How do Top Performing automotive companies balance quality, cost, and sustainability to gain a competitive edge?
Early design decisions significantly shape a vehicle’s total cost and environmental impact. Yet, for many OEMs and suppliers, critical cost and carbon footprint data is scattered across systems, making it hard to evaluate trade-offs when it matters most.
How can automotive companies empower teams to make informed decisions to optimize trade-offs?
Based on a survey of 178 automotive companies, including OEMs and suppliers, this research study examines best practices for managing cost while considering the implications of quality and carbon footprint. The research also reveals how automotive companies can empower teams, including sales, design, procurement, and sustainability, to make more informed decisions to increase profitability.
Please enjoy the summary* below. For the full research, please visit our sponsor, Siemens (registration required).
Table of Contents
- Executive Summary
- Differentiating in the Automotive Industry
- Identifying Top Performers
- What Makes a Winning Bid?
- How Suppliers Win
- Assessing Product Cost
- Assessing Product Carbon Footprint
- Positive Business Impact
- Optimize Early
- Optimizing Product Carbon Footprint and Cost
- A Foundation for Profitable Growth
- Cost-Effective, Sustainable Vehicles
- Recommendations and Next Steps
- About the Research
- Acknowledgments
Executive Summary
Balancing Profitability Drivers
Standing out in the competitive automotive market requires early strategic decisions. Survey respondents report cost, quality and product carbon footprint among the most important differentiators. Research estimates that 70%-80% of a product’s lifecycle costs1 and 80% of a product’s environmental impact2 are determined by decisions made early in the product lifecycle. Multiple roles including sales, design, procurement, and sustainability would benefit from accurate, consolidated insights to make more informed decisions around this criterial criteria. However, data is unavailable or scattered, making it hard to assess trade-offs. With competing priorities, teams struggle to gather needed information. If they could, it would drive significant advantages. This report explores those benefits.
Win More Bids
Competitive pricing and delivery timelines are key to winning bids. Consequently, understanding cost is critical to keeping prices reasonable without compromising profit margins. Beyond that, when everything else is equal, lowering the carbon footprint can be a deciding factor.
Early Assessments
Early product cost and carbon footprint estimates enable better decisions when they have the most impact. Access to comprehensive data helps automotive companies reduce costs without compromising quality.
Digital Thread
While early access helps, decisions based on outdated information offer little value. Teams need a comprehensive view of current data as designs evolve and supplier data changes. Traceability will enable a better understanding of a decision’s full impact.
Use the Right Software Tools
A tool that consolidates data sources, such as from PLM, CAD, ERP, and supply chain solutions, provides a comprehensive view of design details, material information, and supplier data to support more informed decisions.
This report explores this approach and the benefits Top Performing automotive companies achieve.
Identifying Top Performers
How Top Performers Were Defined
To define Top Performers, Tech-Clarity identified the top 25% of companies that outperform their competitors in metrics that indicate business success. These metrics were:
- Revenue growth over the last 24 months
- Profit margin expansion over the previous 24 months
- Percent of sales from new products (less than 3 years old)
- Product cost reduction
- On-time delivery
Top Performers excel in these metrics, signifying greater business success. To identify best practices, we analyzed how Top Performers differ from Others to uncover factors driving their success.
Top Performers’ Advantage
Much of what Top Performers do leads to more effective practices (see table). They are more effective at winning bids, which leads to more business. They also better manage costs, helping them meet cost targets while staying on budget. Interestingly, the most significant difference between Top Performers and Others is that Top Performers are 69% more likely to be able to adapt to new and regional environmental regulations. This indicates they have easy access to critical information to help them assess the impact of regulations and verify that requirements have been met. It also reflects their ability to be more agile and make changes to support regional requirements. This ability to meet different market needs will help them expand their market share.
Cost-Effective, Sustainable Vehicles
PLM Integration
An overwhelming 97% of Top Performing companies agree that a solution to assess product cost and carbon footprint should integrate with PLM. By integrating design and engineering PLM data, with manufacturing, procurement, and supply chain data, companies can get a complete view of material costs, energy consumption, and carbon emissions across the product lifecycle. This leads to data-driven insights for cost-effective, eco-friendly decision-making. Many companies, regardless of performance, integrate ERP, but integrating PLM is what sets Top Performers apart, allowing them to gain deeper insights.
Single Solution Benefits
Automotive companies agree that a single solution that integrates these data sources will lead to more optimized products that cost less, giving them a competitive advantage, and supporting more accurate estimates. They can evaluate the product carbon footprint at the same time as product cost without additional time or effort. This approach should enhance profitability and help capture market share because it better equips them to excel at meeting the criteria needed to differentiate vehicles and components.
Recommendations and Next Steps
Based on industry experience and research for this report, Tech-Clarity offers the following recommendations for automotive companies:
- Prioritize quality, cost, and carbon footprint. This balance is crucial for brand differentiation and customer loyalty. While carbon footprint is a larger concern for companies headquartered in Europe, it is needed to meet the growing number of regulations.
- Equip sales teams with tools for accurate cost assessment for bidding. Top Performing suppliers value solutions that enable profitability analysis, understanding supply chain impacts, comparing product cost and carbon footprint, and tool cost calculations to win bids.
- Empower teams to simultaneously assess cost and carbon footprint. Lightweight materials, aerodynamics, and fuel efficiency reduce the product carbon footprint, but understanding cost impact ensures better decisions.
- Leverage a software tool that consolidates data sources. Data needed to assess product cost and carbon footprint is typically distributed across multiple systems. With competing priorities, teams don’t have time to hunt for it. Data sources should include design details, material information, and supplier data.
- Ensure multiple teams have access to up-to-date data impacting product cost and carbon footprint. Teams, including sales, design, procurement, and sustainability, can make better decisions that will improve profitability if they have real-time access to the data they need, when they need it.
- Assess product cost and carbon footprint together early in the lifecycle. Decisions made early in the product lifecycle have the most impact. Empowering teams with early visibility and access to comprehensive data will facilitate more informed decision-making.
*This summary is an abbreviated version of the ebook and does not contain the full content. For the full research, please visit our sponsor, Siemens.
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