Transforming the Automotive Supply Chain for the 21st Century

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For the JIT model to work, the quality and supply of raw materials, the production of goods, and customer demand must remain aligned. If any link in the chain breaks, stops or goes out of sync, the impact on the supply chains that criss-cross the world can be felt immediately. For companies, unable to deliver orders on time, they risk losing not only efficiency gains, but also brand credibility, market share and revenue.

Today, companies are looking for new ways to manage their supply chains that provide more flexibility and transparency. In the automotive sector, some companies, including Nissan and JIT pioneer Toyota, are increasing their chip inventory levels, while others, including Volkswagen and Tesla, are trying to secure their own supplies of rare metals. But technologies including the Internet of Things (IoT), 5G, and business applications are also giving businesses new ways to avoid disruption and respond to unforeseen circumstances.

Disruption and Transformation

The transformation of the automotive supply chain is taking place in an increasingly digitized world plagued by environmental concerns. As concerns about climate change escalate and governments around the world force industries to adopt more environmentally friendly practices, the automotive industry and its supply chain networks are undergoing profound change. Automakers are shifting from internal combustion engines and large-scale manufacturing to zero-emission, carbon-neutral electric or autonomous vehicles, with a focus on electricity or hydrogen as power sources . Autonomous vehicles, for example, are considered “servers on wheels” that rely on batteries, wiring, laser technology and programming rather than combustion engines. Tech giants such as Japan’s Sony and China’s Baidu have also announced plans for their own electric vehicles (EVs), fueling an already heated race in the EV market.

According to the International Energy Agency, global electric car sales reached 6.6 million in 2021, or 8.6% of all new car sales: more than double the market share compared to 2020 , compared to just 0.01% in 2010. IHS Markit estimates that the number of electric vehicle models in the United States will increase tenfold, from 26 in 2021 to 276 in 2030. At the same time, charging stations will have to alone will increase from 850,000 in 2021 to almost 12 million in 2030. To meet the growing need for battery-powered vehicles, automakers must establish a new ecosystem of partners providing the parts and accessories needed for successful manufacturing and of the operation of these alternative vehicles. According to a study by Transport Intelligence, “The entire powertrain supply chain will be transformed and the types of components, the logistics processes used to move them, the markets of origin and destination as well as the tiering nature of automotive supply chains will change”. .” This has huge implications for how the automotive supply chain is ordered.

Meanwhile, everything in the automotive sector, from the automobiles themselves to entire factories, is becoming increasingly connected, with the support of technologies such as AI, IoT, 5G and robotics. In recent months, Nissan unveiled its “Intelligent Factory” initiative at its Tochigi plant north of Tokyo, which uses AI, IoT and robotics to manufacture next-generation vehicles in a zero-emission environment. And Volkswagen has deployed a private 5G wireless network at its plant in Wolfsburg, Germany, to test new smart factory use cases.

As manufacturing goes digital, so does consumer behavior. Automotive brands are rolling out direct-to-consumer models, allowing customers to increasingly complete the sales process through digital channels. While new players are taking an online-only approach to the sales model, incumbents are adopting digital initiatives in partnership with dealerships where fulfillment, after-sales service and services are still provided by a dealership. In 2020, 69% of dealerships in the United States added at least one digital step to their sales process. And 75% of dealers agreed they couldn’t survive in the long term without moving the sales process online further. Both models require greater supply chain visibility to ensure inventory and availability accuracy.

How Manufacturers Are Responding

Increasingly connected consumers, factories, automobiles and supply chains generate a wealth of data. Collecting and analyzing this data can help manufacturers reduce business risk and become more agile by identifying potential supply issues, increasing efficiency and giving customers more accurate lead times. Predictive analytics, for example, can help manufacturers answer the “what if?” question. » questions and proactively reduce the impact of potential supply chain disruptions. Digital traceability allows businesses to track products and goods throughout the value chain, providing them with accurate information about where inputs are coming from, supplier sourcing practices and conversion processes. “On the demand side, customers expect real-time visibility of when an automobile will be delivered to them, as well as the status of service, spare parts and accessories,” says Mohammed Rafee Tarafdar, SVP and CTO, Infosys.

In an effort to harness data and develop greater visibility across the enterprise, manufacturers are using a variety of technology solutions, including business applications, software suites designed to support business functions . Combined with cloud services, the right line-of-business applications can give organizations better access to cutting-edge technologies, which can then be managed at scale and address visibility, analytics, and cybersecurity needs. As everything becomes more connected and more autonomous, “there is a need for technology that can scale with demand. This is where cloud and business applications have a very important role to play,” says Tarafdar, who adds that manufacturers are embracing both private and public cloud to build hybrid clouds, with support for private 5G networks. .

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