If the auto industry is to withstand the chip crisis and come out the other side thriving, composable ERP may offer them the vital helping hand, says Mike Kiersey, CTO at Boomi.
Triggered by Covid, the global shortage of computer chips has had a significant impact on the car industry, which is unlikely to improve for some time. Modern vehicle systems rely on hundreds of on-board chips, so the shortage has forced manufacturers around the world to curtail production.
Last month, Toyota announced that it would slash worldwide vehicle production by 40 per cent in September. The world’s biggest carmaker had planned to make almost 900,000 cars this month but has now reduced that to 540,000 vehicles.
Volkswagen, the world’s second-biggest car producer, has also warned it may also be forced to cut output, alongside Ford, which announced a reduction of production output at its Cologne plant as a result of Covid-related supply issues from a chip producer in Malaysia.
With this dearth of semiconductors set to continue for at least two years, according to IBM boss Jim Whitehurst, the car industry will need to be more innovative than ever in its approach to manufacturing and procurement.
Car production hits a red light
Historically, the industry has relied on a ‘just-in-time’ approach to buying car parts, procuring components from suppliers right at the moment they’re needed. This is designed to streamline production and eliminate the costs of keeping warehouses stocked. But, as automakers confront a lack of available chips, they need to be nimble and overhaul the way they get the electronic components that have become so critical to car design.
With these supply chain sorrows, this traditional approach to procurement is no longer sufficient. In order to pursue a more flexible, innovative approach, ERP systems, the heart of any manufacturing operation, need to be as agile as possible. However, according to research, data governance issues, complex hybrid IT environments, and outdated legacy technology are hurting almost 40 per cent of manufacturers across the board.
It is also incredibly risky and costly to pursue widespread innovation at a time when businesses are still navigating the instability of the pandemic. This leaves automotive manufacturers stuck between a rock and hard place.
Composable ERP can save the day
Faced with these insurmountable challenges manufacturers need to find a new direction for the innovation they need. This has created a space for a new approach – composable ERP.
In recent global research of 1,675 senior IT executives, it was discovered that a staggering 94 per cent of organizations worldwide are embracing a Composable ERP strategy, a customisable, ‘brick by brick’ approach to innovation. This gives laser focus on specific areas of improvement without having to untangle complicated, sometimes decades old legacy IT infrastructure.
Through this cutting-edge composable approach, manufacturers can maintain a flexible platform to bridge the gap between legacy, modern applications and applications used by their suppliers. This will untangle and simplify the entire ERP ecosystem, creating new ways to do business, and therefore transform the manufacturers dilemma in procurement processes.
An integrated future
Despite the flexibility Composable ERP provides, integrating a whole host of modern applications to work collaboratively and share data is still a monumental challenge. 47 per cent of businesses have indicated their current integration solutions struggle to overcome their business challenges and 38 per cent can’t cope with their complex hybrid technology environment.
Therefore, many businesses, including manufacturers looking to survive the chip crisis are seeking out integrated platforms to help them modernise. Integration platform as a service (iPaaS) can help solve today’s implementation challenges by providing critical application integration and data management to help businesses thrive in complex hybrid technology environments.
With these platforms, a composable ERP approach is possible, and modernisation can continue in spite of the many obstacles. In fact, Gartner recently predicted that by 2023, organizations that have adopted this approach will outpace competition by 80 per cent in the speed of a new feature implementation.
If the auto industry is to withstand the chip crisis and come out the other side thriving, composable ERP may offer them the vital helping hand.