Transforming The Automotive Industry SIX WAYS BUSINESSES CAN STAY ONE STEP AHEAD
Overview of the automotive industry Some analysts believe that the automotive industry as a whole will change more in the next ten years than it has in the previous 100. Products, processes and markets are changing faster and more dramatically than many expected. And as revealed in a recent PwC report, suppliers have become important innovation partners – now responsible for more than 60% of the value added from technical developments. This is why now is the time for the industry to think hard about its future. What role will automated vehicles play in the society of tomorrow? How quickly will the public jump on board the benefits of driverless cars? What about mobility apps and ride sharing initiatives? Will these mean fewer cars on the road? What will the impact be on the wider supply chain? And sustainability initiatives? Against this volatile backdrop, a partnership approach is vital between all involved in the automotive industry – not only to support global, large scale ordering, but to combat the challenges posed by a highly integrated and global functioning supply chain.
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Suppliers and manufacturers are increasingly looking to specialised, focused experts in their fields – from logistics to data and of course packaging.
“Now is the time for the automotive industry to think hard about its future.”
Henry Ford, the father of the automotive industry, once said this: “If everyone is moving forward together, then success takes care of itself.” As the man who ushered in the assembly line method of production, not to mention enabled widespread access to vehicles for the first time, he clearly had a head for growth and innovation. So, what does moving forward look like in today’s business environment? Pulling on thought leadership by other automotive experts, as well as our significant on-the-ground expertise, this white paper outlines six key considerations for every business in the industry. Demand, sustain, analyse, fuel, collaborate, begin again. Read on to find out the importance of each of these to the future of the automotive industry, and why businesses targeting growth will make decisions bearing these actions in mind.
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Demand The automotive industry is growing at a substantial pace. According to figures from the ACEA, the European Automobile Manufacturers’ Association, in 2015 alone 15.8 million new units were sold in the EU. Figures from PwC meanwhile show that in the same year new car registrations in the European Union rose 9.3% year-on-year, to 12.6 million units. While this doesn’t beat the pre-recession 2007 figure of 18 million vehicles sold, consumer demand is moving undeniably upwards. Feeding this is a healthy supply from Europe’s manufacturers, who according to the ACEA in 2015 produced 18.4 million units, 20% of the global motor vehicle production. In the future, however, this demand is set to diversify. Consumers are demanding more variety in the makes and models they choose, to reflect their interests and status. This has meant a significant growth in market niches – SUVs, for example, as well as mini cars and mini vans. German manufacturers between 2007 and 2012 increased the number of model series produced by a full 18. Consumers want more options, and fast.
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So, what does all this demand mean for automotive businesses and their plans for the future? In short, they themselves must demand more. Servicing this enhanced consumer demand requires all those involved in the manufacturing and distribution of vehicles to speed up routes to market, to deliver what consumers want more quickly. To achieve this, the automotive industry will rely on everyone pulling together to create a slicker supply chain, which will require innovation every step of the way.
“Demand more from your supply chain.”
DS Smith’s eye for accuracy The new Birmingham automotive hub uses 3D technology to develop optimised packaging for the heavy duty market, where large industrial items are transported in and protected by corrugated. Using state-of-the-art machinery, DS Smith is able to create accurate and to scale models of components and the optimal packaging required to transport them, meaning faster routes to market. Insight and creativity drive the whole process at similar hubs across Europe.
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Sustain Alongside the launch of new models, features and colours, higher standards in terms of sustainability are hugely important. The green agenda is now a part of the conversation at all levels, partly because with carbon reduction inevitably comes a fall in cost, but also because it’s what consumers expect. This is only likely to increase as concerns around the impact of air pollution become more acute, and of harmful NOx emissions from the use of diesel. In January 2017, the subject hit the headlines as London recorded dangerously high pollution levels, prompting the city’s mayor to call a state of emergency. Limits to the number of polluting vehicles in the UK capital are likely just around the corner, mirroring moves in other European metropolises such as Rome and Milan. As a recent PwC report on future challenges in the automotive industry points out, younger consumers, particularly those living in cities, are opting to forego purchasing a vehicle in favour of other mobility options such as ride sharing apps for this very reason.
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Cue the rise in new technologies. Demand for less polluting vehicles is increasingly outpacing that of traditional models. Figures from the UK’s Society of Motor Manufacturers and Traders show the auto market as a whole grew 6.3% in 2015, but demand for pure electric vehicles rose 48% to nearly 10,000 vehicles and demand for plug-in hybrids soared 133% year-on-year to over 18,000 vehicles.
“Sustain growth by cutting carbon from the supply chain.”
Manufacturers are recognising the trend and opting to cut carbon from the supply side by maximising efficiencies wherever possible and producing models that are greener by design. New models are also launching to tap into nascent demand – Tesla, a leader in battery-powered vehicles, will launch its first affordable model by the end of 2017.
Boosting sustainability with DS Smith An award-winning project saw DS Smith partner with Jaguar Land Rover to develop a packaging concept for the bulk shipping of bumpers. The in-house designed result allowed 25% more bumpers to be shipped per vehicle than the previous version. The solution also enabled 38% more bumpers per shipping container and an increase of almost 100% in terms of warehouse storage efficiency, winning at the World Packaging Organisation’s WorldStar Awards as a result. Transforming The Automotive Industry 06
“Analyse your business closely to see where new technology and specialist expertise can provide a boost.”
Analyse The automotive industry is increasingly relying on automation, robots and artificial intelligence to cut costs as well as waste. Whether it’s warehouse robots or delivery drones, new technology is revolutionising the supply cycle. Alongside these efficiencies, technology is also introducing streams of real-time data that could further increase the pace of change. Tapping into this potential requires a high level of ability, not only in terms of spotting opportunities to automate and improve processes, but in being able to process the insight on offer. For the automotive industry this means the need to upskill employees with valuable expertise in managing and working alongside robotics and artificial intelligence, as well as data and coding. These skills are going to become more highly sought after with the inevitable growth in autonomous and connected vehicles. As logistics specialist DHL points out in a recent report, it is a question of when, not if, driverless vehicles become commonplace in the towns and cities of Europe. Milton Keynes in the UK and Paris in France are already home to driverless vehicles, with plans under way to introduce automated trucks to the UK’s motorways in the near future.
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On mainland Europe, meanwhile, a fleet of trucks largely drove themselves across Europe. Six convoys of semi-automated smart trucks travelled to Rotterdam’s harbour from as far afield as Sweden and southern Germany, after an experiment its organisers say will revolutionise future road transport on Europe’s busy highways. Savvy automotive professionals will be watching such developments with interest. At every point in the supply cycle automation is going to become more important, as will hydrogen cell technology and even artificial intelligence. Progressive businesses able to quickly make use of new technology as it arises will see positive results.
Specialist advice from DS Smith Every one of our customers can call on our expert analysis to support in many different areas. Our paper scientists are constantly striving for a better understanding of paper performance, behaviour and usage. Our plastics division boosts the circular economy with light-weight, highquality and re-usable products designed to be efficient and used in continuous cycles without losing their integrity or quality. Our packaging performance teams carry out audits of entire supply chains to ensure the right corrugated pack is being used, with no more fibre than necessary.
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Fuel It’s not only the use of connected and autonomous technology that is changing the automotive industry. The fuels used to power cars are also developing at a rapid pace. Electric and hybrid vehicles have now become a mainstay in city centres, while the necessary infrastructure to venture further afield is thought by many to be just around the corner. All the major brands are experimenting with battery power. For example, VW has launched Sedric, its first driverless car, which is powered by battery alone. The arena is also appealing to new entrants. German postal and logistics group Deutsche Post DHL is planning to start selling electric delivery vans in 2017. The StreetScooter is a four-wheeled electric van with a range of up to 120 kilometres. It was originally developed for its own use, for delivering mail and parcels, but the group plans to start mass production shortly and aims to be producing 10,000 vehicles per year. In a marketplace that is already highly complex, the development of the production, distribution and aftercare infrastructure necessary to facilitate battery power’s entry to the mainstream will only add further nuances. 09 Transforming The Automotive Industry
The impact has yet to be seen, which means now is the time to understand what alternative fuels mean for the automotive supply cycle.
“Fuel innovation and growth by embracing alternatives.”
In the short term businesses will need to consider how and where production volume can be increased as and when demand rises. This will be a key driver towards reducing system costs to make alternative fuels more accessible. In the longer term, system complexity will need to be tackled, to reduce the cost of individual components and reduce the overall price further.
Innovation leaders As a business driven by innovation, we are constantly exploring what impact alternative solutions can have on our customers’ productivity and future growth. By using our creative expertise from design to production and supply to recycling, we can offer high quality, innovative multi-material solutions and great service that looks at the whole, not just one part. With 700 Designers in the packaging division alone, plus Packaging Engineers and Testing Technicians, our experience is second to none.
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Collaborate Heightened competition and a blurring of boundaries in terms of which businesses make up the automotive industry are bringing both disruption and innovation to the market. To maximise the opportunity and minimise the risk, what strategy should the automotive industry take? The answer could well be collaboration. Research by McKinsey points to the need for heightened competition and closer cooperation between suppliers and manufacturers. In the report The Road to 2020 and Beyond, complexity and cost pressure are highlighted as pinch points. Car buyers are becoming increasingly demanding, seeking region-specific features, performance and styling that reflects individual taste and status. Until relatively recently, major brands would build four or five different models off a single platform, but will now create up to 20. This more complex and diversified landscape will be what drives closer collaboration, as well as healthy competition, not only to meet customer demand but to seek sustainability improvements and efficiencies in the supply chain. This is only going to increase as traditional car manufacturers face competition from multiple fronts: Mobility providers, for example Uber; tech giants, for
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example Apple and Google; and speciality manufacturers such as Tesla. To enable best practice across the industry, businesses must work more closely with their suppliers who are experts in their field. Whether it’s start-ups and larger businesses, or specialists and generalists, this closer collaboration will unlock opportunities for the entire automotive sector to grow.
“Embrace collaboration to find new solutions and opportunities.”
Working together to deliver impact At its core, collaboration is not about answering emails or requests for help but more about bringing together people with alternative perspectives to solve a problem or create something new as a team. That’s why at DS Smith we are vocal exponents of our PackRight Centres – physical places where true collaboration between all sorts of functions in our customers’ businesses becomes possible. Together we explore packaging’s performance at each stage of the supply cycle, drawing on cross-industry insight and new technologies to generate ideas, boost performance and pass on best practice.
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Begin again Before an average German mid-sized vehicle has been driven on the open road for the first time, 86% of the total resources it will use during its entire lifetime have already been taken up by its production. This is why it is important to consider natural resource use across a vehicle’s entire lifecycle. When a single car is composed of up to 40,000 separate parts, this is no mean feat. Take the example of a single part that we might produce – a headrest moulded in expanded polypropylene, for example, or a foam roof liner. When designing a new vehicle, as the supplier of each of these parts responsibility lies with both ourselves and the manufacturer to find a solution. The target is zero waste, which with careful planning should in the future be achievable. The European Commission’s end of life vehicle directive dictates that producers have extended responsibility. Every year vehicles reaching the end of their lives in the European Union generate more than eight million tonnes of waste.
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To minimise the impact of end-of-life vehicles on the environment, the design of vehicles for recycling and recovery must be adapted to maximise reuse, recycling and recovery. Similar requirements exist elsewhere, including China and Japan, and their scope is likely to increase. It’s not only sustainability improvements that can be found when approaching vehicle production in a cyclical way. Cost efficiencies and other sources of improvement are also forthcoming, allowing the automotive industry to come together and target innovation.
“Be brave. New beginnings offer huge potential.”
Closing the loop We don’t see waste as discarded, we see it as a resource to make something new. Through our perpetual devotion to achieving zero waste, DS Smith’s recycling division is the only provider who can actually deliver this ambitious goal of turning 100% of the resources sent to us back into something useful once more.
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Analyse to see where new technology and specialist expertise can provide a boost – DS Smith provides industry-leading knowledge and solutions so our customers can access best practice.
Progressive businesses are those who are able to quickly make use of new technology as it arises.
The auto market as a whole grew 6.3% in 2015. Demand for pure electric vehicles rose 48%. Demand for plug-in hybrids soared 133% (source: SMMT).
In a marketplace that is already highly complex, battery power’s entry to the mainstream will only add further nuances – now is the time to understand it means for the automotive supply cycle.
Analyse
Fuel Fuel innovation and growth by embracing alternatives. DS Smith constantly explores what new technology and supply chain partners can bring.
Automation is going to become more important to the automotive industry, as will hydrogen cell technology and artificial intelligence. Manufacturers are opting to cut carbon from the supply side by maximising efficiencies wherever possible and producing models that are greener by design.
Sustain growth by cutting carbon from the supply chain. DS Smith adopts a cyclical approach to target zero waste by re-using and recycling wherever possible.
Transforming The Automotive Industry SIX WAYS BUSINESSES CAN STAY ONE STEP AHEAD
Sustain The green agenda is now a part of the conversation at all levels in the automotive industry, because it’s what consumers expect.
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Traditional car manufacturers face competition from multiple fronts. Heightened competition and a blurring of boundaries are bringing both disruption and innovation to the market.
Demand more from your supply chain. DS Smith uses the latest technologies and underpins everything we do with insight and creativity to foster supply cycle thinking.
Consumers are demanding more variety in the makes and models they choose, forcing manufacturers to speed up development times and suppliers to respond faster.
When designing a new vehicle, responsibility lies with both suppliers and manufacturers to target zero waste. Each component part must be re-used – all 40,000 of them.
To enable best practice across the industry, businesses must work more closely with their suppliers who are experts in their field.
Collaborate
Be brave. DS Smith believes new beginnings offer huge potential. We don’t see waste as waste, we see it as a resource to make something new.
Demand
Begin Again
Until relatively recently, major brands would build four or five different models off a single platform, but will now create up to 20.
Before a vehicle has been driven, 86% of the resources from its entire lifetime have already been taken up by its production. A vehicle’s entire lifecycle must be considered.
Embrace collaboration to find new solutions and opportunities –DS Smith provides people with alternative perspectives to solve a problem or create something new in our Packright Centres.
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Automotive innovation at DS Smith At DS Smith we take our role as innovation partner very seriously and are constantly looking for new ways to support growth in the automotive industry – whether that’s building the world’s first origami inspired driveable car, making use of 3D technologies to speed up development times, or introducing testing to a supply cycle to pinpoint causes of friction, we deliver more with less every single day. Providing everything from single, double, triple and multi-layered corrugated board for Aftermarket to plastic crates designed for bulk goods and internal fittings for Original Equipment, DS Smith has a packaging solution to maximise performance at every stage of the supply cycle. Our industry insight and creative design solutions provide an unbeatable double act.
Through our expertise and technological capabilities, we can design components to the strictest tolerances and meet the highest standards. Consumer demand is shifting, and sustainability is becoming ever more important as customers demand more assurances that companies are operating in an environmentally sustainable way. Automation is offering huge potential to change the way humans interact with the road, while developments in fuel technologies are shifting expectations. To truly take advantage of the potential requires close collaboration between all involved in the automotive industry, and to not be afraid of change and starting again.
Our understanding of the automotive sector goes well beyond providing exceptional packaging. We also provide numerous different components that make up today’s modern car – energy absorbent, lightweight and exceptionally well designed components in Expanded Polypropylene (EPP), Expanded Polystyrene (EPS) and Extruded Polypropylene (PP).
“We deliver more with less every single day.”
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Further reading www.dssmith.com/automotive www.acea.be www.smmt.co.uk www.mckinsey.com/industries/automotive-and-assembly www.strategyand.pwc.com/trends
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