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Customer LoginsBest practices of leading automotive suppliers
As we transition from a newsletter format to the IHS Automotive Blog, this final edition of the IHS Automotive Quarterly Newsletter draws upon expertise in our Components Research Team to present a number of supplier-focused articles centered on the theme of "best practices." The lead article by team leader Eric Fedewa discusses best practices in terms of understanding the business side of the automaker-Tier 1 supplier relationship-and negotiating the best deal. Best practices encompass more than just an understanding of, and extracting value from, business and investment issues. Leading suppliers also understand the likely evolution of the technologies in the areas in which they play, and the value of all facets of those technologies to the vehicle maker as well as to the ultimate customer. Several articles in this newsletter illustrate the variety of insights that can be gained from assessing various aspects of their products.
So much of the functionality of a vehicle is now controlled through software that no discussion of supplier technology would be complete without covering this "soft" side of the vehicle. A challenge that had been facing the automakers was that their product cycles-up to 10-plus years long-are multiple times the cycle life of consumer electronics (some 18 months). It was often said that the software and functionality of the infotainment center of a vehicle was obsolete before the vehicle was launched given the three- to five-year time-to-market typical of new vehicle programs. The ability to update software remotely addresses much of this challenge, enabling the OEM to offer the latest functionality enabled by the hardware on the vehicle. This suggests that leading suppliers will not only offer remote download capability, but will have forward looking hardware that anticipates future functionalities. The value of this capability is reflected in both improved customer satisfaction and a higher residual value of the used vehicle. (See a related article about a Tesla teardown.)
A second article discusses the issues facing those offering or seeking to use new low-impact refrigerants. It is an example of the kind of twisted path that regulatory compliance can sometimes take. The situation is further frustrated by the fact that the final customer gets no additional tangible benefit from the new refrigerant, while the OEM and suppliers all carry considerable additional costs. The good news in this example is that by using the new refrigerant, the OEM can gain some "credits" toward CO2 compliance. These credits are earned owing to the lower climate-change impact of the new refrigerant. Because the climate-change benefits do not appear in the homologation tests, they must be mathematically applied to the vehicle family after the fact. These credits are just as valuable as technologies that directly result in lower climate-change emissions during the test. Suppliers and OEMs need to be mindful that these credits have a market value that should be included in the price paid to the supplier for that technology. Other technologies that provide such "off cycle" credits are those that reduce the environmental impact of the vehicle but do not directly affect test results. Examples of such technologies include low-energy lighting and "eco" driver aids. Suppliers developing new products need to be mindful that their parts may also qualify for such credits, and regulations need to updated accordingly.
Of course, no current article on how supplier technologies are affected by best practices would be complete without a discussion of autonomous driving. Leading suppliers in this area will be cognizant of all the issues surrounding the introduction of self-driving vehicles. Authors Jeremy Carlson and Helena Perslow look at the legal issues and social "license" relevant to the adoption of autonomous driving. The current concerns over the airbags and ignition switches so much in the media these days will inevitably result in even greater scrutiny being applied to the technologies that enable driverless vehicles. Leading suppliers will be building redundancies into their systems and undertaking failure mode and effects analysis at levels once seen only in the aerospace industry so that legal and societal expectations can be adequately met.
"Best practices" encompass understanding and valuing all aspects of supplier-developed technologies and production capabilities. Every facet offers benefits to some aspect of an OEM's business. Leading suppliers will be totally aware of, and will effectively negotiate the value of, what they are offering.
By Phil Gott, Senior Director, Long-Range Planning
Posted January 16, 2015