The Changing Automotive Industry and the Need for Robust ERP Systems

STERLING, VA--(Marketwired - December 31, 2015) - Few sectors have experienced the tumult that the global automotive industry has faced over the last few years. In almost every part of the world, automotive companies bore the brunt of recessionary economic conditions.

But even as the sector makes its comeback, there are several trends that are combining to have a transformative effect on every part of the automotive supply chain:

  • More streamlined supply chains. Even though economic conditions are improving, automotive companies have learned that their supply chains need to be more integrated if they want to keep costs down and improve end-to-end efficiency. The relationships between suppliers and manufacturers must be more integrated, especially in the development of complex ready-to-assemble parts.
  • The rise of self-driving and electric vehicles. Emissions standards in major markets like the U.S. and Europe are leading auto manufacturers to make and market eco-friendly vehicles. Additionally, thanks to efforts from Google and Tesla, self-driving cars are looking like more and more of a reality, at least for some purposes. Naturally, these are much different than fossil fuel-dependent and driver-controlled vehicles and will require manufacturers to update their design and production processes to accommodate these new technologies.
  • The automobile as part of the Internet of Things. The IoT refers to a network of Internet-connected physical objects that use their connectivity to communicate with the user, the manufacturer and even other "Things." For example, many new vehicles are embedded with Wi-Fi and can use their Internet connections to let manufacturers know when they need to be repaired before the driver even knows about it. This kind of connectivity opens up a whole world of post-sale services that manufacturers can offer as another revenue stream.
  • The growing reach of Industry 4.0. Smart factories, the heart of Industry 4.0, will be revolutionizing the automotive industry throughout the value chain. Information technology systems will connect every part of the manufacturing process, breaking down organizational silos. In addition, we're likely to see finished products, production processes and automated production designed and utilized into one integrated process, with extremely close relationships between suppliers and manufacturers. Machines with the ability to self-adjust based on the parameters of the part being made will also play a major role as Industry 4.0 becomes a reality.

Of course, there are many smaller trends and developments that have yet to fully manifest themselves but are still taking hold in the industry. Automotive companies looking to stay competitive will have to ensure their enterprise resource planning systems are capable of helping them adjust to the internal and external forces shaping their operations.

Where do ERP systems come in?

Many of the changes we're seeing in the automotive industry involve making the value chain more integrated, even in the post-sale phases. Whether a manufacturer needs to find new suppliers for electrical components or is looking for a way to better manage customer service after a sale has been made, an ERP system is a critical tool that can offer visibility into costs and processes from beginning to end. Here are some reasons why it's essential for an automotive company to invest in a robust ERP solution:

  • Powerful lot tracking. With electrical and communications components becoming integral parts of every vehicle, ensuring quality and reliability is of the utmost importance. Auto manufacturers need to know exactly where every single component came from, where it went throughout the production process, who handled it, and finally who bought the finished product. Poorly handled recalls can be financially devastating for an auto supplier or manufacturer, so it's critical to have this kind of traceability throughout the value chain.
  • Web-based supplier portals. These portals give suppliers and manufacturers a central interface that allows them to communicate and handle orders in real time. For example, manufacturers can give their suppliers advance notice when a future order will be placed so they can begin preparing it ahead of time.
  • Robust financial modules. Integrating the supply chain isn't just a matter of streamlining operations. Automotive companies that survived the recession know how important it is to track costs at every step of the production process. A good ERP system will offer financial modules that automatically track costs using data from purchasing orders, invoices and sales figures.
  • Integrated customer relationship management modules. With the growing prominence of IoT-enhanced vehicles, we can expect to see vehicle performance data being transferred directly back to a manufacturer's ERP system. If a particular vehicle is due for a repair, that information will be automatically entered to the CRM system, which can let managers know to start the process of contacting the customer and preparing the resources for additional service.
  • Flexibility to handle changes. Perhaps the most important quality of an ERP system is the ability to adapt to a changing environment without significant interruptions or large upgrade costs. With new production equipment and methods on the horizon, and the product mix always in a state of flux, automotive suppliers and manufacturers alike will have to ensure their operations -- and systems -- are flexible.

abas is an innovator of ERP solutions for mid-size businesses aspiring to be leaders in their industry. We use our 30+ years of experience to deliver exactly what our customers need -- software that is agile, intuitive, sustainable for the long term, and that works anywhere around the world.

Find out more about abas ERP on the web at, on twitter at abas USA, or on Facebook at abas-USA.

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Caroline Gerenyi

Industry 4.0 is heralded as a paradigm shift on par with the Industrial Revolution.