Transforming the Automotive Supply Chain with AWS

“Times are changing” – when Bob Dylan published his record breaking album in 1964, the automotive industry was riding on a wave of success. Cars became widely available for the public, and luxury icons such as the Porsche 911 were born. Today, Bob Dylan’s words resonate much more with anyone involved in the automotive industry, in particular suppliers, who are faced with new opportunities and threats. Strategy consulting experts have identified major challenges and the urgent need to transform for suppliers who want to emerge as winners. In this blog, we offer an overview of some of those challenges. We want to highlight how top suppliers have chosen ways out of the mode of stagnation. Finally, we recommend action fields for those, that are not early adopters.

Figure 1: Traditional versus new automotive industry supply chain

The danger of getting trapped by the need to save money and the urgency to invest

The industry trends of connected, autonomous, shared and electric mobility (CASE) are widely known. The speed at which they’ve evolved is evident in the sales figures of electric passenger cars, achieving a 9% global market share of new car sales in 2021, up from 2.5% in 2019. Alongside comes the opportunity for growth and high yields, exemplified by analyzes that suggest the connected mobility market will experience double-digit growth in the next 5 years. Suppliers, just like OEMs (Original Equipment Manufacturers), are facing the challenge to carry out large investments in order to follow those trends. The situation becomes more complex, when we consider the challenges posed during the Covid-19 pandemic. OEMs and suppliers alike were hampered by inflation, supply chain disruptions, and ultimately reduced sales volumes. But if suppliers don’t invest, others will.

“Speed is disproportionally important to every business at every stage of its evolution,” said Andy Jassy in his 2021 Letter to Shareholders. It is especially true when an industry is transforming. There are specific areas where automotive suppliers are in a race with old (and new) competitors for the best solutions: 1/ The reduction of number of parts in an electric versus a combustion powertrain, 2/ the standardization of vehicle compute hardware and abstraction of software, 3/ the growth of vertical integration of OEMs in the software domain, 4/ the consumer expectation of seamless customer journeys across horizontal domains, 5/ the trend of diversification of OEM supply chains, 6/ new non-OEM customer opportunities such as commercial fleets, energy and charge point providers, non-automotive mobility providers and more. Those disruptions in the industry challenge suppliers to balance both money saving and investments for the future.

Think big and start small offers reduced risk and incremental revenue growth

A major thread of transformation is the break-up of silos like the linear supply chain, moving towards a new era of the automotive landscape. “Ultimately, collaboration across the supply chain needs to be enhanced. In the past, each component was produced separately within a silo, but those barriers are gradually being removed as a more holistic approach with different parts of the value chain communicating on the overall objective.”, states Ultima Media in their report.

The trend towards collaboration and partnerships has been accelerated by companies like AWS. It has become a rewarding path for suppliers to work with AWS and to iterate on new business ideas. The mechanisms that AWS brings into such engagements have their foundation in the Amazon Culture of Innovation and work best when all parties bring in their best talents and a desire to innovate. There are exciting examples of automotive suppliers that have stepped out of their comfort zone to tackle meaningful challenges and we provide a non-exhaustive overview below that aims to inspire others.

Connectivity

AWS worked with Harman and Verizon to help make Cellular Vehicle-to-Everything (C-V2X) technology possible. C-V2X technology allows vehicles to “talk” to their surroundings including other vehicles and infrastructure. The driver can be notified about adverse weather, dynamic road conditions, accidents, and much more.

Product

• Bosch Rexroth, one of the world’s leading suppliers of drive and control technologies, transitioned to provide more digital services to its customers. The company’s new service package, CytroConnect Solutions, is powered by AWS. This solution monitors the current condition of industrial equipment connected to the Internet of Things and predicts when maintenance and replacements should occur.
• SKF, the world’s largest bearing manufacturer, is optimizing its production processes, reducing costs, and providing a better experience to its customers, by using AWS. SKF deploys AWS machine learning, data lakes, databases, and more to help it speed innovation. SKF also announced launch of SKF Axios, a new condition monitoring offer that provides an anomaly detection solution for a wider range of applications and customers.

Platform

• The Automotive industry is an example of an industry with high levels of labor divisions. In this tightly-coupled network, Bosch argues that the resolution of a quality claim from a car can take months due to manual processes of information exchange between OEMs and suppliers. Sometimes this can even result in unsettled claims, inhibiting fair penalties, and low interest to execute on improvement actions on all sides. To break this pattern, Bosch invented Covanto, a service framework that enables anonymous data sharing between companies by leveraging the cloud so that Tier-n suppliers can automatically upload data allowing ML algorithms to discover patterns and issues.
• Automakers are embarking on a digital transformation journey to become more agile, efficient, and innovative. As part of this transformation, Continental created Continental Automotive Edge (CAEdge) – a modular multi-tenant hardware and software framework that connects the vehicle to the cloud. With this solution in place, Continental enables OEMs, suppliers, and other partners to spin up developer environments within minutes.

Marketplace

Bosch and AWS aim to improve efficiency and sustainability in the transportation and logistics industry. Their plan is to offer logistics companies and freight forwarders across the globe quick and easy access to digital services through a marketplace and data platform, called Logistics Operating System (L.OS). It’s website became available this year.

Open-source

AWS is actively contributing to open source initiatives (like SOAFEE), with the aim to make it easy for all players to innovate on behalf of their customers. Automotive Suppliers are often leading the way, as standardization helps to achieve scaling of solutions across OEMs. This principle is also at the heart of the AWS cloud and its Automotive portfolio. As an example, we recently launched AWS IOT Fleetwise, which uses VSS to provide an easy way of capturing vehicle data from single vehicles to large fleets. Another example is provided by the Autonomous Driving Data Framework (ADDF), that offers pre-built sample data, centralized data storage, data processing pipelines, and pre-built dashboards.

Skills

It’s easy to underestimate the importance of skills and experience when it comes to transformation projects in general, and cloud in particular. Not only the technology is changing but also operations and even sales. In addition, hiring new talent is challenging as experts are in demand. During a panel discussion at the AWS Auto Accelerate Event 2022, Ozgur Tohumcu, AWS Automotive Global Sales Director, emphasized “Tier 1s’ ability to transform themselves is directly correlated to their ability to hire and develop top software talent as vehicles are including more and more lines of code.” AWS Training and Certification enables companies to build talent in addition to hiring it, and leading automotive suppliers have engaged in building training plans targeting 1000+ staff members per year. “Training that enables employees is a critical part of any company’s ability to continuously transform and compete in today’s business environment.”, concludes the Forrester Total Economic Impact Study, and highlights 234% ROI achieved by customers who invest into AWS cloud skill development.

Move Fast or Stay Last: Tapping Data’s Potential

Those are just a few examples of automotive suppliers that are finding their path in the area of cloud and digital. Many are still driving with the handbrake on, one of the reasons being so-called “analysis paralysis,” or the phenomenon of stagnation because leaders are overthinking the situation.

Very few automotive suppliers have embarked on the opportunity to partner with cloud companies for new products and services, although suppliers have a wealth of knowledge and capability and can help to solve some of the industry’s biggest challenges. An overview of the AWS Partner Network Solutions is available. It’s required to explain how easy it is to create solutions or scale solutions by partnering with AWS. The AWS Partner Network offers build, sell, and market support with dedicated teams supporting customers to build software-as-a-service (SaaS) solutions, developing a solution portfolio, and selling through AWS channels.

The area of opportunity is immense. With the automotive market for global cloud based solutions to reach $134. 4 billion by 2027, there are many open doors for more innovation and success. Where to start? Capgemini, one of our partners suggests developing a digital strategy process that is not tied to OEMs. This is just one example of how the automotive industry becomes more democratized, and it brings us back to the overall transformation. In the words of Sigrid de Vries, Secretary General at CLEPA (European Association of Automotive Suppliers) “In the future, we will increasingly see different kinds of partnerships and cooperation. The more traditional vertical supply chain is enriched by new participants and an ecosystem of partners.” See Deloitte’s report on automotive innovation for more details.

So what are you waiting for? Reach out to us via the AWS Automotive website and let’s transform the industry! It is up to you whether you move fast or you stay last.