Moderator:

Jens Tillner, M.D., Business Head, KPIT Gmbh

Panel:

Dr. Klaus Blickle, Executive M.D., Volkswagen AG

Markus Baum, Roland Berger Strategy Consultants & Automotive Partner Expert

Dr. Prof. Peter F. Tropschuh, Honorary Professor TUM

Lars Thomas, C.T.O., Unterstand.ai (A dSPACE Company)

There’s a tangible increase in vehicle complexity thanks to software. In fact, it has also made procurement-choices and decision-making, difficult. Complicating this further, is the Pandemic. This panel discussion marks a first for KPIT as host and highlights the role of Procurement while asking — How can Procurement play a key role? What does the road ahead look like?

The key takeaways

Recognizing an Eco-system in Transition

Dramatic changes – from a traditional industry to a mobility-service one — are evident in the automotive sector. The emergence of new niche players, significant shifts – from focus on bigger, faster, safer and design-driven demand to the electric Powertrain — stringent environmental regulations, electrification of OEMs’ fleets due to environmental regulations are evident. As mobility becomes a service with significant emphasis on traditional sales and ownership-driven models, software becomes key to automotive future.

Changing Status of Procurement Teams

Even as OEMs future-proof themselves by becoming software-focused entities, for the Procurement side, software remains a black box. It’s important to devise new best practices, models, initiate greater transparency and demystify software. Procurement teams must be involved in all products and processes from the design stage to enable them to achieve the SDGs.

Shifting priorities of Purchasing teams necessitate a different mix of supplier choices. Partnering smaller players, who have limited expertise in bringing software to a maturity level expected by OEMs, to launch a complex device implies it’s a lot to do with cost-competitiveness and revenue generation, today.

Impact of hardware-software separation and emergent niche software companies in new tech areas on Procurement.

OEMs enjoy innovations by commanding a price premium so they can cover their processes and production costs. For Procurement teams, however, the situation becomes tougher since they now contend with more suppliers and increased competition amongst the latter.

Environmental Regulations, Sustainability and Procurement

Green Deal initiatives within Europe are expected to develop a sustainable economic system by 2050. The automotive sector then, can contribute by reducing energy consumption across processes AND Using renewable energies. Procurement teams are in a position to influence and fulfill all environmental restrictions irrespective of product — metal, plastic, software, hardware, powertrain etc.

SaaS and the software deployment model for the automotive industry

Covid has shown how SaaS, growing over the last 2 decades, has exploded, today. Using MS Teams to host webinars is just an example. It’s important to leverage such tools as – 1. CRM and ERP systems for productivity 2. Software to develop and test what’s deployed in cars 3. The variety of software coming from different suppliers. That’s where SaaS can help. It’s equally important to change mindsets for OEMs now need to consider the entire life of the vehicle and not just the software as soon as the car is produced.

Changing models of compensation and dynamic allocation of computing resources

This presents a huge opportunity. The Paper Use Model enables testing with a new model, tool or a productivity software and its consistent use so it creates value. This means budgetary considerations come in second and no big decisions are expected in the beginning, which allows companies to grow based on the benefits derived.

With the OTA updates in cars while they are running there’s an opportunity to extend certain functions to the driver for their use else the OEMs can remove these.  The opportunity extends to experimenting with user experiences, check functions’ relevance to customers and if unsuccessful, their removal. Budget restrictions at such times will necessitate along broader cross-OEM usage of IP, and wide white box-software solutions regarding safety-critical functions.

Whatever the step adopted, integration is key. The ability to own major aspects of car while building a system that’s open to integrate this with other aspects is a white box-modeling that must be adopted.

Consolidation to handle the multi-supplier landscapes

In the past, the OEMs relied on few major suppliers for system integration and co-ordination with third-party solutions since they had the competencies. Larger companies however, have the advantages of experienced personnel and being agile. These are crucial to success.

Here, companies like KPIT with integration capabilities must take the lead since they can define integration, identify software coming from different suppliers, decide what must be developed in-house and assign roles. The role of the integrator will be dynamic but essential to make complex systems successful in the future. Rating a role like the software integrator’s is quite risky so it’s imperative to be flexible in terms of resources committed to a project, fixing the budget, defining the vendor for integration and use the best models to implement this.

Impact of AI and ML on Procurement

Procurement teams must be trained in AI and implement learnings at work. Larger numbers of niche players and smaller sized contracts will add to the complexity of Procurement, and make it tougher to track in the absence of automation. One way out may be to use automation so personnel understand what they purchase and cope with increasing complexity.

While there may be significant accurate data with regard to Procurement to implement AI, it’s imperative to identify the right data of the right quality and in the right amount to be fed into a system to get good predictions. While this may be difficult it can be done. It may also offer a competitive advantage to build and maintain a system like this. But it must reside with traditional processes and be tested continuously so it can enable the building of purchase-support systems.

Conclusion

Procurement teams are evolving by the day and their changing priorities in a dynamic environment are clear. The panel in discussing the implications of change on the automotive industry and deliberating the immediate ramifications on the procurement function reveal how Procurement can transform itself from a business-support function to a business-leading function.