Did you know that the biggest priority for automotive companies today is supply chain? No longer can automotive companies afford to depend on local suppliers exposing themselves to unforeseen events such as a pandemic, nor can they rely on traditional supply chains which result in higher administrative costs.
According to the International Organization of Motor Vehicle Manufacturers, global automotive production dropped 16% in 2021 due to Covid-19. Conventional wisdom in the industry has been challenged, and companies are now moving towards building resilient, connected and intelligent supply chains in this renewed auto landscape. Several challenges to efficient supply chains persist, and even new ones have emerged since the pandemic. These include an over-reliance on boosting inventory to manage uncertainty, issues between OEMs and suppliers, offshore procurement and a lack of connectedness between the vast set of stakeholders including automakers, OEMs, suppliers, logistics providers and dealers — a network which is spread across the world. Post-pandemic, businesses are rethinking how to diversify operations especially with regards to China.
Given that a typical motor vehicle is made up of up to 20,000 component parts, automotive supply chain management must re-orchestrate how we redesign supply chains which are connected, responsive, agile and, importantly, resilient.
Motoring Ahead with a Resilient Supply Chain
The impact of supply chain 4.0 can be massive. There is a reduction of 75% in lost sales and a decrease of 80% in administrative costs. All while cutting inventories up to 75%. It can result in collaboration and communication across stakeholders to guarantee that every component functions properly as well as streamlines manufacturing processes, saves costs and increases customer satisfaction. There are some crucial stages to keep in mind while implementing automotive supply chain management to help companies tackle the challenges that this complex industry presents.
Planning
First comes the planning stage which includes mapping risks across various points in the supply chain network, estimating and forecasting demand for automotive components, meeting customers’ demands, identifying optimum inventory levels thereby avoiding overproduction which can lead to higher prices. When it comes to innovation in the planning stage, data-enabled services can help achieve long-term operational excellence. By implementing enterprise performance management (EPM) companies can use insights from customer feedback to streamline everything from planning to sourcing, distribution to product development, eventually resulting in post-sales delight.
Sourcing
The second stage is sourcing, which entails selecting suppliers of raw materials and other finished goods, and ensuring quality and pricing is evaluated in a timely manner. Today, given the rising costs for automotive technology, logistic costs, long supply chains and changing customer expectations, in Indian markets companies such as BMW and Honda are increasingly sourcing locally rather than from far-off regions which proves a win-win and helps ward of supply chain risks. Largely, in the APAC region, companies have reduced offshore sourcing by 20%, according to a recent Capgemini report.
Technology and data analytics are being leveraged to adopt a localization strategy to implement nearshoring and localized sourcing, improve negotiation models and implement business intelligence led decision making which results in identifying cost optimization and other improvement opportunities. Nearly 90% of supply chain managers across Asia are looking to invest heavily in building resilience into their networks. For tasks that are labor-intensive businesses are already diversifying their operations to regional Asian locations such as Vietnam for electronic goods, and Thailand for specialized components such as hard disk drives.
Manufacturing
The third stage is manufacturing, which refers to the assembly and testing of components and parts. The manufacturing process must be cost-effective while keeping the quality standards intact.
With data analytics, companies can better collaborate with suppliers and make intelligent data-backed decisions. BI & visualization can help measure overall equipment effectiveness to analyze how effectively manufacturing equipment is being utilized. It can also improve parts management by matching inventory with the production plan to determine stock levels and take corrective actions to reduce inventory costs.
Furthermore, with the use of advanced analytics, companies can create winning strategies such as:
- Improve equipment utilization across the shop floor for effective inventory management and supply chain planning.
- Implement predictive automative maintenance by analyzing historical performance data of repairs and other common problems to anticipate failures.
As global trade dynamics result in complexities, the South Asia region is emerging as an attractive alternative for companies due to lower costs, labor availability and access to established manufacturing bases. India, too, has emerged as a potential hub for several sectors such as life sciences and electronics owing to initiatives such as ‘Make in India’. The state of Haryana in India for instance, is actively looking to encourage businesses to locate production to India. This has been fueled by an opportunity in tech transformation and a demand for low value production left by China. Additionally, the country’s increasing purchasing power and availability of factory workers has only aided this development further. Going forward, the evolution of the auto industry in India, will largely depend on the development of the auto-parts sector.
Delivery
Lastly, delivery or transportation of the finished product from the manufacturing plant to the client is the final stage in automotive supply chain management. Ensuring that delivery is made on time and in proper condition requires robust communication and coordination between the logistics provider, manufacturer and dealer.
The real challenge is not moving or delivering the goods, rather it is predicting market changes, harnessing the latest tech and consistently delivering with the high standards that automakers today expect all while upholding their brand legacies. The global audience also expects customization for example, a particular car model which has worked in Europe might have to be tweaked to fit the Asian market needs which means the need for specific parts and components which adds another layer to the complex delivery ecosystem. Business Intelligence (BI) & Visualization can be implemented in use cases such as increasing visibility across vehicle sales and gaining insights into buyer profiles and distribution performance. It can also help manage dealer performance across regions, orders and inventory.
The Asia region is host to some of the busiest ports in the world — with over 300 seaports in the regions — thereby an opportunity to facilitate seamless flow of trade for manufacturers with the help of advanced supply chain technology and data analytics to streamline operations and gain real-time insights and end-to-end visibility. Here’s how:
Advanced analytics can empower auto companies to:
- Launch auto financing schemes by analyzing data related to customer financial history and combining this with demographics and geographies.
- Enable businesses to manage marketing spend through personalized marketing and focus on specific groups with targeted messages.
Enterprise performance management (EPM) can help connect shop floors, supply chains and boardrooms by:
- Assigning targets and track fulfillments across channels and geographies.
- Define plans to address demand with complete visibility on material and manpower availability and budget to stay on course right from the onset.
The Road to Asia with Digital Supply Chains
As the pandemic highlighted challenges many companies are now shedding their reliance on traditional supply chains and diversifying or relocating to become more agile and resilient. This has led to the emergence of countries in the Asia region as an attractive alternative. However, now as companies look to rethink their sourcing, manufacturing and transportation strategies they must consider the importance of data analytics as a disruptive technology-driven trend which could transform the auto industry. In recent years, data has become a key asset for the entire production to manufacturing cycle.
The decreased cost of collecting and analyzing data are enabling new ways of business optimization turning data into a transformative tool to combat competition. From adjusting production schedules to personalizing marketing campaigns and maintaining a lean inventory, data can help automotive companies digitally transform themselves.
