Beating the slump: The intelligent way

How Auto sector can overcome the slowdown by driving internal efficiencies

Automobile industry in India contributes around 12% to the total GDP and is the fourth largest auto market in the world. With a potential customer base of more than 1.30 billion, the industry attracts top auto manufacturers from across the world to India. However, the industry has been hit by the worst slowdown in two decades. According to Society of Indian Automobile Manufacturers (SIAM), all vehicle segments reported de-growth last year due to weak consumer sentiments and economic slowdown. In addition to this, the global automotive outlook has also turned negative with a decline in sales across geographies. Owing to the heightened trade tensions and other geopolitical factors, the export demand for Indian component manufacturers has been severely impacted.

Considering the low sales volume and the time it would take for the industry to recover from the headwinds, the first step for auto companies should be to look at optimizing their expenses to stay afloat during these turbulent times. This can only be achieved through better visibility into their expenses and taking informed decisions to manage OPEX in the most optimal way.   

One big part of the operational cost pie is employee expenses that form the second largest yet controllable area of business expenditure. While business leaders believe that employee expense is a well-managed area, the reality is far from it. As per a research by SAP with Vanson Bourne, 81% of finance leaders lack total visibility into expense and invoices. In the obsolete spend management solutions that are dependent on pen-paper forms for filing expenses or reimbursements, it is not possible to ensure complete visibility, control and compliance. This results in weak internal control that also leaves the company vulnerable to possible frauds, including inaccurate reporting. According to an Oversight Systems 2017 Spend Analysis Report, the typical organization loses 5% of annual revenues each year to fraud – 89% of which, according to a 2018 ACFE global study, are asset misappropriation which includes expense reimbursement schemes. With narrowing profit margins, it has become imperative for auto companies to have better visibility into their spend data.

Automobile industry has been at the forefront of adopting technology across different departments including design, manufacturing and distribution. Utilizing technology to capture holistic, timely and accurate financial data can help in providing valuable insights to power important business decisions. Following are a few smart ways to overcome the issues related to expense:

• Centralize all data to provide informed insights - Connecting and aggregating all spend data can ensure that auto companies get a more comprehensive picture and draw accurate, representative insights.
• Automate processes - Automating standard business processes such as travel, expense and invoice management can save employees time while helping businesses eliminate manual error and potential fraud. Advanced technologies such as machine learning (ML) can take automation one step further by analysing mobile receipts to automatically populate data fields on an expense report. It can also detect duplicates as soon as they enter the system and notify finance managers of repeat data.
• Consider mobile tools - Mobile tools can help employees manage travel expenses and access information on-the-go. Lost receipts can be eliminated, and expenses can be kept accurate by ensuring employees can capture receipts by simply taking a picture. This also encourages employees to input data in a timely manner, allowing for a more current view of spend.
• Collaborate across departments - Poor communication between departments often encourages data siloes. As a result, there is no access to additional insights that can support smarter spend management. Collaboration among stakeholders across HR, IT and travel units should be encouraged to ensure richer insights as well as open doors to additional efficiencies across the organization.

By leveraging these practices, automobile companies can strengthen their existing spend management models. An Intelligent Spend Management system can ensure timely and accurate insights thereby ensuring enhanced productivity, cost efficiency and future readiness. According to IDC (2018), this can result in a cumulative cost savings of over $ 0.6 million per year for an organization. As the stormy waters of the Indian economy continue to pose challenges, this can help the auto companies in drawing insights and taking informed decisions to manage and lower their operational expenses.