As software adds to vehicle complexity, the role of procurement teams evolves and gets further complex too.
Where do we see the procurement role going in next 5 years?
How would the supplier landscape change?
What does it mean for the procurement team leaders in terms of upskilling, choice of business models, decision making?
The conversation covers this and more insights. View the highlights of the 90 minute conversation in the 20 minute video.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
