Makers of test equipment have to be happy about a number of the current trends in the automotive industry. It is always nice when your marketing efforts are buoyed by drivers that you had nothing to do with and that are, in fact, outside of your control. But lest the component suppliers get too envious, it is worth noting that the market picture is not all golden. Test equipment manufacturers are not about to disprove the premise that the industry is extremely challenging these days.
The boost in demand for test data stems from a number of causes:
QUALITY IS MORE IMPORTANT THAN EVER. The OEMs' intent to go beyond initial vehicle quality in order to win customers has driven changes in the amount of work done in this field. Improvements to long-term and perceived quality entail different parameters. So, for example, we see GM changing its philosophy and testing components to the point of failure instead of to warranty mileage limits, and Ford instituting test series that correspond to the lifetime experience of a part. Also, components that are major contributors to warranty costs are getting a more rigorous examination to drive that waste out of the system.
NOISE, VIBRATION & HARSHNESS (NVH) MATTER. Concerns about NVH have become more acute as other higher-priority problems have been resolved and due to rising consumer expectations. There is a self-reinforcing element to this phenomenon in that refinement in one area of the vehicle can expose NVH problems in other areas.
AN UPTURN IN PRODUCT DEVELOPMENT. The number of planned new model launches over the next five years has accelerated compared to the recent past. Dollars spent on product development lead to dollars for capital equipment, including test equipment.
COMPETITION AMONG SUPPLIERS. Suppliers are getting more deeply involved in testing to achieve differentiation. Data from in-house testing provides advanced knowledge for internal product development, but also the means of selling advancements to the customer. Another driver to suppliers' test equipment consumption is when they take on testing that is offloaded from the OEM as a means of making themselves more necessary to their customers.
Cause and effect being what they are, the rising tide of testing carries rising costs as well, at a time when neither OEMs nor most suppliers can afford the added burden. In many instances, the expense of this testing will likely offset different kinds of costs—e.g. warranty and replacement—but that is not always the case. The test equipment suppliers, therefore, can expect to see some behavioral implications resulting from the customers' financial circumstances. First, with increased demand comes increased scrutiny. The purchasing process of OEMs is less likely to routinely involve acquiring large numbers of equipment units in a somewhat automatic fashion. Instead, every purchase is reviewed with a critical eye and a substantial need for justification. Negotiations with equipment suppliers are informed by better communication systems within the automakers, meaning that the OEMs are using global purchasing to get the best price everywhere, bundling orders when they have similar needs in the same time frame but in different regions, and asking for a discount on the bundled package from a single vendor. Equipment vendors will observe that there is greater competition between groups within an OEM over who gets the available dollars. Equipment that is on the "nice-to-have" rather than the "must-have" list has to wait longer.
Component suppliers also subject test equipment purchases to a stringent selection process. Yes, the demand for increased testing is there, but whether there is compensation is another issue. The decision on building extensive test capabilities usually comes down to a supplier's positioning and how aggressive it intends to be in leveraging the investment. They also have the option of using outside test service providers. We have heard differing opinions from automakers about the advisability of suppliers having all their test and technical capabilities in-house. The advantages are greater control and consistency of data acquisition and analysis, but as long as a supplier has a knowledgeable liaison to interface with an outside resource, that remains a viable alternative.
For test equipment suppliers, the good news is that customers are seeking the means of conducting an ever-increasing amount of testing. The bad news is that their ability and/or willingness to pay, generally speaking, is lower than ever. How does an equipment supplier get around this dilemma? There are some instances of successful approaches by equipment vendors that are worth passing along, whether because they are transferable to other companies or because they might jog the thinking of a company to its own creative solution:
- Getting deeply involved in not only the equipment but also the issues being tested—e.g., by participation in the test-definition activities of groups like the SAE
- Interacting closely with the actual users of the equipment, not just the decision-makers, in order to apply practical hands-on experience to product development and marketing
- Proactively incorporating the customer's needs into product and service development—i.e., considering how to help them improve their operating costs, reduce downtime, improve quality reporting, minimize training time, etc.
- Taking service to the highest level, interweaving personnel and systems in order to create a substantive benefit to the customer, so that competing suppliers cannot be characterized as being viable alternatives. This might include assistance to the customer in designing the physical test environment, a culture of immediate turnaround time on service issues for key customers, maintenance of an information flow that the customer relies upon, and so on.
Admittedly, these elements don't lead to the lowest-cost strategy, but good value efficiently provided still has many fans among the people in the auto industry who are held responsible for getting the job done.