Jan Stoces, Chief Growth Officer beim Digitalisierungsspezialisten Aimtec. Foto: Aimtec

Expert talk: Digitalisation as a means to an end

Bad news from the automotive industry comes almost daily. Manufacturers’ sales are collapsing and suppliers are stumbling. Jan Stoces, Chief Growth Officer at digitalisation specialist Aimtec, and Professor Dr Nils Finger, Professor of Supply Chain Management at CBS International Business School, give their assessment of the digitalisation of the supply industry in the current situation in the latest eMove360° magazine in german language (download PDF).

To what extent do problems in supply chains play a role in this situation?

Nils Finger: Supply chain problems are a decisive factor in the current crisis. There are already challenges on the procurement side, such as semiconductor bottlenecks. The bottleneck is intensifying with the spread of electromobility, as electric vehicles require more chips than conventional combustion engines. Added to this are rising raw material prices, particularly for battery materials such as lithium, cobalt and nickel, the prices of which are exploding.

Geopolitical tensions are also having a negative impact, such as the USA’s tariff-orientated economic policy under Trump or the sword of Damocles that is Taiwan. Added to this are requirements in the area of sustainability, which create transparency in the long term but cause enormous costs in the short term.

Jan Stoces: Another major problem is the lack of planning certainty. Suppliers receive call-offs from OEMs that offer little reliability. The burden of planning therefore lies with the suppliers. The uncertainty is enormous. This has a negative impact on investments and production capacities.

Are digitalisation projects in supplier logistics slipping down the list of priorities in view of these problems?

Jan Stoces: Digitalisation projects are rarely cancelled completely, but we see that many are either postponed or divided into smaller units in order to minimise costs and risks. Companies are focussing more on projects with short implementation times and a clearly defined ROI.

Viele Unternehmen kämpfen derzeit mit steigenden Energie- und Materialkosten, was die Planbarkeit erschwert. Gleichzeitig stehen sie unter Druck, die SAP-Transformation zu S/4HANA umzusetzen. Das bindet Ressourcen und erschwert es, neue Digitalisierungsprojekte zu starten.

Nils Finger: Digitalisation is a long-term success factor. Digitalised processes increase efficiency, reduce costs and improve sustainability. Companies that invest in digitalisation now are better positioned in the long term.

In view of the current situation, are digitalised processes and a high degree of automation in logistics and production an important building block for the future viability of suppliers or rather a drop in the ocean?

Nils Finger: You have to differentiate here. If you look at a small, isolated project, then it’s more of a drop in the ocean next to a big topic like SAP. However, if it is part of a strategic reorientation with an underlying strategy that addresses current challenges or future trends, then I believe there is a great opportunity here. Digitalisation is not a panacea, but it is an important lever for remaining competitive. Automated processes reduce errors, operating costs and manual activities. OEMs are increasingly demanding sustainable and digital solutions from their suppliers. Establishing a transparent, social and ecological supply chain is initially expensive and takes time, but will pay off in the future.

Jan Stoces: The topic of sustainability is closely linked to digitalisation. There are many approaches to working in a more resource-efficient way. But these measures must be affordable. Small suppliers in particular often don’t have the necessary funds to implement comprehensive digitalisation measures.

How are suppliers dealing with the tense situation? Is there a common thread?

Nils Finger: We are currently seeing many trends but not yet a common thread. Many companies are trying to minimise risks through diversification. They are looking for new markets and products in order to reduce dependencies on individual customers. Partnerships and collaborations are also gaining in importance. Unfortunately, this situation often reduces sustainability efforts to a minimum and companies are increasingly focussing on cost efficiency.

Jan Stoces: There are also differences in company size here. Smaller suppliers in particular are under a lot of pressure and are trying to put out fires in the short term. This ties up resources that are not available for strategic measures. Overall, however, the industry is very heterogeneous.

What chances does the German automotive industry have of getting back on track? What needs to happen for manufacturers to sell more vehicles again?

Nils Finger: The political framework conditions need to be improved. This includes better predictability, stable energy prices, reliable subsidy programmes and the expansion of the charging infrastructure. Without these measures, it will be difficult to win back the trust of end customers.

Jan Stoces: The problems are similar throughout the EU. The uncertainty on the markets affects all suppliers. Clear and long-term political perspectives are therefore needed. Companies need to know what they can expect.

What currently gives the industry hope?

Nils Finger: Technological advances in the areas of battery technologies, funding programmes in various markets, autonomous and connected driving offer prospects. We are also seeing a stabilisation of the markets and falling inflation rates. The luxury market remains constant and offers opportunities, at least for some of the German manufacturers.

Jan Stoces: Every crisis also harbours opportunities. The Asian market, for example, still offers room for growth. The only question is what share of it German companies can secure. As far as in-vehicle services are concerned, we still have a lot of room for manoeuvre in Europe. Companies that are courageous now and focus on innovation and new business models can emerge stronger from the current situation.

To what extent can new technologies such as AI help the industry? What potential do AI applications offer industry in the supply chain?

Nils Finger: In the supply chain in particular, AI can improve forecasts, recognise bottlenecks at an early stage and automate processes. Predictive maintenance is another good example.

Jan Stoces: Machine learning has been used in many companies for years to make better use of data and brings visible added value. Generative AI applications are particularly beneficial in sales and marketing. In production, the structured data and expertise required to successfully implement generative AI projects are often still lacking. It will be a few years before we see really useful results here.

What will the German automotive industry look like in 15 years?

Jan Stoces: It will be there (laughs). We can’t say much more with certainty.

Nils Finger: One scenario is the decline in mass production, especially in the low-price segment. The luxury market continues to offer great opportunities, and electric mobility will become more established. However, combustion engines will continue to be with us in the medium term, if only to finance the mobility transition. Digitalization will be much more advanced in 15 years, and companies will therefore be able to adapt better to new market situations. This adaptability will remain crucial for success in the future.

This expert opinion and other articles on electric mobility and autonomous driving can be found in the current eMove360° magazine in german language. Download the free PDF or order the print version at sabine.metzger@emove360.com.