasked with forming a descriptive analysis of the automotive industry and identifying opportunities for improvement.

0 Comments
8 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
8,191
On SlideShare
0
From Embeds
0
Number of Embeds
35
Actions
Shares
0
Downloads
335
Comments
0
Likes
8
Embeds 0
No embeds

No notes for slide
  • -Note the use of platforms
  • Ensure facilities are fully utilized and/or flexible.Optimize the mix of labor and automation to eliminate wasteUnion-based facilities must give up legacy costs and out-dated rules.Optimize sourcing to find operational gains.
  • Problems -- Inventory carrying costs are substantial.B. Dealer must sell off previous model years inventory to make room for the next years modelsC. The land itself is expensiveIt’s a problem not only in emerged markets but also in emerging markets!Exporting to other markets is seen as an effective strategy for reducing overcapacity – but for how long?While acknowledging the challenge of overcapacity, many OEMs are still investing in manufacturing plants for cars and trucks in China and India, as they are concerned about losing out to competitors. Nevertheless, it does seem likely that China and India will see some overcapacity within the next few years, so the industry may have to brace itself for some casualties, as it cannot simply expect to continually find new export market.
  • Other supply chain issues that the automotive industry is working to address include a lack of collaboration in product development, which can lead to product development cycle times of more than 48 months.
  • On the supply chain side, what this means is flawless execution for a company’s most valuable customers, the ability to manage inventory across all types of customers, and short- and long-term capacity planning that is responsive to customer priorities.For automakers, the network effect delivers higher profitability through quicker time-to-market, more appropriate vehicle content, and better-targeted inventories. At the same time, there is less need for open price competition, and automakers are able to upsell more profitable options and cut back on unwanted and unprofitable ones. Automakers also work jointly with dealers to establish long-term customer relationships, which results in a more loyal and profitable customer base.Integration benefit cycleIntegrationEnhances visibilityIncreased visibility brings out inefficienciesEnables action – collaboration / innovationIncreased customer satisfactionIncreased revenue / profits
  • Bridging gaps between customer service, quality and engineering departmentsEnsuring OEM collaboration between upstream and downstream partnersLeveraging technology to gain insights into quality, engineering and manufacturing processesComprehensiveAddresses claims processing and analyticsStructured and unstructured data captureTailored reports with drill down capabilitiesTechnology DrivenPlatform basedIncorporate Rules engine, data mining, text analytics and collaboration toolsConnectedConnected across extended enterpriseEasy access and interfaceReal time / near real time information
  • Automotive Industry Analysis of the Big 3

    1. 1. GLOBAL AUTOMOTIVE INDUSTRY ANALYSIS<br />Abhishek Purohit | Janelle Dangerfield | Matt Blair | Taj Peeran<br />Adjusting Organizational Strategy<br />to Meet Changing Consumer Needs<br />in Uncertain Economic Climates<br />TEAM<br />3<br />
    2. 2. Agenda<br />
    3. 3. Toyota is the market leader with GM close behind. Despite all its economic turmoil, Ford is #4 in the global market<br />The automotive industry is the world’s largest industry valued at $67 billion with over 60 million cars produced <br />
    4. 4. Asia produces and consumes more cars than other global regions<br />China is the new market leader while Germany, South Korea, and Brazil have increased growth<br />Factors Driving Growth:<br />
    5. 5. Ford Company Profile<br />Ford has been able to gain back its reputation and has regained its no. 2 position in US in 2010.<br />http://topics.nytimes.com/top/news/business/companies/ford_motor_company/index.html<br />http://online.wsj.com/mdc/public/page/2_3022-autosales.html<br />
    6. 6. General Motors Company Profile<br />If GM can reign in escalating costs and offer cost-competitive products, it can once again assert its dominance of the market.<br />http://www.srl.gatech.edu/Members/bbradley/me6753.industryanalysis.teamA.pdf<br />http://online.wsj.com/mdc/public/page/2_3022-autosales.html<br />
    7. 7. Toyota Company Profile<br />Toyota is well position for future success with well targeted high-quality products<br />http://www.reuters.com/article/idUST13898620080210<br />http://online.wsj.com/mdc/public/page/2_3022-autosales.html<br />
    8. 8. The gap between automotive competition has narrowed in recent decades<br />US automotive players have faced cost disadvantage: Other players have been able to leverage low labor costs outside US<br />GM and Ford operated in excess production capacity and took too long to produce products at high costs<br />Failure to innovate core product: GM was more focused on profiting from finance while Toyota continued to innovate<br />U.S. Total Vehicle Sales Market Share between Big 3, 1961-2009<br />Source: http://wardsauto.com/keydata/historical/UsaSa28summary/<br />http://www.dailyfinance.com/story/company-news/after-101-years-why-gm-failed/19052641/<br />
    9. 9. Consumers view safety and fuel-efficiency as prime factors in car purchases<br />Total Cost of Ownership<br />Fuel efficiency is the most prominent decision factor of consumers this year.<br />N/A%<br />+14%<br />-7%<br />+15%<br />+11%<br />-3%<br />http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Global-Auto-Executive-Survey-2011.pdf<br />http://issuu.com/jandaroscher/docs/automotivemanager_i_2010_en?mode=embed&layout=http://skin.issuu.com/v/softlight/layout.xml&showFlipBtn=true<br />
    10. 10. Standard Car Platforms<br />Technology partnerships enhance the customer experience while standard car platforms reduce manufacturing cost.<br />New approaches to production have modulated cost and risk for manufacturers<br />Chassis<br />Engine Type<br />Steering<br />Wheelbase<br />Powertrain<br />Suspension<br />Technology Partnerships<br />Electronics<br />Engine Size<br />Interior<br />Exterior<br />Ergonomics<br />Interfaces<br />2007<br />Fiat Croma Cadillac BLS Opel Vectra<br />2011<br />Flexibility is a Necessity – Mazda GG Chassis<br /> Ford Fusion Fusion Hybrid Mercury Milan Lincoln Zephyr<br />2011<br /> Mazda 6 Mazda CX-7 Ford Edge Ford Flex<br />http://www.thecarconnection.com/tips-article/1012020_sync-no-turning-back-from-tech<br />http://en.wikipedia.org/wiki/Ford_Fusion_(Americas)<br />
    11. 11. Economic conditions have led manufacturers to relocate production facilities to low-cost regions<br />Challenges of Moving Production to Low-Cost Regions<br />To reduce unnecessary expenses, manufacturers must move production to regions that maintain lower costs of labor.<br />Extra shipping costs may reduce marginal gains.<br />Facility distance from demand may increase supply lag times.<br />Varying political requirements require close legal attention.<br />Differences in quality of living require addit’l continuity plans.<br />Poll: Investments in Emerging Markets<br />http://issuu.com/jandaroscher/docs/automotivemanager_i_2010_en?mode=embed&layout=http://skin.issuu.com/v/softlight/layout.xml&showFlipBtn=true<br />http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/Global-Auto-Executive-Survey-2011.pdf<br />
    12. 12. Demand and Supply Chain Challenges in the Global Automotive Industry<br />Vicious Cycle of the Automotive Industry<br />Challenges of the current model<br />Excessive structural cost<br />Dissatisfied customers<br />Slow to respond<br />Lost revenue opportunities<br />Constrained, inflexible production and assembly capacities and long delivery lead times contribute to high dealer inventory levels in the form of safety stock.<br />
    13. 13. Overcapacity is one of the biggest problems grappling the global automobile industry<br />The car industry can produce 94 million cars a year, against global demand of 64 million<br />Overcapacity in TRIAD significantly high<br />Make Cars-to-Order to Improve Auto Industry Performance<br />Remove Inventory Carrying Costs to Reduce Prices and Increase Profits<br />Overcapacity major problem even in BRIC<br />Source: KPMG’s 2011 Global Auto Executive Survey<br />
    14. 14. Automotive companies can leverage more external partnerships to collaborate and drive innovation<br />The drive to innovate spurs process and market alliances<br />Alliances can be a good way to access specialized technologicalknow-how <br />Will help share and reduce cost in areas such as R&D<br />Estimate of loss due to lack of supply chain visibility ~ $16 million / country*<br />*see appendix<br />*see appendix for benefits<br />Challenges present opportunities<br />Automotive<br />Collaboration<br />gap<br />
    15. 15. Digital Loyalty Network model is to integrate the supply chain and align priorities with the needs of the customer<br />Digital technologies to optimize an automaker’s supply network based on customer value and loyalty<br />13% of manufacturing companies following DLN strategy are 70% more profitable <br />Percentage of Companies with Exceptional Performance on Goals<br />Source: Deloitte research<br />
    16. 16. Enhanced warranty systems can reduce liability and increase profitability<br />Business Impact<br />Compartmentalized Approach<br /><ul><li>Disjoint information flow across the enterprise
    17. 17. Lack of partner collaboration</li></ul>Ineffective claims processing<br />41% of the companies recovering warranty costs from liable suppliers was a significant challenge<br />Present Scenario<br />Decreased Effectiveness of Design, Engineering<br />15% of total number of claims being accepted are sub-standard [fraudulent or inaccurate]<br />Technology limitations<br /><ul><li>Old legacy systems
    18. 18. Bolt-on systems – limited span
    19. 19. Generic ERP modules
    20. 20. Reporting systems with minimal analytics</li></ul>Process inefficiencies<br /><ul><li>Delayed claims processing
    21. 21. Inefficient detection of incorrect claims
    22. 22. Manual coding of claim data</li></ul>Lack of Partner Collaboration<br />75% of the annual warranty expenses are consumed by repetitive and chronic problems<br />Compliance Issues<br />A holistic approach<br />Possible Solution<br />Comprehensive<br />Technology Driven<br />Connected<br />Source: Infosys paper<br />
    23. 23. The Automobile industry is adapting to a changing economic environment<br />Credit Meltdown<br /><ul><li>Credit market disappearance
    24. 24. Dependency of car sales on credit
    25. 25. OEM & supplier refinancing</li></ul>Innovation and Collaboration<br />Change the business model<br />Globalization<br /><ul><li>OEM global presence
    26. 26. Global sourcing
    27. 27. OEM interdependencies
    28. 28. Foreign investments</li></ul>Global Recession<br /><ul><li>Wealth destruction
    29. 29. Confidence hit
    30. 30. Unemployment rates
    31. 31. Household financials
    32. 32. Slowing growth in emerging markets</li></ul>Long live the brand<br />Reduce inventory levels – OTD / JIT<br />Green<br /><ul><li>Oil price fluctuations
    33. 33. CO2 targets
    34. 34. Customer beliefs
    35. 35. Need for innovation
    36. 36. Budget pressure</li></ul>Profit potential in spare parts<br />Better integration tech & business<br />After the crisis, companies can achieve only 10% profit margin and 25% return on capital if they stick to the right business design. Those who stick to the old paradigms will not be profitable!!!<br />
    37. 37. Questions & Discussion<br />Appendix<br />Benefits of Collaboration / Alliances<br />Examples of Collaboration & How it can Help<br />Dealers are Focused on Sales, Services and IT<br />Benefits of Customer Integration<br />Aggregating Customer Touchpoints<br />Example Solution for a Warranty Management System<br />Profitability of Manufacturing Companies following DLN Strategy<br />Automotive Industry Competitor Analysis<br />
    38. 38. Appendix 1: Benefits of collaboration / alliances<br />Estimate of loss due to lack of supply chain visibility<br />Best way to access new alternative fuel/hybrid technologies<br />
    39. 39. Appendix 2: Examples of collaboration and how it can help<br />
    40. 40. Appendix 3: Dealers are focused on sales, services and IT – which is the right direction, but still plenty needs to be done<br />Dealers should invest in managing customer relations in order to keep ownership of the direct interface with the customer<br />Level of business and technology integration<br />Increasing trend on expenditure on IT systems indicate that dealers realize that there is scope for better integration between technology and business<br />
    41. 41. Appendix 4: Benefits of Customer Integration<br />
    42. 42. Appendix 5: Aggregating Customer Touch Points – the importance of customer; using technology to solve problems<br />Automobile Customers<br />
    43. 43. Appendix 6: Solution for Warranty Management System – Infosys Warranty Management Solution<br />
    44. 44. Appendix 7: 13% of manufacturing companies following DLN strategy are 70% more profitable <br />Loyalty Networkers, excel in other areas of business performance as well, including sales growth, market share, return on assets, and return to shareholders.<br />
    45. 45. Appendix 8: Automotive industry competitor analysis<br />http://www.carfreaks.info/automotive_industry_competitor_analysis_CPM<br />

    ×