Latin America. After two years of a market with several disruptions, automotive companies are eager for positive news. Already some regions and vertical segments are mitigating risks and addressing faults with agile and creative strategic moves.
They implement pragmatic best-practice models while struggling with large losses in their turnover due to a shortage of microchips. Without a doubt, 2021 has been a difficult year in this sector.
Predictions for 2022, considering the strong blows that COVID gave to the automotive industry:
1. The disruption is not over
The aftermath of the COVID-19 pandemic is sure to be felt for years, so business leaders must be attentive to market changes and sensitive to provide a safe environment for employees. Staff's different positions on vaccines and testing policies will evolve as the pandemic and medical studies progress. Employee resilience and political and legal challenges will influence the ability to keep plants running at full capacity. Some administrative tasks can be performed by employees remotely, and zoom meetings but automotive assembly tasks are face-to-face. Change is here to stay and auto companies must act now.
2. Product safety must be a priority
COVID cannot be blamed for all existing issues. Huge changes were already on the horizon before the pandemic. The transformative impact of (Connectivity, Autonomy, Sharing/Subscription and Electrification), along with the demand for greater sustainability, greater fuel economy and increased safety cannot be ignored. Returns are a plague on the industry. Innovation especially in relation to electric vehicles has left difficult lessons about the need for careful testing before launching new technology and components. The risk of fire due to lithium batteries is just one example. This issue has been analyzed from all areas, with reforms and security already installed. Fortunately, product lifecycle management helps automakers and suppliers manage the entire process, at all stages.
3. Agility is paramount
The automotive industry has recently undergone several paradigm shifts, especially driven by the unstoppable C.A.S.E. (Connectivity, Autonomy, Sharing/Subscription and Electrification). This impacts all aspects of the industry; product design, development, manufacturing, distribution, sales, service and after sales. The user experience has undergone major transformations, with even half-priced vehicles now equipped with luxury details, additional ones that are becoming standard such as heated seats, camera-assisted parking, and sensors that prevent crashes. These types of changes at an unprecedented level of agility and with technological solutions accordingly. Cloud-based solutions are quick and easy to deploy, providing flexibility and scalability in launching new operational processes and new partnerships.
4. More companies will enter the chip market
Modern vehicles use a variety of microchips, whatever their level. Unfortunately, even at the end of 2021, there is still a shortage of microchips. We assume that the shortage will endure in 2022 and is an issue that the industry must address. There is no easy or quick answer. Some OEMs are taking the issue into their own hands, starting the production of microprocessors, although this may mean more control, many consider this to be impractical economically since the chips are very low cost, and the investment in chip production takes a long time to recover. The European Union also wants to enter the chip business, aiming to reach 20% of world production by the end of the decade. Organizations will need to anticipate changes, and act faster to ensure adequate supply. Collaborative alliances and partnerships will become more important in 2022. As an example, Ford recently announced a partnership with GlobalFoundries. Cloud collaboration tools will help manage these multi-business relationships.
5. Greater emphasis on regional and self-supply nodes
The chip shortage is causing several criticisms in the US where it is suggested that the country should be self-sufficient, without having to rely on other countries for critical parts and components. The issue will undoubtedly continue to be hot in the coming years, and will hardly be able to be resolved in 2022.
6. The greatest visibility will be the lifeguard
For cutting-edge manufacturing companies, software will be the savior. Microchip manufacturing may not be the answer for every organization, but turning to technology is certainly the tactic to be implemented. Supply chain planning tools can help companies monitor inventory, deliveries, transport routes, expected deliveries, and the impact on sales orders in case a delivery is delayed. Even if visibility won't get components there faster, knowing the situation helps you prepare, look for alternatives, and set real expectations with customers makes a difference.
7. Business intelligence transforms chaos into actionable strategy
As companies establish recovery strategies, data visibility will be essential to understanding the changes, and the financial impact those changes can bring. Many organizations enter virgin territories, new reports are needed. New KPIs must be determined. New ways to anticipate and measure impact and predict outcomes across the organization will be needed. Augmented intelligence, artificial intelligence, machine learning, and digital platforms will be critical. Only advanced modern solutions will be able to meet the challenges. More and more organizations will see the value of having intelligent analytics and machine learning/AI and will invest solutions with these features already included.
8. Talent recruitment, increased retention
Talent recruitment will be part of the strategic agenda, so as to compete and be successful in 2022 and beyond. All roles will be involved. Soft skills such as collaboration, teamwork, problem solving, data management and customer service will be as important as the ability to operate the machinery. In addition, CASE is transforming the industry, and like Industry 4.0 and IoT, digital talent will quickly be the foundation of competitive advantage. The automotive industry competes directly with Silicon Valley to attract the best and smartest and organizations must address the lack of skilled workers, such as architects and software developers, data scientists and other IT professionals. In addition, there is a tsunami of trained workers who retire and who have spent years with them. The ability to capture that knowledge is also vital. Employers should offer technology courses and training for the existing workforce and attract more new talent. Recent graduates expect easy-to-use software similar to the apps they use in their personal lives. Organizations must provide a good experience to attract and retain talent. Talent management solutions are vital to incorporating new practices and helping organizations recruit, train, and retain the right employees in the right roles so that they maximize their potential, develop successful careers, and deliver value to the organization.
9. Sustainability will continue to increase its importance
Environmental ramifications will continue to have a considerable impact on industry trends and direction. "Circular Industrial Sustainability" and 'Carbon Footprint' are two terms that are already part of the manufacturing sector lexicon and appear increasingly frequently in debates about the future of the automotive sector, and electric cars are considered by some to be a panacea. However, it is important to note that electric cars present their own environmental challenges, the high energy consumption in their manufacture (especially in the case of aluminum), the highly destructive and toxic elements of mining, the problem of batteries filled with toxic material that will then have to be eliminated and the increase in the demand for electricity (generally based on fossil fuels). A broader look is needed to assess all the challenges and not just look at emissions and look beyond political and socio-economic interests. The ability to effectively collect data from different sources inside and outside the industry will be important for decision-making.
Conclusion
2022 will likely come with similar challenges to last year for automotive manufacturing companies and there will be some surprises as well. Organizations must be prepared for known challenges, but above all for unforeseen ones. If there's one thing we've learned in the last year and a half, it's that we can no longer take "normalcy" for granted. Resilience, agility, adaptability and collaboration are the new currencies we must manage. State-of-the-art technological solutions in the cloud are a robust foundation for moving forward in this constantly disruptive world.
Text written by José Rivero, Country Manager of Infor Mexico.
