Reliable program management has become a critical competency for automotive suppliers. It drives customer satisfaction and quality requirements. Just as importantly, it also determines financial success. But recent shifts in the industry, namely electrification, supply chain disruption, and a spiraling number of OEMs, have stressed the traditional processes and IT systems used today. For many Tier 1 and Tier 2 suppliers, the status quo just doesn’t cut it anymore.
Can your practices and tools handle the demands of today’s marketplace? In this post, we will discuss the challenges program managers face, the changing original equipment manufacturer (OEM) landscape, and opportunities for improvement.
Modern automotive suppliers rely on program management to stay competitive in the marketplace. It’s how managers keep track of a host of evolving tasks, keep pace with dynamic and condensed schedules, and meet design specs—all while communicating with OEMs and Tier 1 suppliers. And there’s more.
Program managers must also keep their own executives up to date on progress, helping them identify and implement corrective actions when needed. The program manager carries a huge load, and his job performance directly affects profitability and customer satisfaction.
With such high stakes, organizations should be prioritizing robust program management. But findings from Lifecycle Insights’ 2021 Automotive Program Management Study suggest otherwise. Respondents painted an alarming picture of program managers scrambling to stay on top of swirling program chaos.
The auto industry is evolving dramatically. New mobility models are emerging. Consumers are demanding more personalization and fit-for-purpose mobility. Sustainability concerns have birthed a host of emissions and regulatory incentives. There are new safety standards for just about everything. And electrification and autonomous or assisted driving features are becoming ubiquitous.
These changes translate into a drastically altered OEM and Tier 1 supplier landscape. Electrification has put a premium on battery systems, electrical powertrains, and electrical/electronic systems. Assisted and autonomous driving features, among other requirements, have also increased the need for software. As a result, companies from outside the industry see new opportunities for their own well-honed competencies. And the number of OEMs has skyrocketed.
Of course, many of these new players have never manufactured products at this scale. Satisfying such OEMs and suppliers can be a tall order, even more so when they are unfamiliar with the challenges involved.
One of the most impactful changes to the industry is OEM and model proliferation. The volume of programs is growing much faster than overall business value because there are so many more models from so many more OEMs. There doesn’t seem to be any end in sight. But now, this program growth is colliding with organizations’ program management capacity and is pushing it to a breaking point.
So, is program management meeting these challenges? In a word, no. OEM customer growth and proliferating programs are wreaking havoc on overall performance—and suppliers’ bottom lines.
Lifecycle Insights’ 2021 Automotive Program Management Study asked respondents to assess their program performance, focusing on whether early errors or problems cause downstream issues. The results were striking. It is clear program management competencies aren’t keeping pace with the rising number of programs, engineering changes, and compressed schedules.
Let’s look at the data.
According to survey respondents, rising complexity and out-of-date practices are to blame. Organizations can’t stay ahead of the issues that, too often, turn into costly and time-consuming downstream disruptions. Certainly, the degree to which this affects development and delivery varies from company to company. But when only 17% of respondents say these issues aren’t a problem, program management obviously isn’t as effective as executives would like. Not only that, but nearly half of respondents (42%) consider program management errors a moderate or significant problem that leads to unnecessary disruptions.
The bottom line? Automotive suppliers are paying a high price for less-than-ideal program management performance.
Program management is largely focused on that period between contract award and the start of volume production. Auto suppliers commit to pricing and delivery when the program is awarded before the development and production engineering stage. Existing manufacturing systems work well once they kick into gear. But that’s usually after the quoting, launch, and development phases of the program lifecycle. Suppliers are left scrambling to support these earlier, critical stages with in-house systems and numerous spreadsheets. Strong program management processes are vital to keeping the program on track and on budget. But why is program management so difficult to execute well?
One reason is that most suppliers lack IT support for program management. Program managers must coordinate progress, keep different departments in sync, communicate with customers, and find ways to anticipate and avert downstream problems. But when program managers rely on manual, ad-hoc processes, they can’t keep up with the growing volume of programs and the accelerated pace of change. These practices are directly linked to problems, yet are still widespread in the industry.
Program managers must email or call people in different functional departments frequently to get progress updates. They exchange models and specifications with others. They pull data out of multiple systems manually, and then enter the information into spreadsheets to share with other stakeholders. These processes eat up a lot of valuable time. Worse, they also increase the risk of errors due to inaccurate, missed, or out-of-date information.
Automotive suppliers face unprecedented challenges in today’s market. As they move to execute new programs, it is clear that good program management matters—a lot. Findings from Lifecycle Insights’ 2021 Automotive Program Management Study demonstrated that suppliers who can figure out how to execute program management well are much more likely to hit their margin targets—and protect their organizations’ bottom line.
Organizations can improve program management efforts by replacing manual, ad-hoc processes with automated systems. As a result, they will insulate themselves against the effects of the changing OEM landscape and increasing product complexity.