The automotive industry across Europe is in transition. New market entrants, US tariffs and a changing technology base are adding competition, cost and uncertainty. The impact is clear, with the number of vehicles manufactured in the UK falling to the lowest level since 1953 this summer. Legislative confusion, such as the relaxation of electric car targets, further underlines the challenges of forecasting and planning in an industry that requires years of product design and development for each new vehicle.

Is now really the time to embark upon a major digital transformation project and ERP migration? With the deadline for the move to SAP S/4HANA set in stone, the question is moot: automotive SAP customers have to invest now to ensure their vital operations are safeguarded and supported after 2027. And the benefits are tangible, not only creating a step change in efficiency and productivity but providing a foundation for AI and insight to support new market models, meet customer expectations and deliver essential operational agility.

Bodo Philipp explains how the combination of SAP expertise and automotive heritage is supporting companies as they transition to the next iteration of automotive business model…

ERP Migration

Forced technology change is never popular, but at a time of accelerated digital innovation, it should also be less of a concern: organisations are proactively replacing legacy applications, including ERP, as part of cross-business digitisation plans.  They are replacing dated on premise systems with powerful cloud-based alternatives and gaining tangible operational gains as a result.

However, while the deadline to migrate from legacy SAP technology to S/4HANA has been in place for several years, the automotive industry response has been extremely mixed. Forward thinking automotive companies are actively embracing the opportunity, recognising the importance of achieving the next level of efficiency and agility as well as creating a platform to leverage both AI and customer insight to drive change. These companies have accepted the need to let go of traditional processes, culture and mindset and are looking for support in exploiting the next generation of ERP innovation to safeguard long term success.

Others, however, are finding the move to S/4 HANA hard to comprehend. For an industry that prides itself on a history of leading the world in manufacturing and logistics efficiency, underpinned by highly tailored, business specific ERP systems, the one size fits all approach of modern cloud-based solutions represents a daunting cultural as well as technological change.

Automotive Specific Expertise

So, what is the way forward? How can automotive companies ease the migration to S/4HANA whilst also maximising the value of digital transformation to accelerate change? SAP expertise is, of course, key but far more important is a deep understanding of the automotive industry. The ability to combine automotive understanding and the ability to address process, methods, organisation, tools and data is the key to achieving this step change in operations.

The cultural aspect of the migration is significant. Embracing a new ERP solution affects every aspect of the organisation, and one of the biggest challenges is moving away from the familiar territory of systems designed specifically to the organisation’s requirements. New cloud-based ERP deployments such as S/4 HANA require businesses to mould the organisational shape, process and culture to software. This demands process change and education alongside proactive cultural change management to empower both individual people and the organisation as a whole.

This is not, of course, a process that can be rushed. While SAP has designed the optimum set of processes to support a step change in business efficiency and productivity, S/4 HANA is a generic ERP solution. There are inevitable automotive specific aspects that need to be considered and managed. Combining in depth understanding and expertise within the automative sector with SAP experience is key to understanding how automative processes can be optimised to support the specific demands of this industry.

Transforming Performance

Process change provides an enormous opportunity to transform business operations. At a time when competitors are entering the market with fully automated and digitalised processes, the speed and effectiveness with which SAP S/4 HANA can be deployed to support the next generation of efficiency will be a vital enabler of effective, productive business.

From automating material flow throughout the entire production process to creating a transparent supply chain, overhauling legacy processes by following the model defined within the ERP solution accelerates change. In addition to delivering the improvements in control and performance required, critically this streamlined approach allows automative organisations to focus both on other areas of business differentiation, such as enhancing the luxury brand reputation, and vital compliance requirements, such as measuring and reporting Scope 3 emissions.

To support organisations to achieve ERP migration, SAP has created a best practice methodology. But, again, that is also a generic approach. This is where a migration partner with deep automotive heritage and understanding as well as SAP expertise is key not only in delivering S/4HANA but matching the deployment model to key operational goals. Empowering automotive organisations to leverage proven ERP deployment models to not only meet the objectives of transformed efficiency and productivity, but also support faster iterations of product design and development and improve collaboration to drive down costs and reduce time to market.

Conclusion

The automotive industry is poised on the cusp of fundamental change. Not only has the competitive landscape transformed completely within a few years but the entire industry is now predicated on software led design. The pace of innovation has accelerated and the shift to EVs has changed customer brand perception.

Automotive companies need to urgently embrace digital technologies to retain market share and carve out a new niche and brand persona to appeal to changing customer expectations. They need to transform visibility and retain profitability despite the unpredictable global economy and geopolitical landscape, the constant supply chain disruption and unexpected financial hurdles.

The migration to S/4 HANA is not just a vital step on the digital transformation roadmap, it is the foundation for the next stage of automative business. By unlocking the power of real-time cross business data to leverage AI and insight manufacturers can do more than respond to a challenging marketplace: they can proactively drive the new automotive industry model. For an industry in transition, digital transformation, including SAP migration, is vital to build a foundation for future success.