Driving automotive manufacturing into the cloud

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By Ronald Teijken, director of industry marketing, manufacturing and logistics at Sterling Commerce, an IBM company. 

Despite cloud computing being one of the most talked about topics in IT and business, there is still some uncertainty within the manufacturing industry around when and how it should be used, as well as what is actually meant by the term 'cloud'.


While it is true that there are many definitions, the widely agreed definition is that cloud computing is a style of computing where scalable and elastic IT-related capabilities are provided 'as a service' to external customers using Internet technologies.
Many manufacturers are wary of moving particular processes to the cloud, due to questions around trust and visibility. However, as manufacturers increasingly rely on IT to ensure the smooth running of their supply chains, the question of whether or not to move to the cloud is unavoidable. It provides some much needed elasticity both in terms of cost and more importantly the agility needed in the supply chain to support future growth.
In the automotive sector, global manufacturing is going through a period of transition. Nearly everything about the automotive manufacturer's businesses products, services, where and how they're sold, the degree of governmental involvement, even the fundamental business models of the industry - is changing, due to changes in the patterns of demand from the market.

The cloud can help manufacturers become more flexible and adaptable to market demands, and in particular, it can help them cost-effectively optimise their supply chains for sudden and sometimes unexpected growth. So for the automotive sector, cloud computing may be the signal of a brighter future on the horizon.

The automotive supply chain
Central to the changes affecting the automotive sector is the automotive supply chain. Companies in this sector need to connect to parts manufacturers, tyre manufacturers, distributors and a host of other business partners. Each of these partners will run their own business-to-business (B2B) communications networks, based on their own chosen communications standards. As a result, automotive companies are facing an increasingly complex integration problem.  

What we are seeing is that as a result of the combination of factors, including the proliferation of standards, changes in the supply chain and the need to abide by new regulations, automotive companies are increasingly choosing to outsource part or all of their IT operations. In fact, talking about standards in automotive IT is almost an oxymoron - in a world of global dependencies (a whole car production line can grind to halt if a single element is missing), where parts and equipment need to be sourced from the four corners of the globe, the US standard XML must co-exist with OFTP, ANX, ENA and many others. Larger automotive providers have their own private clouds, to which smaller suppliers must adapt. And many larger manufacturers rely on smaller companies for crucial parts of the manufacture.

This is where the cloud comes into its own. A collaboration platform run from the cloud [see automotive footprint graph], for example, can accommodate all standards, connecting large players and small businesses; and companies can choose to tap into it as necessary, saving the expense of building their own infrastructure or employing specialist staff dedicated to B2B integration. Being able to run effective B2B communications is critical to a manufacturing company, but should never be the core competency of any car-maker, or indeed of any cosmetics supplier, dairy business or other manufacturer.

A further option is hybrid solutions and we are seeing more and more automotive manufacturers wanting a choice of deployments and especially to make efficiencies where they can.  This may mean using a point-to point solution to connect with major OEM part suppliers, but a cloud solution to accommodate all the demands of tier one suppliers.

How the cloud supports growth strategies in an unpredictable and globalised economy
OECD predicts growth will be less than two percent amongst member countries [OECD Economic Outlook 88 Database]. If manufacturers want to grow, they will need to look to new and unfamiliar markets. Aston Martin has just opened its first store in Warsaw in Poland. BMW has opened a factory in India producing its 3 Series vehicles, and has a full order book for the next three years. These are just two examples of companies relocating to meet domestic demand, but the trend applies across the whole manufacturing sector and also applies to mass market and non-luxury goods. The cloud provides a useful implementation choice for cash-strapped companies looking to enter emerging markets.

Success in this new economy depends in large part on how supply chains adapt. Greater speed and efficiency will help, but won't be enough. Automotive supply chains need fact-based intelligence to predict which future scenarios are most likely to occur and the flexibility to get repositioned before they do. In fact there are several more reasons for adopting cloud solutions:

Predictive analytics - automotive manufacturers need forward looking visibility and predictive analytics to see where opportunities are going to come from. This depends on a solid B2B integration strategy - for real-time and forward looking visibility, integration is paramount

Inventory optimisation - again, visibility and synchronisation provided by the cloud enable near-sourcing and just-in-time delivery to keep stock levels low and inventory moving

E-invoicing - a typical managed service and straightforward and effective way to cut costs

New partner on-boarding - the cloud makes it much easier and quicker to integrate new partners into a business network and start trading within days rather than weeks

In these early days of recovery, manufacturers must chase growth and orders where they are available. And it has become more difficult to plan. During the recession, inventory reduction to liquidate capital all along the supply chain has resulted in longer lead times for stock. If manufacturers do not have the flexibility and agility to deliver on unexpected orders, and meet new markets' expectations at a moment's notice, this could impact their potential for growth. The cloud provides the tools to cope with this new and unfamiliar territory.

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