2022 is off to an unexpected start. While it may have seemed that disruptions in supply chains are lessening as COVID-19 restrictions are relaxed, that hasn’t been the case. Ramifications from the pandemic continue to be felt worldwide and it will be a while yet before things ‘return to normal.’ As a testament to this, the OESA Supplier Barometer index fell to a pandemic low of 33% at the end of 2021 due in large part to auto manufacturers’ concerns about cash management and survival.
Existing disruptions have been further exacerbated recently with international sanctions caused by rising geopolitical tensions. These changes have shaken global supply chains and put greater pressure on automakers to increase domestic production. It is now more important than ever for automakers to have a resilient and transparent supply chain.
Here’s what automakers need to do to ensure that their supply chains remain uninterrupted during tumultuous times.
Diversify supply hubs
First off, digitizing your supply chain capabilities is a must. Digital capabilities provide you with greater visibility and real-time insights into your processes through advanced analytics. Better access and management of this data helps you pinpoint the areas of your supply chain that are most vulnerable. At a time when date guarantees are difficult to provide, this visibility allows your suppliers to gain a better understanding of when they should expect to be paid, making you appear more attractive as a client.
Having gained valuable insights and established yourself as a transparent organization, you can diversify your supply chain by sourcing suppliers both domestically and internationally. This will help you ensure that if disaster strikes again and there are auto parts your organization suddenly has difficulty accessing, production won’t be impeded, as you can quickly make the switch to alternate suppliers of equal quality and comparable prices. Diverse supply chains are resilient supply chains.
Make forecasting a priority
For many years, automotive manufacturers got away with a just-in-time mindset. The pandemic and other disruptions have taught us the importance of a shift to a just-in-case inventory mindset. Having extra inventory is now seen as an advantage, not a miscalculation. While traditional inventory practices may have saved costs, they come at the cost of resilience – something the past few years have shown us is not a price you should be willing to pay. These inventory buffers are the safety net needed to navigate uncertainty. Digital solutions in the form of smart factories include 3D printing tools that can be temporarily deployed to create parts when necessary.
What is more, demand planning is just as critical for your suppliers as it is for your company. Without it, they run the risk of overstocking their warehouses with parts, causing a concerning balance issue across your supply chain. Sales and Operations Planning tools (S&OP) ensure you have a forecast across your value chain helping you mitigate such instances. These forecasting tools use predictive analytics to allow you and your suppliers to optimize your inventory to meet fluctuating levels of demand.
Where possible, synchronize
With the pressure on keeping costs low, greater efficiency is top-of-mind. It’s the one solution that doesn’t sacrifice productivity, quality, or any other important factors. It can be accomplished through achieving centralization and automating your manufacturing data collection.
Currently, many auto manufacturers have siloed data, meaning it comes from many sources and is therefore difficult to collect and make sense of. 79% of automotive organizations consider it important to collect and analyze vehicle data to predict outcomes for design, service, safety, and operations – but only 20% are able to do so. With a centralized solution deployed cross-departmentally, these insights can be collected to optimize your manufacturing process in real-time with the help of Machine Learning, saving many labor hours of tedious, repetitive tasks which are prone to human error.
To many, it may seem that supply chains have taken their greatest hit but, if recent history has taught us, it could happen again. The past few years have taught auto manufacturers that these disruptions are not just something to bear through, but a learning opportunity on how to become agile and resilient in the face of adversity. Digital tools such as advanced analytics, IoT, and Machine Learning, are essential.
The time for automotive manufacturers to bulletproof supply chains is now, not when global uncertainty strikes again.
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