Building a World-class Automotive Supply Chain

Current advancements in the automobile industry, such as zero-emission vehicles and carbon-neutral production, indicate the rising importance of sustainability. These developments are fueled by higher emissions rules, rising awareness about environmental issues, and customer demand for sustainable automobiles. Furthermore, owning a car is no longer a status symbol and for many, shared vehicles are a viable alternative for financial and environmental reasons. Increasing demand and market potential for electric vehicles, the promise of autonomous vehicles and production & supply chain issues have brought about a significant change in the global automotive industry.

To succeed in the changing marketplace, Automotive manufacturers must shift their attention to building supply chain-focused models. But how can they transform without any hiccup?

An increased pace of innovative technologies and rapid swings in consumer needs have put additional constraints on automotive supplier delivery performance, which is already vulnerable to various internal and external disruptions. Thus, the automotive supply chain must be enhanced to ensure back-end supply chain procedures remain unaffected while accommodating new vehicle-buying habits.

The industry can boost its delivery performance by focusing on a few systemic root causes:

  1. Lack of Standardization in Supply Chain Process:- Essential supply chain operations have not been recognized consistently, and supply chain management criteria have not been adopted uniformly across the automobile sector. Supply chain-related procedures have long been seen as non-value-added tasks in manufacturing operations, and as a result, they are rarely standardized or improved. Quality and supply-chain functions are frequently separated resulting in unsatisfactory outcomes for OEMs and suppliers.
  1. Poor Employment of Automation and Advanced Technologies:- Automated supply-chain methods and advanced technologies have yet to become industry standards. OEMs tend to concentrate their efforts and resources on core manufacturing processes, a crucial lapse as the industry transitions toward a consumer-driven model, where the value-add is described as “the right product in the right place at the right time”. Under such circumstances, supply chain processes have become increasingly essential for business success.
  1. Increasing Supply Chain Expenditures:- Inefficiencies in processes and significant inflation in fuel and salaries have resulted in India’s logistics costs as a percentage of sales being at least 30% higher than those in China and other large automotive markets. The industry will need to keep costs down to protect margins.
  2. Talent Shortage:- There is a scarcity of qualified candidates to fill white- and blue-collar talent. As supply chain operations grow more important, white-collar professionals with strategic and functional supply chain management expertise remain in short supply.

Reimagining An Integrated Value Chain for a Promising Future

While these trends provide considerable challenges and opportunities, industry stakeholders need to be more sustainable in the changing business landscape.

  • Expedite Synergy through the Value Chain: Collaboration across the value chain should be accelerated. OEMs will need to lead in achieving common goals and forming long-term win-win collaboration with other stakeholders. Tunnel vision needs to be broken to improve supply planning across multiple horizons to address volatility, increase the influence of OEM-supplier strategic relationships, to improve time-to-market and speed product scale-up. OEM-supplier partnership models also need to evolve to optimize inventory and throughput.
  • Better Cost Management: Suppliers must actively manage the cost pressures of underutilized capacity, which is the highest supply chain cost driven by increased capital intensity and financing rates. Suppliers will need flexible shift-deployment techniques to deal with short-term volatility. They continue to manage risk by integrating flexibility into production lines and deferring production-line expenditures until actual demands arise. Supplier networks can leverage intelligent technologies for better visibility and risk management.
  • Customize Value Chain Capabilities: Suppliers will need to expand their global presence, integrate with the worldwide network of large OEMs, and assure quality and process consistency for components made in diverse locations to enhance component exports.
  • Redesign and Upgrade the Supply Chain Organization: To acquire functional expertise, OEMs and suppliers can proactively focus on long-term skill development by providing enough training and good knowledge management.

Onward and Upward

Automotive manufacturers must establish robust supply chain processes that integrate smoothly into their business systems, given the continually changing nature of the sector due to new technology and evolving consumer expectations.

While it isn’t too late, the clock’s ticking, and the subsequent supply chain disruption may not be a long way.

MOURI Tech professionals leverage industry knowledge and technology expertise to transform automobile manufacturers into sustainable enterprises through comprehensive automation and smart solutions.

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