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Competitive Challenges: Thriving in Complexity

Your future customers aren’t going to be happy with limited choices.

In today’s fast-paced information age, consumer complexity has been taken to a whole new level of confusion. Remember the days of ordering simply a Coca-Cola? Now there are numerous variations—Coke with lime, Vanilla Coke and Diet Coke with vitamins and minerals to name a few. How about a cup of coffee? Today there are over one million variations of Starbucks coffee—which almost makes too confusing to order. In an age when iPods, Sony PlayStation®, text messaging, and camera phones are prevalent and ever changing, so too are consumers’ need for complexity. The new generation coming into driving age, now 12 to 16 years old, is more sophisticated and savvy than many of the designers and engineers responsible for developing the cars and trucks that generation will be driving. The millennial generation understands technology and expects more from their future vehicles than is today’s norm.

The automotive industry has a new challenge ahead. How can this complexity—necessary to meet the demands of the new consumer—be managed? Carlos Ghosn from Renault-Nissan has said he wants to have a new vehicle in dealer showrooms every seven to nine months in order to meet the needs of the new, ever-changing consumer. And each model must have more features and innovations than the previous one.

A seven-month car is not an easy accomplishment. OEMs have worked for years to manage product development time reduction in a cost-efficient manner. In order to reach this aggressive life cycle plan, OEMs are making major product engineering strides. Through the commonization of platforms and vehicle architectures on a global basis, Ghosn’s company, along with many other OEMs, can now achieve this level of model variation in the time consumers are demanding. The big question for the OEMs becomes will suppliers that support them be prepared and able to help achieve this goal?

The effect on the supplier community has already begun. The extreme level of complexity in engineering, manufacturing and vehicle launch has caught suppliers off guard and many of them are now in major financial crisis because of it. It’s important to remember when an OEM introduces a level of complexity to one model, the cascading effect on the supplier is exponential because they support many OEMs and many different models. So the future trend of fewer platforms, more models from those platforms and lower volumes will drive immense complexity at the supplier level in the next five years.

As a result of necessary industry changes, suppliers have fewer internal resources and launching sophisticated products is a major hurdle for many suppliers that traditionally had three or four launches a year. Today suppliers are facing more than 30 to 40 launches each year with model complexity. Managing this at the operational level is the challenge. Successful execution means suppliers must ensure engineering is complete while at the same time launch manufacturing operations and meet all the launch process gates to deliver quality product on time.

Many OEMs are working diligently to reduce unneeded complexity where the customer doesn’t care. At the same time, they are adding features and innovations that contribute to the consumers’ buying experience. For example, General Motors is commonizing the guts of many components globally, such as shifter assemblies, while maintaining customization of the shifter handle. In other words, different exterior materials and colors depending on the vehicle brand. This creates significant savings for both the OEM and suppliers in areas of the vehicle where the customer does not see, yet provides uniqueness in areas where the customer looks for it.

The bottom line of this complexity and consumer-driven variation is changing the industry landscape. Suppliers that are prepared from an engineering and operational level will survive long term while gaining high-volume, global programs. Other suppliers will consolidate and some will drop out of the industry making the overall supply base dramatically smaller than years past. Many suppliers are still in denial of this trend because the OEMs have talked of this type of commonization for years, but now is the time to heed the OEMs’ words. They can no longer continue with past strategy and meet the new generation’s needs with just such features as iPod and laptop connections. There are demands for more. Today’s next generation, which is larger than the baby boomers, is driving greater change than ever before, and at a speed that is unprecedented. Is your company ready? Will you survive the changes long term? 

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