One of the biggest challenges brought by COVID-19 pandemic that we, as an industry, are facing, is ensuring the supply chain remains undisrupted. The supply chain of the automotive industry is unique as compared to the other sectors, because of the given number of stakeholders involved, the new disruptive trends, availability of raw materials that require global coordination and adhere to strict timelines. This has also helped the industry evolve and create one of the best supply chain systems across sectors.
In a joint report by Thomson Reuters and AIAG, the concerns regarding the automotive supply chain are exacerbated by the acceleration towards electrification and automation, as well as the demand for more features in standard vehicles at a lower cost. However, there are always newer systems that can be implemented, which can help optimise processes.
ERP Systems: Enterprise Resource Planning (ERP) in SCM is very critical for manufacturing and distribution business as it helps in gaining greater transparency and managing business information, integrating various systems, working processes, and ensuring optimal operational efficiency.
3PLs: 3PLs/ third party logistics can facilitate day-to-day operations of an automotive supply chain seamlessly by managing customer demands for more considerable product variation, availability, and quality. It collates data in real-time and helps automotive manufacturers in building relations with the customers.
Automation: The automotive industry is much ahead in automation and has reaped huge benefits due to this. Drawing from this, companies should adopt at least a significant degree of automation to reduce physical labour or even processes. An automated supply chain system helps in attaining a time advantage to a great extent while lowering the operational costs and improve the quality of outcomes.
Local Sourcing: At Continental, we are committed to the philosophy, local-for-local market, ensuring uninterrupted supplies even during uncertain business situations. Localised supply chains can benefit companies in many ways: flexibility, greater control, cost reduction, and can also help in generating more revenue. The automotive industry is quietly leading the way in creating a localised supply chain, by rationalising inventory levels and having supplier parts brought closer to the plants to contain costs and prevent a pricey factory shutdown.
Duel Sourcing: Always being reliant on a single source is a gamble, especially in a situation like COVID-19 pandemic, where there are heavy restrictions on the supply chain in terms of material movement internationally. In that perspective, duel sourcing can ease supply chain operations to a great deal.
Market Analysis: Automotive companies rely on sales and analytics for forecasting long term demands. By evaluating market risks and challenges, the automotive industry can adapt and adjust accordingly.
Pricing and Negotiations: Automotive Supply chain work on a high level of networking, consolidating volumes across locations, and increases buyer’s power of negotiations. And gives more leverage to agree on better terms and conditions, and all this can be managed sitting anywhere in the world through ERP systems. Highest level of transparency and compliance with audit requirements on pricing management.
Collaboration: Automotive sector can also acquire cross-company collaboration processes- which can provide them with an upper hand on technology utilisation. Collaboration in SCM brings efficiency, effectiveness, and profitability. It shortens lead-time, reduces inventory and the cost, improves customer service, market share expansion, and higher revenue.
Inventory Management: It is one of the most vital aspects of the automotive supply chain. IoT and Cloud-based technologies can organise the entire inventory seamlessly with each detail, such as purchase and supply of the material, stock available in the warehouse, demand in real-time without disruption in customer production, just in time, and as per the requirement.
Automotive SCM is considered to be one of the strongest SCM across the industries. It is a fast-evolving, lean, and efficient model that has seen continuous improvement over decades, covering various stakeholders. Moreover, IoT devices, 3D printing, and other digital technologies are driving changes in SCM by improving production visibility and refining ongoing processes within the automotive supply chain. With aid from these technologies, companies can easily manage the uncertainties in the supply chains.
The author is Head Purchasing, Continental Automotive India