Many executives in the automotive industry were glad to see the back of 2007. This was a year which saw immense change within the automotive industry. Slow growth in most markets, numerous acquisitions and mergers, companies going out of business and significant workforce reductions in both the OEMs and their respective supply chains. Despite their best efforts many automotive companies are struggling to work out where to go next in their quest to return to profitability. However on the positive side a few of the major Tier 1 suppliers, particularly in North America, are just starting to emerge from potential bankruptcy as a result of drastically restructuring their business operations. 

In recent years there has been an increasing trend towards developing smaller, lower margin cars with improved fuel efficiency. Ford for example are breaking up their premier automotive group, no longer wishing to compete in the premium car market and instead focus on developing global car platforms to compete in the volume car market. Ford recently announced the sale of both Jaguar and Land Rover to the Indian conglomerate, TATA. This is one way for Ford to prop up their balance sheets but they will need to take more drastic action in order to become competitive on the global stage once again. Like Ford, many other OEMs are now trying to standardise on vehicle platforms and component usage across multiple vehicle platforms.   

So what does 2008 hold in store for the automotive industry?  well, very much the same as 2007 with a continued focus on the top two business initiatives of cost reduction and improving business efficiency. In addition, there will be an increased interest in improving IT infrastructures and according to the research analyst AMR, the automotive industry intends to increase its IT related spending by 7.2% in 2008. The ultimate goal of this spending will be to help improve efficiencies, lower costs and hopefully lead to improved customer satisfaction. According to the U.S Enterprise IT Spending Report, 2007-2008, the breakdown of 2008 IT spending will be as follows: 

• The 7.2% increase in IT budgets represents a shift from the -1.2% that was intended last year.
• 50% of the automotive firms surveyed in this year’s study indicate IT budget increases, compared to the 33% that intended increases last year.  Only 25% of the respondents in this year’s survey indicate they will be decreasing their total IT budgets
• 66% of the overall budget will go towards operating costs, with 19% on depreciation.  33% will be targeted for predictable capital expenditure

So what business drivers are influencing the IT investments in 2008? Automotive IT teams are continually under pressure to deliver more to the business, but with decreased funding, in comparison to other industries such as retail and high tech. In addition to the previously mentioned initiatives of increased efficiencies and cost reduction initiatives, IT departments will have to address a mix of other IT priorities during 2008: 

• Improve the utilisation of enterprise data, ie developing enterprise wide IT platforms that integrate into many different business systems and at the same time ensure that both internal and external stakeholders who want to get access to information can do so in an efficient and timely manner
• Implementing IT outsourcing initiatives to manage for example PCs, network infrastructures and associated helpdesk support
• Using Business Process Outsourcing (BPO) to outsource entire business processes, for example having an outside vendor manage all aspects of a company’s B2B e-Commerce infrastructure
• Exploring the use of Software as a Service infrastructures to improve the deployment and management of software implementations, especially amongst smaller companies with limited IT support capabilities

The aim of all these initiatives is to reduce the amount of time and money that IT departments spend on these activities, allowing them to focus on other IT projects that help to improve business efficiencies still further. OEMs for example will be looking for ways to help their business partners introduce cost savings to their own IT infrastructures. To achieve this, many companies will have to improve internal collaboration between disparate business functions and then extending that collaboration to external trading partners. A company should be working more closely with their trading partners in order to achieve a number of goals:·        

• Reduction in inventory through a better understanding of demand, as well as the ability to translate demand to supply for profitable response
• Collaborative, not prescriptive, relationships with suppliers to identify opportunities for process and product related improvements and innovation
• Further rationalise and centralise supply chain functions, particularly logistics as well as sourcing and procurement

To achieve these goals automotive companies will have to improve visibility into their respective supply chains and introduce Business Process Monitoring (BPM) to ensure that the entire supply chain is operating to its most efficient levels. Many companies are starting to introduce Key Performance Indicators (KPIs) for measuring the performance of suppliers and logistics providers and in 2008 it is expected that many more companies will adopt such monitoring and measurement techniques to help take costs out of their supply chains. 

GXS has a number of solutions and services to help automotive companies implement some of the afore mentioned IT initiatives, for further information on how GXS can help improve the efficiency of your automotive supply chain in 2008, please visit www.gxs.com