Automotive supply chains need a resilience vaccine

automotive manufacturing

December 14, 2020By Peter Maithel

Even though declared “pandemic” its Word of the Year for 2020, one could argue the term “supply chain” is a close second. 2020 was likely many people’s first time hearing about supply chains or experiencing the massive role they play in our day-to-lives.

Automotive suppliers, of course, have long been aware of the supply chain’s significance. Unfortunately, this knowledge didn’t necessarily make the events of 2020 any easier on them. What world events did do, however, is highlight areas of vulnerability and corresponding opportunities for improvement. One could say, in keeping with the 2020 Word of the Year, that the automotive supply chain needs its own vaccine of sorts: greater agility and resilience, developed from better visibility, communication, collaboration, and vigilance.

Timing is everything

The automotive industry is under severe pressure to innovate, driven by powerful forces: rising customer expectations, new and non-traditional entrants, alternative powertrains, stringent quality and safety requirements, shared mobility, and connected/autonomous technologies.

Supply chain resilience is a non-negotiable requirement for growth and innovation at scale – and yet, when it is most critically needed, it is most under assault. The effects of the longstanding challenges in the automotive supply chain – enterprise-centric silos, a lack of transparency and collaboration and inconsistent data, processes and practices – have been amplified by the pandemic, which has also exposed the risks associated with an excessively lean operating model.

Additionally, the financial havoc of the two-month industry shutdown has led to a huge increase in supplier bankruptcies, with several more still expected; in fact, the full effect of the events of 2020 are yet to be fully understood.

Why now?

This has been a wake-up call for the industry. In fact, it would not be an exaggeration to say that it represents an existential threat to the industry itself. Overcoming these challenges will require more than business as usual; it will require a completely new normal, built on vastly improved visibility, transparency and collaboration – both intra-organizational, as well as outside the four walls to extend across the entire automotive ecosystem.

Traditional linear supply chains can no longer provide the resilience and agility that the industry needs; organizations need to reimagine their supply chains from a data-driven yet largely reactive construct to intelligence-driven, proactive and predictive digital ecosystems.

A closer look at supply chain visibility, transparency, and collaboration

Supply chain visibility refers to the ability to track raw materials and components from vendors and suppliers across the entire supply chain in real or near-real time, facilitating proactive and timely response to address emerging situations and reduce the risk of disruption.

Platforms such as Infor Nexus provide standardized tools and processes to connect all parties for real-time visibility and collaboration and access to a single source of truth. These tools can help address the age-old supply chain conundrum: using an enterprise-centric approach to solve a multi-enterprise problem.

Transparency is an extension of visibility that enables all concerned parties to communicate openly with each other using a single source of truth, thereby increasing trust and facilitating collaboration; and as collaboration increases directly with trust, it yields the benefits of increased agility and resilience.

The role of technology and human capital in supply chain transformation

Technology plays a key role in the evolution of supply chains to predictive/prescriptive digital ecosystems, which require high-quality data and associated tools to achieve their potential. Infor Coleman artificial intelligence and Infor Birst analytics solutions are examples of such tools that can enable the realization of a digital ecosystem.

However, technology alone is not enough; finding and retaining the right talent is equally vital. This, though, is easier said than done: the automotive industry is no longer competing only with other auto companies for the best and brightest.

In the war for talent, the adversaries are from every industry and sector – and the most highly-qualified candidates are fully aware of their options. A strategic approach to human capital management (HCM), enabled by appropriate tools such as Infor HCM and Infor Talent Science, is, therefore, a must-have for success in this critical arena.

Summing it all up

While the events of 2020 have definitely been a seismic shock to the industry, the problems themselves are nothing new: they have challenged supply chains since the dawn of commerce itself. If one were to look for a positive coming out of this year, perhaps one could say that it has really raised awareness of major vulnerabilities in the status quo. Ultimately, when all is said and done, the measure of success for a supply chain or digital ecosystem is still the ability to maximize service levels and customer satisfaction by getting goods to the right place at the right time while minimizing working capital and cost of goods sold.

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