Boosting resilience and agility in the automotive sector

Jun 14, 2021
Supply Chain

The P&L of car manufacturers and their suppliers are under increasing pressure and internal scrutiny as the global automotive market becomes more competitive and volatile. An industry already battling against unpredictable consumer demand, and one highly susceptible to economic instability, has faced a tumultuous global pandemic, resulting in violent sales peaks and troughs as communities deal with sporadic government lockdowns, travel restrictions and greater financial uncertainty.

Production plants are finding it difficult to manage their costs and scale up or down with the shifts in demand, since so many job functions are specialized and require specific training during hiring. For instance, a task like seat cover sewing requires up to 3 months training for operators. Production plant managers are asking supply chain designers, as well as industry trade bodies like VDA and ODETTE in Europe, to develop more efficient ways of carrying out day-to-day supply chain execution, to help ease this mounting financial pressure.

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The crucial role of real-time visibility in automotive supply chain execution

Real-time transportation visibility for automotive

Fortunately, new technologies and software platforms now exist to help tackle these significant and urgent industry challenges. Real-time transportation visibility (RTTV) platforms play a crucial role in helping the automotive industry to cut costs, improve strategies and streamline day-to-day operations by enabling new capabilities including unequivocal root-cause analysis when troubleshooting thanks to discrete information sources.

These key use cases and benefits include leveraging RTTV to create efficiencies for material dispatchers, lessening assembly line halts, avoiding recalls with better quality control of parts, streamlining processes and communication between workers and partners, reducing safety stock, improving security of freight, and cutting both transportation costs and carbon emissions.

Beyond execution, RTTV benefits strategic and tactical efforts as well, enabling faster innovation and improved collaboration between ecosystem partners, enhancing planning capabilities, increasing agility and resilience and automating continuous improvement of supply chain operations.

Increasing supply chain agility with real-time transportation visibility

The constant availability of real-time supply chain performance data and insights enables decision makers to act with greater confidence. In addition, the flexibility of API (Application Programming Interface) integrations used by real-time visibility platforms also unlock further organizational agility. As it stands, most of the industry uses EDIFACT standard integrations for data exchange. The technology is expensive to maintain or update and it can also be cost-intensive adding new data exchange partners. This ‘barrier’ makes it more difficult to change or add suppliers quickly in response to market changes, potentially taking months to onboard and significant investment, which in turn limits agility. API integrations on the other hand can be made in weeks or even days and are relatively straightforward and cost-effective to implement.

Improving supply chain resilience with real-time transportation visibility

According to McKinsey, a lack of visibility is one of the big six supply chain risk factors, and the largest potential source of vulnerability for any industrial company. The ever-increasing complexity and fragmentation of automotive supply chains has left them vulnerable to disruptions.

Having already been dealt a blow with the Covid-19 pandemic in 2020, the automotive industry was further impacted by a global chip shortage. As cars become increasingly ‘smart’, their onboard systems require ever-increasing computing power. Following the initial slowdown of car manufacturing, semiconductor makers producing chips for vehicles were forced to pivot and supply a suddenly-booming gaming industry. Some months later, demand for cars was skyrocketing and chipmakers couldn’t switch their production fast enough to cater again to cars. Analysts estimate it will take two years for semiconductor supply to catch up with demand.

Previously overlooked due to overconfidence and complacency, the industry’s resilience to external events was clearly overestimated. This event served as a reminder of just how complex, risky and under stress automotive supply chains had become and made clear that significant end-to-end visibility gaps exist, which is surprising given how important just-in-time supply chain synchronization is for car manufacturers.

Supply chain risk factors according to McKinsey

Despite the herculean challenges car manufacturers and OEMs are facing in the wake of major global economic uncertainty, the market opportunity for automobiles remains enormous given the emergence of wealthy markets and strong appetite for electric vehicles. End-to-end supply chain visibility will increase organizational agility by aiding leaders to make decisions more confidently thanks to real-time operational data and actionable predictive insights.

By leveraging new technologies to both eliminate unnecessary executional layer costs and increase flexibility and agility throughout automotive supply chains, car manufacturers and their OEMs can weather disruption events better, gain a competitive advantage and ultimately improve both customer experience and shareholder value.

To find out more about what makes Shippeo’s real-time transportation visibility platform such a great fit for the automotive sector, get in touch with one of our specialists or download one of our automotive sector white papers: