Digitization in the automotive industry doesn’t just mean eliminating paper. It also implies changing one's competitiveness in the market, improving the company's reputation, and being ready to take advantage of future evolutions. How does all this apply to the automotive industry?
Data is among the most valuable business resource, and being able to manage information in the most efficient way has become a real priority for every organization. This is an area that affects every sector, from government and healthcare to manufacturing and beyond. As technologies advance, AI and ML become more prevalent, and the adoption of automation becomes the norm – digitization in the automotive industry will become a necessity.
Digitalization vs. Digitization vs. Automation in the Auto Industry
In the ever-evolving landscape of the automotive industry, three crucial concepts have taken center stage: digitalization, digitization, and automation. These terms, often used interchangeably, have distinct meanings and implications, shaping the industry's future in unique ways.
Digitalization is a fairly holistic term, encompassing the broader integration of digital technologies and practices of a business or industry. It involves leveraging a wide array of digital technologies to enhance processes, craft new business models, and transform operations. In short, digitalization involves the adoption of digital tools, platforms, and strategies to improve efficiency, effectiveness, and innovation within any given organization.
Digitization is more specific, referring to the transformation of analog processes into digital formats. It involves the integration of technology to enhance various aspects of the automotive lifecycle, including design, manufacturing, sales, and after-sales services. Digitization empowers the industry to leverage data-driven insights for smarter decision-making, streamlined operations, and improved customer experiences. For instance, digital design tools facilitate rapid prototyping, simulation, and virtual testing, reducing time-to-market and enhancing product quality.
Automation, on the other hand, involves the use of machines and technology to perform tasks with minimal human intervention. In the automotive context, automation includes robotic assembly lines, self-driving vehicles, and advanced driver-assistance systems. Automation aims to enhance efficiency, precision, and safety, revolutionizing production processes and redefining transportation norms.
While digitalization, digitization, and automation share the common goal of enhancing the industry's capabilities, they differ in their scope and impact.
Digitization + Digitalization + Automation = Digital Transformation
Digitization extends beyond manufacturing to encompass the entire value chain, enabling personalized customer interactions, predictive maintenance, and supply chain optimization. Automation primarily addresses the physical aspects of production and transportation, reducing the need for human involvement in repetitive or hazardous tasks. Digitalization, which we’ll focus on in a future article, is another massive piece of the digital transformation equation.
Looking ahead, the automotive industry is poised for a convergence of
digitization and automation. Trends suggest an increasing synergy between these concepts, where digitized processes provide the foundation for effective automation. Data-driven insights from digitization will fine-tune automation systems, enhancing decision-making for autonomous vehicles, predictive maintenance algorithms, and even dynamic supply chain management.
A Revolution is Forcing Digitization in the Automotive Industry
As mentioned digitization and automation are radically transforming the automotive industry, and we are already facing a rapid digital acceleration that has led (in some cases, forced) even the most reluctant to a decisive change of perspective.
The automotive industry has therefore initiated a process of implementing advanced automation and digitization technologies to make traditional processes more efficient.
Consider, for example, paperwork management, data usage, or collaboration with those involved in the automotive supply chain. The vast majority of paper documents have been transformed into digital formats to facilitate communication and collaboration. Digitization in the automotive industry also improves an organization’s ability to respond to the growing needs of customers who are used to increasingly effective and fluid online experiences based on a consumer-centered model.
First and foremost, digitization of data streamlines operations protects archived information, and enhances collaboration. It allows organizations to initiate an intelligent, more automated process of extracting data, processing that information using optical character recognition software and other technologies, and then analyzing and using it for business purposes. Such solutions enable automotive companies to raise their level of organizational intelligence, which in turn leads to better decisions in a highly competitive marketplace.
Data collection, analysis, and digitization in the automotive industry are key to easily accessible and secure information, which leads to achieving more efficient workflows and simplified activities. This approach helps automotive companies be more productive while fully complying with industry regulations.
The Main Challenges of Digital Transformation in the Automotive Industry
Automotive companies are under pressure to undertake digital transformation and automation, focusing especially on digital and data operations to support and improve communication and collaboration between OEMs, suppliers, and clients.
The digital shift faced by the automotive industry is driven especially by smart mobility and stimulates the market to implement new technologies and software for modern vehicles. At the same time, there is a growing desire to make production activities more sustainable, environmental-friendly and flexible.
The use of new technologies, such as ML (machine learning) and AI (artificial intelligence), to improve short and long-term performance enables clear control over plant monitoring and business processes. This is thanks to the ability to track every component in the supply chain while reducing risks and costs. Let’s take a closer look at the main factors and challenges of digitization and automation in the automotive industry.
Challenge 1: Costs and Product Data Quality Management
If we look at current cost patterns across the supply chain in the automotive industry, we can see a major constraint on the ability to make savings. Therefore, companies are increasingly moving to “just in time” (JIT) operations with the potential to contain costs and improve all supply chain processes effectively.
Certainly, digitization and automation of supply chain processes would significantly improve and streamline not only business processes but also traceability and transparency.
The implementation of digital solutions results in greater control over manual errors, which often occur in quality control, while improving the transfer of data between various departments/systems. This also has an impact on product quality and related costs. With effective monitoring, including digitization and automation, companies can reduce production delays significantly and improve the efficiency of operations.
Challenge 2: Environment and Regulations
Sustainability is no longer an option. It’s a necessity for all industries worldwide, and the automotive sector is not immune.
Issues surrounding environmental sustainability have made manufacturers and customers more sensitive to this topic. Additionally, increasing attention is being focused on “environmental responsibility” when customers make purchasing decisions.
The process of digitization and automation in the auto industry for data management, supply chain, and shipping processes are making a real contribution to reducing the environmental impact of every production process.
Another key factor is the increasing requirement from regulators around the world to reduce or eliminate congestion, cut the automotive sector’s climate impact, make transport safer and more sustainable, and improve safety for transport users. In order to meet these challenges, companies in the sector are pushing to develop solutions that need to be connected and intelligent.
Automotive companies worldwide, including OEMs and their suppliers, are already considering and implementing new, more sustainable ideas. In addition, several projects and concepts are already at advanced stages of development, including:
- Smart cities
- Intelligent transport solutions
- The digitization of the entire transport infrastructure (Singapore, Helsinki, and Zurich were leading the way in this field in 2021).
Challenge 3: Staying Ahead of the Market and Competitors
Many companies in the automotive and other sectors have embarked on profound digital transformation in response to the pandemic crisis. For large automotive manufacturers, in particular, such a shift represents an opportunity to benefit from greater investment opportunities. However, acceleration towards digital implies the revision of processes involving suppliers and partners. The latter, in order to remain in the market, will have to keep pace with this transformation.
While digitization in the automotive industry is necessary to maintain a presence in the market, it can also become an important lever to gain ground on competitors, offering partners the possibility to integrate systems and data and improve overall efficiency.
Is the Automotive Industry Ready for Digital Commerce?
Digitization in the automotive industry has accelerated over the past decade. This is leading to a new approach in terms of sales, embracing factors such as the potential of digital commerce and changing the expectations and demands of anyone interested in buying a car.
Thus, while the complexity of the purchasing process and the level of structuring of the sales network in automotive have so far kept the sector outside the sphere of digital transformation, the industry is now ready to review the distribution process by introducing new methods and tools to handle a growing volume of data that could be better used to serve clients.
Many companies in the industry have already started investigating the possibility of digital commerce, but there are certainly many challenges (especially of a technical nature) and potential conflicts with regulations that could hinder progress.
Analysis carried out by several companies has led to a review of purchasing processes for the near future in terms of digitization. This could be the right solution and a driver for vehicle sales right now, but only if the industry is able to embrace the opportunities.
Benefits of Digitization and Automation in Car Manufacturing
Digital transformation of business processes takes time in terms of implementation and results, not to mention the commitment required to invest resources in the process. However, efforts to transform processes into digital largely pay off at the revenue level.
Among the various positive aspects of the digital transformation of business processes, we can identify the main benefits of making an automotive business digital.
1. Optimization of Supply Chain Management
Digitization of the supply chain is a cross-functional process that runs through the entire lifecycle of a vehicle/product and involves all company divisions, which – by removing the functional barriers that separate different areas – can create a fully integrated ecosystem that transparently involves all stakeholders, from suppliers of raw materials and components to logistics providers, dealers, and customers.
Using digital technologies across the entire supply chain provides real-time monitoring of all phases of supply and makes it possible to evaluate and control the effects of each event, automate processes, and prevent potential disruption.
2. Ability to Reach and Expand into New Markets
The digital world has made it possible to break down cultural, organizational, and communicative barriers that, in previous decades, appeared to be insurmountable.
This achievement has meant that companies can address new markets (new geographic areas) and opportunities for innovative products and trends.
3. Better Company Competitiveness
The new competitiveness of a production line lies in its ability to have a flexible process to provide a single model with all the possible customizations requested by customers.
Digitization supports lean and agile production processes in order to significantly reduce time to market. With smart processes and new design tools, feedback on manufacturability is immediate: companies can reduce feasibility risks and high costs while developing a more responsive supply chain.
4. Customer Experience Improvement
Through the digitization of processes, companies can achieve full customer satisfaction and approach the organizational challenges they face in a new way. Adopting an agile infrastructure and exchanging regular feedback between employees and customers are two of the essential requirements for improving customer satisfaction.
Any automotive company can reduce costs significantly simply by adopting new technologies to service multiple customers simultaneously or by implementing modern tools that facilitate a customer-centric approach. These solutions drive the delivery of the best customer experience through, for example, the use of marketing and omnichannel experiences.
The result is the creation of a system that – through the digitization and automation of business processes – simplifies and universalizes the experience for the customer regardless of how, when, and where they interact with the brand.
Summary: Digitization and Automation Make Automotive a Stronger, More Robust Business
The benefits of digitization in the automotive industry, with smarter, data-driven operations across the entire business and all departments, including manufacturing, the entire supply chain, marketing, sales, and aftermarket – can have a real impact.
An increasingly digital supply chain will also eliminate traditional silos and significantly improve collaboration to build a stronger, more robust business. The automotive industry certainly needs to embrace greater digital transformation focused on enterprise data management and accurate analytics to create value from data that will improve operations across the business.
Customer satisfaction and collaboration of intents across departments are some of the essential elements of digital transformation. Companies need to reset their culture and ways of thinking in order to seize new market opportunities by transforming themselves in a gradual and smooth manner.
About the Author
Business Solutions Manager, Comarch
Vincenzo Cirillo leads global Documents Management & Data Exchange solutions at Comarch, drawing on his extensive experience in the supply chain and automotive industry in several countries. He has developed a passion for enabling digital business.