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Keeping track of product development

18 April, 2018

Phil Biggs
Director, PwC US

From the floor of the Cobo Center at the 2018 SAE WCX World Congress there was no shortage of leading-edge technology on display. Alongside technology and innovation growth in the auto sector, we are of course seeing new and challenging business issues emerge. Global automotive engineering teams face significant financial and business risks – from expanding vehicle technology requirements and scarce engineering talent to increasingly complex geographic, functional and R&D demands for OEMs and the automotive supply chain. The arrival of mobility and autonomy on the scene only complicates the issues. Talent demands are shifting and there is greater urgency to create accounting and tracking processes, as product development investments surge in many segments within the industry.

Product development lifecycles in the automotive industry are accelerating exponentially as tech and auto sectors combine R&D resources. More in-vehicle technology applications are being introduced at a faster pace. This is causing advanced project timelines to compress from five years to less than 36 months in some cases, as product concept through applied design to vehicle commercialization accelerates.

According to the Center for Automotive Research in Ann Arbor, the realization time to customer program delivery has shrunk from a 6-year cycle (2005) to a 4-year cycle (2010) to a 2-year cycle today. Coupled with a continued shortage of engineering resources in North America and other global regions, the pressure on product development teams is intense.

As the industry sees dramatic growth this decade there are acute business problems resulting from the accelerated product development lifecycle. Capacity planning is becoming more complex. There is a critical need to better define engineering time and motion in hours, as a lack of common work standards ⎼ across multiple vehicle platforms and geographic regions ⎼ is creating cost and quality issues. Automakers tell us there is a lack of common cadence contributing to product development planning gaps, which leads to greater inability to accurately forecast unit volumes. Faster cadences coupled with rapid global market expansion creates a severe challenge for auto OEMs, according to global information and forecasting firm IHS.

Today’s CFOs are frequently being called upon to address these product and engineering planning issues, and to create new methods for keeping these growing investments in check. Board members at public and private companies alike are clamoring for a clear path to justify how dollars are being spent as they enter into complicated joint ventures.

What is causing engineering issues/shortages and performance gaps as the auto industry transforms? Exploding customer requirements, the hybridization of engineering skills and designations – Mechanical Engineer (ME), Electrical Engineer (EE), and Software Engineer (SE) – and extreme competition in fewer talent pools are key contributors of talent shortages. The fewer number of American students choosing the engineering fields over the past decade creates acute supply issues which further deepens the problem.

Contractor versus full-time resources are frequently a root cause of performance gaps and cost overruns, according to a study by PwC’s Strategy& consulting group. Contractors are sometimes preferred to avoid capex, but they often subject teams to further risks, such as those associated with program delivery and quality. Re-work comes back, sometimes in significant volume, from BRIC countries, particularly China and India. Additionally, some Chinese and Indian contract engineers are known to veer from project plans in terms of objective and scope. Worse, OEMs have invested heavily in the China market only to discover the turnover rate of engineering talent there is high.

Aligning continuous software updates with new, or ongoing, project requirements disrupts workflow, a key challenge identified in the contractor ranks. Also, many mechanical parts have become obsolete due to a significant shift to software and application “components”.

The rise of consumerism in Southeast Asia has put enormous pressure on the automakers to address the complex demands of car-making, as consumer needs and markets themselves evolve worldwide. Multi-country impact creates new market opportunities, but those gains are harder to realize as vehicle engineering processes differ by region and country. The regulatory environment is vastly different by country, which affects internal compliance processes for OEMs. Here in the U.S. the National Highway Traffic Safety Administration (NHTSA) is driving rigorous new safety and regulatory standards, particularly focused on mobility and autonomy, but has no authority elsewhere.

NHTSA maintains detailed ten-year recall record-keeping that serves as a blueprint to determine its safety and recall framework. That rigorous framework, however, is skinny or non-existent in many regional world markets. Short cuts are normal in certain circumstances. Work-arounds are often necessary to keep up with technical and regulatory requirements. Project management and control issues force a greater need to share institutional knowledge as boomer engineers retire and millennial teams take the reins.

Recalls are perhaps the greatest issue facing OEMs and suppliers as world vehicle demand grows, particularly where processes have been deliberately circumvented or avoided. Today, engineering and product development teams must anticipate ethical or process gaps that lead to product failure, recalls, and fraud, or face the real possibility of crippling lawsuits that could affect future operations.

What can be done? In the next five years it is expected that the gap between vehicle innovation and the scarcity of available engineering resources will widen, creating a perfect storm of business risk and market leverage for the auto industry. The automakers and their suppliers will need more advisory help than ever before. A huge wedge opportunity will be created for the consulting firms that offer business process improvement and risk mitigation insights and methods focused on product development.

OEMs and tech firms are seeking guidance that help them avoid greater instances of potential product failure, recalls and fraud leading to government investigations. The Society of Automotive Engineers (SAE) is pushing the industry to fully understand and embrace the Product Development Life Cycle (PDLC) framework and evolve and embrace new standards globally.

In the short term, firms such as PwC must request and gain access to OEM Project Control Boards by means of an “embedded” audit professional who deeply understands their need for development, advanced versus core engineering, and program execution requirements.

Longer term, we must provide ideas to improve, transition, support and sustain product development processes that insure cost containment and fraud avoidance. This could mean refining manufacturing processes so they integrate with program engineering, R&D, and field management, as well as financial diligence. It’s a timely requirement given the rise of artificial intelligence and machine learning. Helping to define new business processes that align with these new automotive ecosystem requirements and link to engineering/R&D teams will be necessary.

Keeping track of product development has turned into a full time job in the automotive industry.