Tier 1 automotive suppliers are simultaneously facing the shift toward electrification, autonomous driving, and connected vehicles, while also dealing with increasing cost and quality pressures from OEMs.
https://www.sap.com/assetdetail/2022/12/e27ce82b-547e-0010-bca6-c68f7e60039b.html
At the same time, operational and IT environments remain fragmented—built around legacy host systems and optimized individually across production, procurement, sales, and finance. This makes end-to-end visibility across the supply chain and product lifecycle extremely difficult.
https://www.deloitte.com/cz-sk/en/Industries/automotive/blogs/trends-and-strategic-importance-of-it-ot-in-automotive-manufacturing.html
In this context, initiatives involving SAP S/4HANA, PLM, supply chain planning, and MES represent a critical opportunity for enterprise-wide transformation.
https://www.capgemini.com/wp-content/uploads/2021/09/S_4HANA-for-Automotive-1.pdf
However, due to the scale of investment and associated risks, organizations often struggle to answer a fundamental question:
Where should we start to maximize ROIC?
Why ROIC and IT Investments Remain Disconnected
ROIC (Return on Invested Capital) is increasingly used as a key metric for evaluating business portfolio quality and capital efficiency.
https://www.abeam.com/jp/en/expertise/sl406/
Yet, most IT investment discussions remain limited to operational improvements such as:
- Reducing work hours by a certain percentage
- Slight improvements in inventory turnover
These improvements are rarely translated into ROIC impact.
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/selecting-p-and-l-linked-kpis-for-industrial-transformations
This creates a structural gap:
- Executives aim to transform business structure through ROIC but see IT investments as low-impact
- Operations teams focus on immediate efficiency and lack visibility into ROIC drivers
- IT and PMs cannot clearly demonstrate which system initiatives maximize ROIC
Enterprise Architecture (EA) plays a critical role in bridging this gap.
https://cioindex.com/topic/ea-in-the-automotive-industry/
Three Core Roles of Enterprise Architecture
EA is not just an IT structuring method. It is a management discipline that connects business strategy, processes, data, applications, and technology into a unified transformation roadmap.
https://www.epitomione.com/blog/how-enterprise-architecture-can-facilitate-digital-transformation
In Tier 1 SAP transformation programs, EA delivers three key functions:
- Structurally linking ROIC drivers with business processes and systems
- Designing phased investment roadmaps based on impact
- Ensuring consistency across IT/OT, PLM, ERP, and MES
This reframes system implementation into a full-scale business transformation program aligned with ROIC management.
https://www.deloitte.com/cz-sk/en/Industries/automotive/blogs/trends-and-strategic-importance-of-it-ot-in-automotive-manufacturing.html
1. Architecture Design Backward from ROIC Drivers
ROIC is defined as:
ROIC=Operating Profit Margin×Capital TurnoverROIC = Operating\ Profit\ Margin \times Capital\ TurnoverROIC=Operating Profit Margin×Capital Turnover
EA begins by breaking down ROIC drivers and linking them to business architecture.
Example breakdown:
- Low gross margin: fragmented cost data across design and manufacturing
- Lack of profitability visibility by product/customer
- High SG&A: manual processes and system fragmentation
- Low capital turnover: excess inventory, long lead times, underutilized assets
EA maps these issues to end-to-end processes such as:
- Order-to-cash
- Design-to-production
- S&OP to procurement
This enables clear linkage between system capabilities and ROIC impact—for example:
- PLM enabling cost visibility during design
- S/4HANA enabling early detection of unprofitable products
2. Phased Implementation Based on ROIC Impact
Rather than attempting a “big bang” implementation, EA prioritizes investments based on impact and feasibility.
https://www.abeam.com/jp/en/expertise/sl406/
Example phased approach:
- Phase 1: Improve operating margin
- Profitability analysis
- Cost planning integrated with PLM
- Phase 2: Improve capital turnover
- Integrated demand and supply planning
- Inventory and asset optimization
- Phase 3: IT/OT integration
- MES-ERP integration
- Factory-level performance and ROIC tracking
This enables executives to allocate investments based on measurable business impact.
3. Designing a Connected Architecture Across PLM, ERP, MES, SCM
Siloed system implementation leads to data fragmentation and suboptimal performance.
https://cioindex.com/topic/ea-in-the-automotive-industry/
EA connects systems through end-to-end processes and shared data models.
Examples:
- Product lifecycle-driven cost management
- Integration of PLM BOM and routing with ERP costing
- Seamless S&OP to execution
- Demand planning linked to production and procurement constraints
- Factory visibility through IT/OT integration
- MES operational data combined with ERP financial data
This reduces long-term complexity and avoids ad hoc integrations.
4. Practical Benefits for Project Managers
From a PM perspective, EA provides:
- Communication with executives in ROIC language
- Logical prioritization of investments
- Easier cross-functional alignment
- Improved system consistency and scalability
EA becomes a common language between business and IT—not just a governance tool.
5. First Steps to Introduce EA in Tier 1 Projects
To incorporate EA into ongoing SAP-centered programs:
- Map ROIC drivers to business capabilities
- Align capabilities with system functions (SAP, PLM, MES)
- Redesign roadmap based on ROIC impact
This transforms projects from feature-driven to value-driven initiatives.
6. Positioning EA as an Investment for ROIC Maximization
EA is often misunderstood as additional overhead.
Instead, it should be positioned as:
- A blueprint for maximizing ROIC
- A mechanism for avoiding fragmented investments
- A decision framework for prioritization
EA is not a cost—it is a strategic enabler for maximizing investment effectiveness.
Conclusion: Making EA Your Strategic Advantage
SAP transformation in Tier 1 automotive suppliers is not just a system upgrade—it is a transition to ROIC-driven management.
https://www.sap.com/assetdetail/2022/12/e27ce82b-547e-0010-bca6-c68f7e60039b.html
By leveraging EA, organizations can:
- Link ROIC drivers to business and IT architecture
- Build phased transformation roadmaps
- Align investments with measurable outcomes
For project managers, mastering EA means turning complexity into strategic clarity.
Reference Links
1. ROIC, value creation, and KPI/driver trees
- McKinsey & Company – “Selecting P&L‑linked KPIs for industrial transformations”
https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/selecting-p-and-l-linked-kpis-for-industrial-transformations - Abeam Consulting – “How to Drive Up Earning Power and the Growth Expectations” (ROIC‑driven value creation)
https://www.abeam.com/kr/en/insights/038/ - Abeam Consulting – “REX (ROIC Enterprise Transformation) support service to maximize corporate value”
https://www.abeam.com/jp/en/expertise/sl406/ - Divya Katticaren – “ROIC: Efficiency vs Growth” (LinkedIn article on ROIC drivers)
https://www.linkedin.com/posts/divya-katticaren_this-definitely-gives-a-deeper-and-a-clearer-activity-7444290701070323713-vmc4
2. Enterprise Architecture & digital transformation
- CIO Index – “Enterprise Architecture (EA) in the Automotive Industry”
https://cioindex.com/topic/ea-in-the-automotive-industry/ - Epitomione – “How Enterprise Architecture Facilitates Digital Transformation”
https://www.epitomione.com/blog/how-enterprise-architecture-can-facilitate-digital-transformation
3. SAP S/4HANA, PLM, MES and automotive suppliers
- SAP – “SAP S/4HANA Cloud for Automotive Suppliers”
https://www.sap.com/assetdetail/2022/12/e27ce82b-547e-0010-bca6-c68f7e60039b.html - Capgemini – “SAP S/4HANA for Automotive Suppliers” (PDF)
https://www.capgemini.com/wp-content/uploads/2021/09/S_4HANA-for-Automotive-1.pdf - SAP – “Drive your business with SAP S/4HANA Cloud for automotive suppliers” (solution brochure, PDF)
https://www.capgemini.com/wp-content/uploads/2022/01/SAP-S_4HANA-Cloud-for-automotive-suppliers_Solution-brochure.pdf
4. Additional EA & manufacturing strategy references
- NRI (Nomura Research Institute) – “Automobile Manufacturers Perspective | Services by Industry”
https://www.nri.com/en/service/industry/automobile/gpga_car_manufacture.html - SAP – “Summary of Honda Business Briefing 2026” (context on automotive business transformation)
https://global.honda/en/newsroom/news/2026/c260514beng.html
Disclaimer
Parts of this article were developed with reference to generative AI suggestions and were reviewed, refined, and supplemented based on the author’s professional expertise and judgment.
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