AUW03006USEN

IBM Global Business Services
Thought Leadership White Paper
Applying analytics within

the automotive industry
How automotive organizations can use analytics to
deliver business value
Automotive
Applying analytics within the automotive industry
Contents
2 Executive summary
3 Why focus on analytics now?
The widening divide
The key business imperatives for analytics
Why is analytics important in the automotive industry?
5 The potential applications for analytics
Analytics for manufacturing
Predictive asset optmization
Warranty analytics
Actionable consumer intelligence
Applying analytics to the workforce
Digital lead management
Advanced inventory optimization
Connected vehicle analytics
Captive finance
21 Enablement activities
Relevance to the automotive industry
The results
23 Establishing a business intelligence and analytics center of
competence
The results
24 The future of analytics
26 Next steps
Executive summary
Across the automotive industry, organizations are using
analytics to transform all aspects of their business. In the vast
majority of instances, the analytics performed is on data that is
already available within the organization or wider automotive
ecosystem, but has not yet been tapped to use its full potential.
Analytics can unlock the value held in this data, helping to
answer key what if questions across the organization and the
value chain. For example, what if dealerships could better
understand their customers digital journey? Or what if
manufacturing could improve visibility into parts, assembly
and vehicle inventory?
This paper has been developed by IBM to offer our perspective
on how automotive organizations can use analytics to deliver
business value. Using our knowledge of the automotive
industry, we have taken input from our global client
engagements, and research undertaken by the IBM Institute
for Business Value and leading analysts such as Gartner, to
identify how companies within the automotive industry are
using analytics. The goal of this paper is to stimulate thinking
on a broad range of potential applications of analytics in the
automotive industry, and to support our clients in unlocking
value held within their data.
The paper describes the potential applications of analytics
from a business rather than a technology perspective. The
boundary between analytics and reporting (or business
intelligence) is not always distinct. The blurring of this
boundary is increasingly true as static reports gain increasing
levels of user interaction and as single reports are brought
together into dashboards. In this paper, we focus on more
advanced analytics.
Why focus on analytics now?
The widening divide
In 2012, USD13.1 billion was spent globally on business

intelligence, corporate performance management and analytics
software.1 This amount represented a 6.8 percent spending
increase from 2011. The market is developing quickly and is
moving towards pervasiveness. This section aims to provide an
overview of the key business drivers.
The latest analytics paper published in 2013 by the IBM
Institute for Business Value, Analytics: A blueprint for value,
provides a framework for the broad considerations an
organization must make when developing an analytical
capability within their organization in anything other than a
piecemeal fashion.
Strategy
Technology
Organization
Sponsorship
Expertise
Culture
Source of value
Platform
Measurement
Funding
Data
Trust
Figure 1: Considerations when adding analytical capability.
Source: IBM Institute for Business Value 2013 Big Data & Analytics Study.
Changing less tangible organizational aspects of a business

such as culture and trust cannot be done overnight. Building
effective sponsorship and funding to support the technological
changes that may also be required takes time as well, so it is
important for organizations to begin the journey with a sense
of urgency. This paper focuses on the source of value
element of the framework shown in Figure 1, and provides a
range of possible starting points for this journey.
The escalating volume, variety and velocity of information

generated in todays hyperconnected world presents
businesses with a major challenge. For those organizations able
to capitalize on it, this abundance of information offers a major
opportunity to gain competitive advantage. Big data and the
powerful analytics solutions now being used to analyze it are
fundamentally changing the way organizations manage their
daily operations, where they direct new investments, and even
how they are structured.
Today, we are capturing more data, more quickly, about more
things than ever before. The 2012 IDC Digital Universe study
predicted that by 2020, over 40 zettabytes of data will exist.
This equates to 5,200 GB of data for every person on the
planet. Every day, we are creating enough data to fill 168
million DVDs, creating 340 million tweets and sending 290
billion emails. The speed at which we are creating data is
doubling year after year, and increasing volumes of data are
also being created by machines and devices. Hundreds of
millions of connected people, billions of sensors and trillions of
transactions now work to create data. We are dealing with
unimaginable amounts of information.
Most of this data is unstructured. It is not stored in the friendly
and manageable confines of a database, and only a tiny fraction
of the data being produced has been explored for its value
through the use of analytics.
Although the prospect of storing and analyzing this data is
daunting, it is clear that there is an opportunity to derive
substantial competitive advantage from understanding and
using it. Organizations that are aggressively pursuing an
analytics and information strategy are breaking away from the
competition. At the same time, those organizations that are
slower to embrace analytics may find themselves struggling to
maintain market share.
The research shows that organizations that are using analytics

are outperforming their competitors. Between 2010 and 2011,
there was a 57 percent increase in organizations that were
using analytics. Those organizations that were doing so were
more than twice as likely to be outperforming their peers.2 Use
of analytics led to increases in productivity of, on average, five
to six percent, which in todays hypercompetitive business
environment is a large enough margin to separate the winners
from the alsorans in most industries.3
Having access to the data is the first step, but the benefits are
only gained by deriving insight from the data and then taking
action to optimize the business.
Soon, whether you act on insights from analytics will no longer
be an option. It will become a necessity. In a 2012 report from
Gartner it was stated that Identifying patterns, anticipating
outcomes and proactively optimizing a response will be the
basis for competition in the future. In the next 10 years, the
companies that dont have analytics deeply embedded in their
business model will most likely cease to exist.4
The key business imperatives for analytics

Organizations get the best results when they focus on the
biggest, highest value opportunities and address the key
business questions, which they need to answer. Based on our
research and engagement with thousands of businesses
globally, we have identified that it is often one of the following
key business imperatives that drives organizations to increase
their analytical capability.

Grow, retain and satisfy customers. Todays marketplace is

increasingly competitive. Empowered customers can often
dictate terms in the dynamic between buyers and sellers.
Customer analytics can help improve loyalty and drive
higher revenues by helping businesses gain insights into
customer needs, desires and behaviors. With these insights,
businesses can create tailored, personalized offerings, which
adapt to the individual customer.
Increase operational efficiency. Analytics help companies

optimize existing processes, including streamlining supply
chains and using predictive analytics to anticipate
maintenance needs for equipment.
Transform financial operations and processes. CFOs and
finance teams can apply analytics to increase speed and
accuracy in the closing process, improve planning, budgeting
and forecasting, allocate enterprise resources to maximize
profitability, and report with confidence to internal and
external stakeholders.
Manage risk and capital, and ensure regulatory compliance.
Too often, risk is regarded as the exclusive purview of the
CFO, even though a high percentage of risks are not
financial, legal or compliance related. Analytics offer insight
into both traditional and emerging categories of risk, as well
as the tools to detect and combat fraud.
Why is analytics important in the automotive industry?

In todays economically, socially and digitally connected world,
automotive organizations are facing an entirely new set of
challenges. The IBM Automotive 2020 report identified five
dimensions of differentiation, which will be crucial in
delivering success for automotive companies.
These challenges lead automotive manufacturers to ask new
sets of questions, such as, what if:

Dealerships could better understand their customers digital

journey?
Executive teams could make better business decisions using
accurate data across all time horizons, past, present and
future?
HR could quickly assess the impact of changes in staffing
levels?
Finance could reduce operating costs and better project
financial performance?
Sales and marketing could better target and monitor

campaigns to drive dealer traffic and meet sales forecasts?
Manufacturing could improve visibility into parts, assembly
and vehicle inventory at every level of the supply chain?
Research and development could reduce time to market for
new features?
After-sales could manage service inventory and target
customers to drive more after-market revenue while
reducing cost?
Captive finance could increase customer loyalty through
personalized and targeted marketing communications?
We think a more analytical approach can help answer these

questions, and that automotive companies that successfully
integrate a more analytical mindset across their business will
gain significant competitive advantage.
Interdependent ecosystem
Integrated enterprise
The potential applications for analytics

The subject of analytics for manufacturing in the automotive
industry is broad. It encompasses supply chain optimization,
predictive asset optimization and point analytical solutions, and
can overlap with warranty analytics.
Analytics for manufacturing

This section primarily covers supply chain optimization and
point analytics that can be performed on production data.
Predictive asset optimization and warranty analytics are
covered in subsequent sections.
Supply chain optimization
The fundamental objective for any manufacturing organization

is efficiency, which must be achieved across processes, costs
and resources for a truly optimized supply chain. As a result of
incremental company growth, such as the addition of new car
lines or an upscale in operations to meet new demand, most
automotive organizations are not able to achieve efficiency due
to the unconnected nature of the data.
Imagine what efficiencies could be achieved if there were both
breadth and depth of visibility across the entire supply chain.

Intelligent
vehicle
Sophisticated
consumer
Dynamic
operations
Figure 2: The five dimensions of differentiation.
Inventory, production and demand information could be

reconciled to meet customer requirements and decrease lead
times for orders.
Reports on performance by department, employee, machine,
customer (particularly for fleet sales), supplier and operation
could be generated. The processes and operations that
generate unfavorable variances could be identified, such as
the flow of materials into assembly plants.
Consolidating large data sets is a substantial challenge, but it is

one that will reap significant rewards. Getting this foundation
right will open the door to a wide range of analytics, which
include:

Predictive analytics, for example to run simulations and to

forecast demand.
Dashboards and business intelligence reporting, which can
provide information such as sales and vehicle inventory
levels throughout the month and analysis of vehicle,
customer and market segmentation information.
Identification of early warning signals that can help to avoid
a mismatch of production plans with forecasted demand,
inventory shortfalls and production delays.
Operational trend analysis.
Having the right foundation in place also brings the ability to

drill down to a more granular level of detail, which can be used
to discover underlying causes, so you can fix production issues
in minutes instead of days. For example, an increased failure
rate may be noticed on a casting machine. Normal processes
would involve moving this equipment for manual inspection,
causing significant downtime. By using the data and employing
root cause analysis, the issue can be quickly and potentially
more accurately pinpointed, allowing for a fix to be
implemented quickly.
With real-time visibility of data, you can create more accurate
rolling forecasts. Combining this data with predictive analytics,
you can also develop action plans for variable future outcomes,
such as how you might respond to the increased demand for
electric vehicles.
Point analytics
The manufacturing division of any company is rich with data.

Think of a question regarding operations and the probability is
that the data holds an answer. The key is in knowing where to
look and having the right tools and skills to understand,

interpret and turn that data into useful information.
Ensuring your organization has the right kind of analytical
capabilities at its disposal is the first step to unlocking the value
of production data. Whether through an internal center of
competence or using outsourced resources, access to these
capabilities enables tailored analytics on data sets that exist in
their current state, regardless of how unstructured the data
may be. For example:

Using historical data about previously defective parts and

employing real-time monitoring can help reduce the number
of defects released into production.
Root cause analysis of manufacturing processes can help
reduce scrap rates.
Development of analytical models can help predict the sales
of SKUs on a store level, which can increase revenue and
reduce capital lockup because the right SKU is in the right
store.
Looking at component and lead time management, insights
can be gleaned about your production line to help reduce the
time it takes to assemble a vehicle.
Whether the economy is strong or weak, the fundamental

business strategies for surviving and thriving still hold true.
Automotive organizations must be highly efficient to meet
demand, production and supply requirements. Costs and
resources also have to be managed carefully and intelligently.
Optimization solutions for complex supply chains can mitigate
risk, transform business processes and predict outcomes with
greater certainty.
The results
We have seen some automotive companies embed deep

analytical capabilities within their operations to help them
answer a wide range of point problems across their
manufacturing plant operations. For example, predictive
analytics has been used:

A global automotive company was able to reduce defect rate by

50 percent in 16 weeks using predictive analytics to better
understand and eliminate issues in the production process.
A car manufacturer reduced their scrap rate by 80 percent in
15 weeks based on the insights gained using root cause
analysis.
In power train facilities to better understand and eliminate

issues in the production process.
In paint shops by combining VIN, historical defect,
employee activity and external weather data to identify
defects.
To identify defects in real time and to reduce scrap rates.
Condition
Monitoring
Predictive
Maintenance
Preventative
Maintenance
Scheduled
Replacement
Run to fail
Replace when
broken
Replace every 3
months
Figure 3: Reductions in downtime.
Inspect weekly
and service every
month
Vibration analysis
Replace before
fail
Predictive
modelling and real
time analysis
Maturity
Predict which parts are likely to fail so that they can schedule
maintenance when the engineers and parts are available.
Prioritize scarce maintenance resources for assets that are
most likely to fail, reducing unnecessary maintenance
activities.
Understand the characteristics that tend to lead to frequent
machine failures and take steps to avoid them.
A European OEM was able to identify over GBP400 million in

savings through the creation of a data pool, which allowed
them to analyze and compare the worldwide spare parts
business in detail for the first time. Through this, detailed
analysis of worldwide inbound and outbound volume flows
could be performed and optimal central depot locations
worldwide identified.
A global automotive company increased capacity (potential

production) by 30 percent and raised schedule adherence to 90
percent by applying optimization algorithms to production
scheduling and sequencing data.
A global electronics manufacturer was able to create forecasts
approximately 30 percent faster than before by increasing
automated processes. They are also now able to create
12-month forecasts every month, helping the company
respond to changing economic conditions.
So where does this insight come from? The volumes of data

being generated are exploding, and manufacturing plant and
machinery is no exception. Instrumented assets record in real
time the parameters that measure the health of the equipment,
from trends related to run hours, power consumption and
operating parameters to condition monitoring measures built
into the equipment that record vibration, oil condition or
temperature. This structured data can be augmented with
existing unstructured data sources such as maintenance logs,
emails and manuals.
Predictive asset optimization
In manufacturing, the reduction of unplanned downtime has

generally been driven by a large increase in scheduled
maintenance tasks, such as regular replacement of parts,
inspections and condition monitoring visits. Now,
manufacturers are starting to use the power of analytics to
monitor equipment in real time, predicting breakdowns before
they occur, and diagnosing what factors cause those
breakdowns.
Asset-intensive industries such as automotive manufacturers

are the ideal place to get the most out of predictive
maintenance. Historical breakdown data is already captured in
maintenance databases and can be used to immediately target
preventive activities where they will have the greatest impact.
Analytics helps avoid the delayed benefits realization that
accompanies traditional pushes in preventive maintenance
activities.
Using an analyticsbased approach, manufacturing companies

are able to:
In the automotive industry, where a stoppage can cost several

thousands of pounds per minute, the return on investment
(ROI) associated with the reduction in unplanned downtime
that predictive asset optimization can deliver is significant.
The results
A major US helicopter manufacturer reduced direct

maintenance costs by 25 percent, and proactively increased
customer loyalty by providing the lowest flight per hour cost
and highest aircraft availability. The company was able to
intelligently price extended warranty contracts based on
predicted costs and repairs by aircraft type.
A major manufacturer of construction and mining equipment
was able to proactively identify problems and the best action
before failure, leading to savings of USD1 million in repair
costs in less than two weeks and an overall 12 to 14 increase
ROI in just four months.
A major UK water company was able to increase their
proactive blockage detection rate by 25 to 30 percent and jump
seven places to number three in the Ofwat league table over a
two-year period.
A UK container terminal has increased planned maintenance

and reduced breakdowns by 10 percent. This change has
significantly reduced repair costs and delays of goods in transit.
An exploration company was able to reduce annual operating
costs by 13 percent because they were able to asset failure and
proactively take corrective actions. Similarly, one refinery in
the UAE has increased production by 10 percent using similar
techniques.
Warranty analytics
Organizations are increasingly deploying predictive analytics
to track and analyze all of the variables that can affect a
product or delivery failure and the associated warranty costs so
that they can start the problem-solving process earlier than
ever before. Warranty analytics can be employed to:

A US energy company was able to reduce unplanned outages

from 200 per year to just two.
Improve product quality

Reduce warranty costs
Enhance customer satisfaction
Predictive
Maintenance
Raw Materials
Supplier
Manufacturing
Warranty
Analytics
Consumer
Product
Quality
Analytics
Root - cause
Analysis
Customer
Distribution
Figure 4: The typical manufacturing lifecycle consists of multiple steps and touch points. Consumers are the crucial link in this process, because the information
they provide about defects or delivery issues post purchase enables manufacturers to identify and correct problems at their source.
Source for Image: IBM Software Business Analytics
10
Warranty claims data can be transformed into useful

intelligence by integrating structured and unstructured
warranty data from across the enterprise, including customer
information, call center and technician notes and sales,
performance and production data. The software then looks for
patterns in real time and provides alerts about developing
trends that may indicate a production or performance problem
to the appropriate decisionmakers.
Many automotive manufacturers have also recognized that

their warranty programs are more than just repairing or
replacing defective products. These programs can be valuable
opportunities to build customer satisfaction and loyalty, and to
enhance brand reputation. This change has led to a dramatic
increase in the duration of warranty periods as manufacturers
seek to use the message in marketing programs to indicate
product quality and reliability.
Warranty data provides valuable insights that enable

companies to identify the root cause of a claim, such as
whether it is a delivery or production-related issue. Analysis of
a firms data may reveal that a defective part is responsible for a
high number of warranty claims, and that the defect is actually
the result of a production quality issue. Armed with this
knowledge, the manufacturer can pinpoint the cause of the
production problem and implement an appropriate solution,
eliminating unnecessary claims.
The warranty period for automobiles was 90 days in the 1930s

and this duration has steadily increased over the years to
10-year warranty terms for certain models and parts.6
Analysis of the warranty data can also be used by

manufacturers to help detect and minimize warranty claim
fraud. Anomalies can be seen in data in many cases of fraud,
but given the large volume of warranty information, subtle
patterns may be easily overlooked.
Warranty costs are significant for automotive manufacturers,

so even small improvements in the warranty process can
amount to millions of dollars in savings and lead to significant
gains in profitability. For instance, Toyota Motor Corporation
paid approximately USD4.2 billion in warranty claims in
2010.5
The opportunities related to warranty analytics are likely to

increase still further as vehicles become increasingly
connected. This change will increase the data set that is
available for analysis and reduce the time taken for data such as
diagnostic trouble codes (DTCs) to be available. It may also
provide more options for automotive manufacturers to
communicate with the vehicle owner and take action to correct
or even prevent failures, further reducing costs and improving
customer satisfaction.
The results
An automobile manufacturer learned that side mirrors were

repeatedly breaking off, and turned to warranty analytics to
resolve the issue. Using software to analyze structured and text
data from dealerships, the corporate website and social media
sites, the company found that a specific machine used to
manufacture the mirror subassembly had not been maintained
properly and was producing low quality parts. By making
operational adjustments, the company eliminated the risk of

producing future defective parts that could increase warranty
exposure. The company also was able to notify customers who
were likely to experience the failure but who had not yet
brought their vehicles in for service, which improved customer
satisfaction.
A premium automobile and motorcycle manufacturer with
numerous production facilities worldwide set out to reduce
error rates and repeat repairs by improving manufacturing and
service quality. The company needed an integrated view of
production data, data management and analysis capabilities.
Warranty analytics was used to proactively identify systematic
error patterns and their dependencies. The company was later
able to reduce warranty cases from 1.1 to 0.85 per vehicle and
realized annual savings of GBP30 million.
Actionable consumer intelligence

Customers are interacting with automotive companies through
a larger number of touch points, driven by increasing use of
digital channels. Automotive marketing organizations have an
unprecedented opportunity to collect and synthesize this vast
array of customer data. This data, coupled with the latest
Historical customer touch points
customer analytics techniques can result in a greater

understanding of the customer and a customer experience that
is more personalized and timely, which adds value across the
customer life cycle.
But creating remarkable customer experiences requires
automotive companies to address their fragmented interaction
model. Our industry experience has shown that some of the
key business constraints are likely to be:

The absence of a scalable analytics data mart with

consolidated data, which can tap into new data sources as the
business needs change.
Analytical maturity that differs greatly across business units,
making it difficult to conduct cross-business unit analytics.
Inability to govern data across business units.
Despite these challenges, some automotive companies are

generating useful consumer insights through development of
an enterprise customer analytics platform, with the business
goals of improving customer acquisition, customer retention
and return on marketing investment.
New touch points that enable greater customer understanding

Search optimization
Social networking
Mobility services
Purchase
History
Finance
packaging
Warranty
history
Blogs/user
communities
In Ve
h
icle
Portals
Onli
Viral marketing
E-mail/text
Retail
11
Retail
Service
history
Source: IBM Institute for Business Value.
Figure 5: Automakers are increasingly using online tools, vehicle connectivity and mobility services to connect with customers.
Connected
services
12
Like other industries, the automotive industry faces changes in

the way that their customers interact with them in the digital
era. Alongside this increase in connectivity, customers are
becoming increasingly sophisticated and impatient.
The results
A major global OEM is developing its capability to derive

actionable consumer intelligence by moving from a suite of
isolated capabilities to an integrated, fact-driven enterprise
application. The key benefits they are recognizing are:

Single version of the truth. Business users across the

enterprise access data and insights using a standard tool set
that focuses on reuse and information sharing, and addresses
the needs of users ranging from analysts to C-level
executives.
The ability to better measure ROI on marketing and service
programs.
Identification of at-risk customers, which made proactive
retention actions possible.
Productivity gains in analytics and business intelligence.
Centralization of customer analytics has resulted in total
effort across business units reducing significantly.
More personalized and targeted marketing offers. Brand
marketing and dealer teams gain insights that allow them to
make more personalized communications and more targeted
campaigns.
Workforce analytics
Todays economic climate is forcing organizations to make
difficult decisions about how best to maximize the productivity
and effectiveness of various assets. Issues such as access to
financial capital, buildings, equipment, technology and
employees are being discussed. Unfortunately, many
organizations have not invested in defining, capturing and
analyzing workforce data to the same extent as in other critical
business areas such as procurement and finance.
Analytics can help to address many of the key HR challenges
which organizations are facing:

Defining the requisite knowledge, skills and capability

requirements needed for the execution of business strategy.
Organizations must have a firm understanding of what skills
and capabilities they have in-house, where gaps exist, and the
best ways to fill those gaps through external hires or internal
mobility.
Evaluating workforce performance. In turbulent times,
organizations must differentiate high performers from low
performers, compensate and reward these individuals
accordingly and identify opportunities to close performance
gaps.
Retaining valuable talent. Along with identifying top
performers, organizations should have retention plans to
keep these employees highly motivated and engaged. This
planning helps ensure the continuity of operations and
enable future growth.
Determining strategies for redeployment, retraining and

workforce reductions. It goes without saying that tough
times mean tough decisions. However, organizations can
minimize the impact of layoffs and the subsequent loss of
employees intellectual capital through reassignment,
retraining and reallocation of resources to higher priority
areas.
Understanding collaboration and knowledge sharing. Now,
more than ever, organizations must ensure that critical
knowledge is retained, as downsizings and early retirement
programs make it difficult to hold onto institutional memory.
Developing career paths and succession plans. Formal career
path and succession planning are vital to accelerating time to
competency and minimizing productivity losses due to
employee departures.
However, an IBM study showed that only a third of

organizations had adopted workforce analytics. The same
survey showed that those organizations which had done so
were far more effective than their peers, in a number of areas
as shown in Figure 6.
Even where analytical approaches were being used, they
tended to focus on historical trends and patterns, rather than
being used to develop future-based scenarios; only around 10
percent of organizations were using analytics in this way.
As well as the universal pressures of the economic climate,

automotive companies face additional workforce challenges. As
more sophisticated processes are being used to manufacture
50%
Developing training strategies
32%
Retaining valued talent

within the organization
57%
45%
Evaluating workforce performance
45%
34%
Determining strategies for reductions in

force, redeployment and training
41%
28%
37%
Understanding collaboration and

knowledge sharing
24%
0%
10%
13
20%
Employs a workforce analytics system
30%
40%
50%
60%
Does not employ a workforce analytics system
Figure 6: Level of effectiveness in addressing human capital challenges. (Source: IBM white paper: Getting Smart About Your Workforce: Why Analytics Matter)
14
vehicles, the workforce must have greater technical skills than

previously required. As the industry continues to evolve, this
need will increase.
Dynamic operations specifically including workforce
management was one of five key dimensions of differentiation
in the IBM Automotive 2020 report.
Analyzing workforce data in the ways mentioned can help
organizations understand what profile of workforce can deliver
the long-term goals of the organization and, further, how to
retain those skills and knowledge.
The results
Many large global organizations across a range of sectors are

using workforce analytics to deliver a competitive advantage.
Here are some examples:
An American car manufacturer has implemented an analytics
system that allows for easy and streamlined workforce
reporting. The benefits achieved included successful tracking
of the workforce, improved management decision-making
capabilities, and deeper insight into HR and workforce
strategy.
A US public department implemented workforce analytics and

was then able to quickly assess the business impact of changes
in staffing levels, make more informed staffing decisions, and
prioritize vacancies based on demand for services across the
organization. In addition, this provided increased effectiveness
in budgeting and planning.
A large US consumer products company used analytics to
improve their insight into the current workforce as they
developed a new business model. The solution provided a clear
integrated picture and analytic capability into its future
workforce trends and options, gave insight into employee
retirement and helped the company plan for succession and
recruitment.
Digital lead management

As Figure 7 shows, digital lead management encompasses the
entire automotive customer lifecycle, but essentially boils down
to three core factors, all of which can be positively influenced
by analytics:
1. The number of leads generated
2. The quality of the leads and the quality of the data within
the leads
3. The dealership networks response to the leads
Analysis of customer data can be used to help target campaigns

more effectively to drive traffic to your website, and once a
customer has arrived at your website, can help you understand
which pages they are viewing, what their propensity to buy a
vehicle is, and what model they are interested in. Having
successfully driven your prospective customer to one of a
number of action pages, such as request a test drive, request a
quote, or request a brochure, analytics can help you optimize
your web forms so that the maximum number of people
complete the form, and so that the data captured within the
form is usable. For example to ensure that phone numbers are

valid. Analytics can help you recognize customers who are
struggling to complete a form, or may be struggling to find the
information they are looking for, and can allow you to
intervene in real time and begin a dialogue with the customer
through live chat or a call back.
Having successfully generated a digital lead, analytics can help
you monitor the leads through your CRM and lead
management systems and ensure that you route the leads to
After-sales
Aware
Re-purchase / Re-finance
Online service booking
Parts / repair enquiry
Targeted marketing
Social media
General advertising /
brand awareness
Social media
Search engine optimisation
OEM website
Dealer websites
Microsites
3rd party websites
Mobile
Request a test drive
Brochure request
Keep me informed
Live chat
Call me back
Car configurator
Finance quote
Used car valuation
Fullfillment
Customer kept informed
Figure 7: Digital lead management.
15
Terminate
Receive offers
Complaints
Warranty claims
Cross-sell
Parts
Repairs
Servicing
Telematics
Marketing /
Social media
Online evaluation
Visit dealer
Consumer details
Test drive
Pricing /
part exchange
Customer hand-over
Vehicle importation
Status updates
Distibution planning
Shipping
Vehicle build
Intercompany billing
Vehicle build slot
Vehicle specification
Finance quote
Negotiate purchase
Order entry
Make payment
Pricing /
deal-stacking
Vehicle availability
Purchase
Call centre pre-qualification
Pass lead to dealer
Lead opening & contacting
Email / phone / walk-ins
Dealer welcome
Lead qualification in dealership
Vehicle up-sell
Cross-sell
Part exchange
Lead closing
Data capture
16
your dealership network or your call center as quickly as

possible. Analytics can help you monitor your different lead
sources (typically referred to as campaigns) and help you
understand which campaigns are doing well and which ones
are struggling. It can also provide an early indicator of
campaigns whose performance has changed suddenly, which
may be indicative of an issue that requires rapid resolution.
Once the lead has reached your dealership network, they must
respond to that lead as quickly as possible. There is a strong
correlation between the time taken to contact a lead and the
likelihood of that lead turning into a sale. Analytics can help
you track and monitor metrics such as how quickly a dealership
opens and contacts leads, how many times they try to contact a
lead, whether they are trying to contact the customer at the
times of the day they are most likely to make contact, and
ultimately what the conversion rate of the leads is to new and
used car sales.
Using these key metrics to compare salesperson with
salesperson, dealership to dealership and region to region
provides rich insight into where pockets of good practice exist
and also where improvements can be made. And this analysis
can be used to change behavior. Would you want to be the
dealer that appeared at the bottom of the league table? These
metrics are also frequently used to drive margin payments to
dealerships, and analytics can help you identify those
dealerships that may be using a little latitude in their sales
reporting by helping you match reported sales to actual sales
within your system of record.
Digital leads account for a significant and growing proportion

of the sales within automotive companies. By the time a
customer arrives at a dealership they have typically done online
research, have a clear idea of what they want to buy, and are
already well into the buying cycle. Maximizing the conversion
rate from these digital leads therefore plays a key part in
determining how effective an automotive marketing and sales
team is.
Automotive customers will generally only be in the market for
a new vehicle every few years. If you fail to respond to the
buying signals quickly and effectively, one of your competitors
is likely to benefit.
Potential customers fall into one of two categories. They are
either existing customers in some respect or they are new to
your brand. For existing customers, it is arguable that an
automotive company should maintain a close enough
relationship with the customer to be able to sense or even
predict when the customer will be in the market for a new
vehicle. In reality, most automotive companies do not currently
have the capability to bring together data from the different
parts of their organization, such as sales, marketing, after-sales,
captive finance, customer service and the dealership network.
Given this context, along with the fact that typical vehicle
ownership cycles run from three to five years, identifying the
precise moment when an existing customer or a prospect
enters the market to buy a vehicle is paramount. Responding
to that lead quickly and appropriately is the next part of the
equation. When the majority of customers complete an online
form, they are aware that this action will generate a lead. To
fail to contact the customer, for whatever reason, when they
have raised their hand in this way is to squander a great
opportunity, and yet our analysis of lead management data
shows us that the response is at best highly variable.
Inventory levels set by enterprise resource planning (ERP) and

advanced planning and scheduling (APS) systems are often too
high, and far from optimal due to a number of influencing
factors:

The results
IBM has been working with a major global automotive

manufacturer for a number of years, and across a number of
countries globally, to improve their digital lead management
capabilities through the use of analytics. This project has
yielded significant benefits for the company. In some countries
we have seen lead volumes double, response times improve
dramatically across the dealership network, and conversion
rates increase by several percentage points. The cumulative
impact of these changes is even greater.
IBM has in-depth knowledge of the impact this type of
engagement can have, and has developed a simple business case
model that allows us to quantify the potential benefits of this
kind of project for an automotive company.
Advanced inventory optimization

How companies set inventory policies is evolving from general
planning rules to a more sophisticated analytical approach that
balances cost and service at each SKU and location across the
entire supply chain. This change is being driven by increases in
SKU complexity, pressure to deliver customer service
improvements, and shareholder performance through cost
controls.
17
Traditional ABC classification is used rather than more

progressive inventory classes.
Production dictates the lot size.
Demand forecasts are created at too high a level to drive
meaningful inventory targets at the stock keeping location.
Safety stocks are calculated using ordinary techniques.
Management reactively focuses on shortages.
Inventory management theories are misinterpreted by
setting incorrect parameters.
Advanced statistical forecasting can be used as a complement

to ERP and APS systems to more accurately forecast demand
and optimize inventory levels.
Advanced inventory optimization is relevant for the automotive

industry in relation to spare parts. The majority of companies
approach these projects with reduced inventory carrying costs
as the main aim, but Figure 8 shows that spare parts availability
is also viewed by some as key in terms of customer satisfaction.
18
The results
This approach has been undertaken at over 60 different

companies worldwide, including a number of automotive
organizations, and the projects have typically reported
reductions in inventory levels of between 30 percent and 60
percent. As an example of results achieved in a single
implementation:

Inventory reductions of 32.5 percent were identified while

maintaining a 97 percent service level.
Replenishment orders were reduced by 18 percent.
75 percent of the stock overage was consumed in three
months.7
Connected vehicle analytics

Vehicles are becoming increasingly connected, either through
embedded SIM cards and communication modules, use of a
tethered phone as a modem, or through interaction with
smartphones and applications. This connectivity provides a
3%
Support sales growth
in new channels and
geographies
range of opportunities for new features and services and new

business models, as shown in Figure 9.
Analytics forms a part of the majority of the potential use cases
for connected vehicles:

Analyzing vehicle or customer behavior can help provide

enhanced customer services such as safety aids or geospatialrelated features.
Connected vehicles also present the possibility of extending
warranty analytics, discussed earlier in this paper, into the
realm of predictive rather than reactive. Data from the
vehicle, including diagnostic trouble codes and potentially
larger volumes of data from the CAN Bus, can be analyzed
to identify patterns that indicate large impending vehicle
failures, which allow preventive action to be taken.
Wireless connectivity started being used in cars in 1996, with

GMs introduction of its OnStar service supported by an
embedded mobile device. Since then many manufacturers have
followed suit to offer similar services, including Fords offering
7%
Customer retention
issue, need to improve
customer service
Data
Events
Geospatial
Weather,
local events
Location,
traffic patterns
Single, integrated view of

vehicle conditions
63%
Reduce inventory
carrying costs and
other related
expenses
26%
Gain market share
through superior
service and product
availability
Real-time personalized alerts
Customer
Predictive capabilities e.g.

maintenance / service issues
Demographics,
driving patterns
In service vehicle
Telematic info, wipers,

air bags, infotainment
Figure 8: Top drivers for improving inventory management.
Figure 9: Connected vehicles.
Dealers
Aftermarket purchases,
vehicle order info
Social Media
Customer sentiment,
driving experience
called Sync, which connects to a mobile phone and uses its

modem to connect to a cellular network. Recent forecasts
indicate that of a predicted 1.7 billion global cars on the road,
600 million cars will be fitted with an embedded telematics
system by 2025.8 Whatever the exact numbers, it seems
undeniable that connected vehicles will be increasingly
important over the coming years. The intelligent vehicle was
identified as one of the five key dimensions of differentiation in
the IBM Automotive 2020 report.
The results
Many automotive manufacturers are early in their development

of services related to connected vehicles, therefore its
application and any associated results are still in their infancy
and most organizations are still working on research or pilot
projects.
Applications of analytics related to connected vehicle data
include analysis of data related to crashes to improve safety,
analysis of driver behavior to provide enhanced services or
safety features, and geospatial applications such as enhanced
traffic routing and parking applications.
19
Captive finance
Captive finance is an area that contains vast amounts of
customer data, including finance contract details, payments to
date, model choice, as well as trim and option selections. The
more customers who choose to purchase a car through captive
finance the greater the potential of this data for the OEM.
The primary aim of analyzing this information is to increase
customer loyalty, and identify what strategies might have a
positive impact on customer retention. Simply targeting all of
your customers at the same fixed points in their contracts is not
effective. Instead, the data you have about the customer can be
used to personalize marketing campaigns and offerings to their
needs.
We are increasingly seeing captive finance data analyzed to
identify the optimum time to re-engage with a customer. One
of the more common approaches involves calculating a
customers residual vehicle value and offsetting this value
against any outstanding payments. With this approach, the
20
equity a customer holds can be found and, if this equity is

positive, can be used to settle the existing agreement and use
the remaining equity as a deposit for a new contract.
Working under the assumption that the customers that have

been targeted will be contacted by a dealer, we also must
ensure those leads identified are of sufficient quality and
provide a satisfactory conversion rate. It is especially important
because leads that are not customer-initiated tend to show
lower conversion rates than other hand-raiser campaigns. If
the quality of the leads is too low, the dealers will not consider
them as viable sales opportunities and therefore will not treat
them seriously. Losing dealer confidence in any type of
OEM-provided lead can cause a loss of faith, which spreads to
other campaigns and then causes a breakdown in relationship.
This type of approach can be used whether a national sales

company is supported by a captive finance company or a
third-party finance provider.
Third-party businesses have long been offering solutions that
aim to use finance data to increase customer loyalty directly to
dealerships. There is no reason why this capability cannot be
delivered directly by the manufacturer or national sales
company.
The results
A global automotive organization has increased the conversion

rate of finance leads by 80 percent through analysis to identify
the optimum time to re-engage.
Original Vehicle
Value
De
Re
du
ci
ce
Customer in
positive equity
ion
Value
iat
ec
pr
ng
ba
lan
Outstanding Balance
Residual Vehicle Value
Time into contract
Figure 10: Captive finance.
Enablement activities
Although significant value can be delivered through the
opportunities identified in this paper, there are some
enablement activities which can help provide increased
benefits.
Information, especially good information, has real business
value. Analytics can help to unlock this value, but the quality of
the information determines the quality of the resulting insight.
Bad data results in poor recommendations, although trusted
high-quality data results in more complete and accurate
analysis.
The key to ensuring the quality of information lies in making
sure that there are effective arrangements in place within the
organization for information governance and information
management. These are defined as follows:

Information management. How an organization efficiently

plans, collects, organizes, uses, controls, disseminates and
disposes of its information, and ensures that the value of that
information is identified and used to the fullest extent.
Information governance. The authority, control and shared
decision-making (planning, monitoring and enforcement)
processes over the management of information assets.
Information governance is the high-level planning and
control over information management and by extension, the
information management function.
21
At the heart of the model are three key disciplines of

information management:

Data quality management. Defines the organizations

approach to data quality improvement, measurement,
verification and integration with normal business operations.
It establishes and reports data quality thresholds that are
measured empirically.
Metadata management. Metadata is descriptive information
about an organizations business processes and systems that
allows individuals to communicate in a consistent manner
regardless of whether they are business or IT, internal or
external. Metadata management includes the processes and
technologies to define, capture, approve, version and
integrate different types of metadata.
Information Management and Governance Strategy
Policy & Compliance
Data Quality Management
Metadata
Management
Information
Architecture Management
Governance Competency Management

Organization Change Management
Figure 11: A typical information governance framework..
22
Information architecture management. The practice of

defining information structures and systems throughout
their life cycles according to welldefined policies, standards,
and guidelines. Information architecture management aligns
business, system, information and technology architectures.
This effort is aimed at optimizing the controlled acquisition,
storage, distribution and presentation of information to meet
identified business goals.
These disciplines are supported by appropriate policies and

compliance activities, and the overall efforts should be
informed by a clear strategy for information management and
governance, which aligns with the organizations business
goals.

Information management and governance are relevant for all
industries, and automotive is certainly no exception. Many
automotive organizations still have a strong internal silo
mentality, which means that IT, sales, marketing, after-sales
and captive finance may all consider that they own certain
portions of the data. Without clear information governance it
is not unusual to find multiple versions of the same data held
within different areas of the business, and for these versions to
be out of step with each other. Automotive companies must
understand that the end customer does not recognize or care
about these internal silos, but instead views the entire
organization as a single brand and expects data to be accurate
and complete irrespective of the touch point.
Along with these vertical silos within the business, the

automotive industry has the additional layer of complexity of
the dealership network to manage. The exact structure of the
dealership network and the data sharing agreements in place
between national sales companies (NSCs) and dealerships
varies, but a common issue is a lack of trust between
dealerships and the NSC. This means that although data
normally flows freely to the dealerships from the NSC, the
data that flows back through the dealer management systems is
not always complete or accurate. Many of these issues,
including the lack of trust, could be improved through better
information management and governance.
This issue is not just for automotive companies; it can also be
visible to the end customer (the vehicle owner). Data on the
customer themselves or the vehicle they own is frequently
incomplete or out of date, and automotive companies have
much to learn from other industries who maintain a much
better understanding of their customers. Poor information
management and governance has the potential to lead to loss
of trust, reduced customer satisfaction and damage to the
perception of the brand. It also impacts all stages of the
customers lifecycle from awareness and purchase of a vehicle
through to fulfillment and after-sales and servicing.
The results
A global car manufacturer undertook an information
management and governance project to address the business
impact caused by miscommunication of key facts, and a lack of
common understanding of data across the enterprise. This
situation was driven by a complex system environment, where
data was distributed over multiple applications, databases and
platforms. Data relationships were complex, poorly
documented and misunderstood by users of the data.
A large US integrated oil and gas company implemented an
master data management solution, governance model and
organization-wide capability to address poor data governance
and data quality, which had been negatively affecting the
business ability to make timely decisions. The project
delivered in excess of USD50 million in benefits.
A recent short study we undertook with a major global OEM
identified a huge number of issues spread across the whole
organization whose root cause was ultimately found to be poor
information management and governance. Although no
individual issue carried a significant financial impact, the sum
total of the impacts was extremely significant and easily
justified managerial focus and investment in this area. As well
as the obvious benefit of better quality data producing more
accurate results when used for analytics, there are other less
obvious benefits such as the ability to complete IT projects
more quickly as difficulty in integrating data as a result of poor
information management and governance frequently is one of
the key reasons for delays in projects.
23
Establishing a business intelligence and

analytics center of competence
Many organizations find that regardless of the promise and
expectation that precedes new business intelligence or analytics
initiatives, the anticipated benefits are not always delivered in
full. Our experience suggests that a key factor for this
mismatch is recognizing the need to develop an enterprise
wide competence in deriving intelligence from the
organizations data.
Competence is defined as the ability to do something
successfully or efficiently. To be truly competent in delivering
insight and intelligence to the organization requires much
more than the ability to provide technical solutions.
Organizations must find a way to bring together a blend of
business, analytical and IT skills from across the enterprise
with a specific focus on developing this capability. This change
requires a number of resources, approaches, strategies and
governance structures that together will support the growth,
promotion, selling and effective management of business
intelligence and analytics, including its projects and programs.
Creating a business intelligence and anlytics center of
competence within your organization is a key way to maximize
the return on investment in business intelligence generally and
analytics specifically. Research conducted by analysts such as
Gartner, Forrester and The Data Warehousing Institute
(TDWI) also highlights the benefits of this type of approach.
24

Through our interactions with automotive companies we know
that a number of them are wrestling with how to expand their
business intelligence and analytical capabilities. As part of this
discussion, the question of whether to embed analytical
capability in individual business units or to develop a center of
competence within the national sales company is frequently
raised.
Through our work with automotive sales, marketing and
after-sales departments, we recognize that analytical capability
has effectively been outsourced to marketing agencies over the
past decade, in some cases along with ownership and
management of customer databases. Our view is that data,
especially customer data, is a key asset for automotive
companies and that this dislocation between the business and
the data has in some cases led to an unhealthy lack of
understanding of the data. Even if the data is owned and
managed by a third party, analytical capabilities must be
retained and expanded within the business, given the
importance that we believe analytics will play in the success of
automotive companies in the coming years. Marketing
agencies have a pivotal role to play, but automotive
organizations must be able to check the ideas and analysis that
is being put in front of them, and generate ideas and insight of
their own.
The results
IBM has extensive experience in supporting organizations in
establishing and running business intelligence and analytics
centers of competence. Although there are some core tenets
which apply, each organization has specific needs and wants,
and the focus areas are dictated by the required outcomes.
The US Army implemented a center of competence to

propagate business intelligence and analytics best practices.
They made significant improvements in how requirements
were gathered and created reusable assets to minimize project
delivery timescales and costs. A ROI of 143 percent was
achieved within 1.5 years.
A large US financial services company implemented a center of
competence to maximize how internal expertise was used to
control the runaway costs of storage and to reduce the overall
cost of content access. Access costs were reduced by 70
percent, storage costs were reduced by 40 percent and overall,
there was a USD2.3 million in savings made within a two-year
period.
The future of analytics

The IBM Research Global Technology Outlook for 2013
looked specifically at the future of big data and analytics, an
area we feel is particularly relevant to the automotive industry.
Within the ever expanding volume and velocity of data, by far
the biggest shift has been within the creation of multimedia
data. Multimedia data makes up 60 percent of Internet traffic,
70 percent of mobile phone traffic, and 70 percent of available
unstructured data.
The reason for this shift is that people are ultimately visual
beings. We can understand visual information easily, and we
like visual interfaces. While this situation has always been true,
the recent increase in bandwidth, computational power and the
surge of mobile devices have made visual information the
de-facto standard.
Soon, we believe analytics will increasingly be applied to this

multimedia data. Here are some examples of how we think that
this change may be applied within different areas within an
automotive company:

At the dealership, in-store cameras can be used to tell

retailers about the demographics of customers in the store,
what car lines and features they are most interested in and
for how long they looked at each aspect. This information
combined with the data gathered from virtual showroom
demonstrations like those we are seeing from brands such as
JLR, Audi and Nissan can lead to better understanding of
what matters most to customers.
Repairs and claims. Video-based inventories can provide
valuable documentation for the basis of service requests,
logging repairs performed and insurance claims.
Trend:
Most of the data generated today is multimedia. Demand for
visual analytics is increasing significantly.
Opportunity:
Connected vehicles. Multimedia analytics can be used to

detect dangerous behavior, identify safety concerns, and
monitor conditions to help ensure safety and security in
transit.
As well as applying analytics to this multimedia data, we also

see a shift in the way that people consume and interact with
data and analytics through visual interfaces.
Users want data delivered through compelling, interactive
visual interfaces and are demanding these features. Usage
patterns are changing too, with the move from desktops to
mobile, the desire for access to large-scale data in real time and
the need to collaborate on data, rather than reviewing it in
isolation. Users no longer want to rely on others to interpret
data and create their visualizations for them; they want the
ability to manipulate the data selection, the analytics and the
visualization for themselves.
Multimedia makes up 60% of Internet traffic, 70% of mobile phone traffic

and 70% of available unstructured data.
Demand is growing for analytics and decision-making enabled by
interactive visual interfaces on many devices, including mobile.
Extremely large volumes of data require processing close to the data with
insights delivered to the decision point.

Expanded value and insights from multimedia analytics and

interactive visual analytics.
Customers require methods, technologies and systems to aggregate and

analyze multimedia content from multiple sources.
Line of business users can accelerate their knowledge insights through
interactive visual analytics.
Challenge:
Need to push boundaries in difficult technical domains to

address needs of emerging users
Table 1: IBM Research Global Technology Outlook.
25
Extracting insight from multimedia content requires massive scale, realtime computing, and deep semantic understanding.
Creating a scalable, extensive set of visual analytics components involves
addressing requirements of current and emerging users in diverse
domains.
Aggregating information from multiple public and private sources requires
security, privacy, policy and governance.
26
The advantage of improved visual analytics is that, due to our

visual nature, they make it easier to understand the data and to
gain insights. However, to make this type of visual analytics a
reality, there are several specific technical challenges that will
require innovation:

Systems must learn how to present data based on the user

context, the type of data, the device being used and the level
of interaction.
You need to be able to handle visualization of large-scale
data sets, moving from terabytes of data to petabytes of data.
As data volumes increase and predictive analytics become
more prevalent, you must find ways to present uncertainties
visually, so that users are truly working from an informed
viewpoint.
The analytics marketplace is fast moving and continually

developing. New developments are enabling new business
opportunities. Therefore, it is important to look towards the
future and to embrace areas, which align with your business
goals and objectives.
The annual Global Technology Outlook by IBM Research,

provides a comprehensive overview of advances in technology,
but it is much more than a raw technology viewpoint. It is a
view into how new technologies can be applied in the
marketplace and how they are expected to change and create
new industries and businesses in the process.
Next steps
We would be happy to have a more in-depth discussion with
you on any of the analytical applications covered in this paper,
or to discuss any other analytical challenges or opportunities
you recognize in your business.
Paul Andrew Smith
Associate Partner, IBM Global Business Services, Business

Analytics and OptimizationAutomotive Lead. Mobile: +44
7740 923075. Email: paul.a.smith@uk.ibm.com
Sophie Clark
Managing Consultant, IBM Global Business Services, Business

Analytics and Optimization. Mobile: +44 7769 960229. Email:
sophieclark@uk.ibm.com
27
Further reading
Automotive white papers
Below are a selection of publications and links from IBM that

expand on the information in this paper and provide further
insight. If you are unable to locate any of the material
mentioned, please contact us. We will be happy to provide a
copy.
Most of these papers, and others, can be found at ibm.com/iibv

by choosing Automotive under the heading Access entire
library by industry.

General

Explore the wealth of analytics offerings from IBM here

http://www.ibm.com/analytics
Analytics white papers
Most of these papers, and others, can be found at ibm.com/iibv

by choosing Business Analytics and Optimization under the
heading Access entire library by business function.

Analytics: A blueprint for value: Converting big data and

analytics insights into results
Analytics: The widening divide: How companies are gaining
competitive advantage through analytics
Analytics: The real world use of big data: How innovative
enterprises extract value from uncertain data
Breaking away with business analytics and optimization:
New intelligence meets enterprise operations
Business Analytics and Optimization for the Intelligent
Enterprise
Predictive Maintenance for Manufacturing: How to improve
productivity, minimize downtime and reduce costs
Analytics in the boardroom: Accelerating competitive
advantage
Customer analytics pay off: Driving top-line growth by
bringing science to the art of marketing
Automotive 2020: Clarity beyond the chaos

Driving customer change through the automotive industry
Truck 2020: Transcending Turbulence
Copyright IBM Corporation 2014

IBM Corporation
Global Business Services
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Produced in the United States of America
February 2014
IBM, the IBM logo, and ibm.com are trademarks of International Business
Machines Corp., registered in many jurisdictions worldwide. Other product
and service names might be trademarks of IBM or other companies. A
current list of IBM trademarks is available on the web at Copyright and
trademark information at www.ibm.com/legal/copytrade.shtml.
This document is current as of the initial date of publication and may be
changed by IBM at any time. Not all offerings are available in every country
in which IBM operates.
THE INFORMATION IN THIS DOCUMENT IS PROVIDED
AS IS WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED,
INCLUDING WITHOUT ANY WARRANTIES OF MERCHANT
ABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY
WARRANTY OR CONDITION OF NONINFRINGEMENT. IBM
products are warranted according to the terms and conditions of the
agreements under which they are provided.
1 Gartner Report: Market Share Analysis: Business Intelligence, Analytics
and Performance Management 2012 May 2013
2 Analytics: The widening divide MIT Sloan Management Review &
IBM Institute for Business Value October 2011
3 The Intelligent Enterprise MIT Sloan Management Review & IBM
Institute for Business Value 2011
4 Gartner report Market Trends: Analytics, Business Intelligence and
Performance Management to Be All Pervasive by 2020 June 2012
5 Toyotas warranties and recalls, Warranty Week, June 30, 2011,
http://www.warrantyweek.com/archive/ww20110630.html.
6 4 Murthy, D. N. P. and Blischke, W. R., Warranty Management and
Product Manufacture, Springer, 2006.
7 GBSC BAO, DIOS Overview
8 IBMs Automotive 2020: Clarity beyond the chaos report and GSMA:
The connected life: A USD4.5 trillion global impact in 2020 (February
2012)
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IBM Global Business Services

Thought Leadership White Paper

Applying analytics within

Applying analytics within the automotive industry

IBM Global Business Services

Why focus on analytics now?

The widening divide

In 2012, USD13.1 billion was spent globally on business

Figure 1: Considerations when adding analytical capability.

Changing less tangible organizational aspects of a business

The escalating volume, variety and velocity of information

Applying analytics within the automotive industry

The research shows that organizations that are using analytics

The key business imperatives for analytics

Grow, retain and satisfy customers. Todays marketplace is

Increase operational efficiency. Analytics help companies

Why is analytics important in the automotive industry?

Dealerships could better understand their customers digital

IBM Global Business Services

Sales and marketing could better target and monitor

We think a more analytical approach can help answer these

The potential applications for analytics

Analytics for manufacturing

The fundamental objective for any manufacturing organization

Figure 2: The five dimensions of differentiation.

Inventory, production and demand information could be

Applying analytics within the automotive industry

Consolidating large data sets is a substantial challenge, but it is

Predictive analytics, for example to run simulations and to

Having the right foundation in place also brings the ability to

The manufacturing division of any company is rich with data.

look and having the right tools and skills to understand,

Using historical data about previously defective parts and

Relevance to the automotive industry

Whether the economy is strong or weak, the fundamental

IBM Global Business Services

We have seen some automotive companies embed deep

A global automotive company was able to reduce defect rate by

In power train facilities to better understand and eliminate

Figure 3: Reductions in downtime.

Applying analytics within the automotive industry

A European OEM was able to identify over GBP400 million in

A global automotive company increased capacity (potential

So where does this insight come from? The volumes of data

Predictive asset optimization

Relevance to the automotive industry

In manufacturing, the reduction of unplanned downtime has

Asset-intensive industries such as automotive manufacturers

Using an analyticsbased approach, manufacturing companies

In the automotive industry, where a stoppage can cost several

IBM Global Business Services

A major US helicopter manufacturer reduced direct

A UK container terminal has increased planned maintenance

A US energy company was able to reduce unplanned outages

Improve product quality

Applying analytics within the automotive industry

Warranty claims data can be transformed into useful

Many automotive manufacturers have also recognized that

Warranty data provides valuable insights that enable

The warranty period for automobiles was 90 days in the 1930s

Analysis of the warranty data can also be used by

Warranty costs are significant for automotive manufacturers,

The opportunities related to warranty analytics are likely to

An automobile manufacturer learned that side mirrors were