Creating the 21st Century Automotive Supply Chain: Complexity #3 – How collaboration allows automotive manufacturers to squeeze efficiency gains while increasing flexibility

ERP manufacturing automotive factory modern technology laptop

August 5, 2020By Peter Maithel

Traditional focus areas

Lean methodologies have been firmly established in manufacturing, and specifically in the automotive industry since the 1930s. Those working within the industry know the 5 key principles of Lean Thinking, which include “… precisely specify value by specific product, identify the value stream for each product, make value flow without interruptions, let customer pull value from the producer, and pursue perfection.”

As auto manufacturers strive for greater efficiency, many have adopted the use of the visual factory. This method allows organizations to drive financial and cultural benefits by incorporating visuality in the world of continuous improvement. A visual factory and visual management create the ability to quickly see problems, get alerts, and uncover weaknesses in a proactive fashion.

With factory walls now extending further than ever before, the concept of a visual supply chain is more relevant than ever before. Like the visual factory, the visual supply chain provides new levels of transparency so manufacturers can identify potential issues earlier than ever before and collaboratively address them.

Unsurprisingly, the mission of the supply chains has changed very little over time and remains firmly rooted in creating competitive advantages through purchasing, manufacturing, and distributing products and services that provide value to customers. Driving efficiency is at the heart of that mission and serves as a performance measure, particularly in terms of time and resources. Automotive supply chains are continuously squeezed for incremental efficiency, often by decreasing working capital and decreasing cost. Automotive manufacturers are constantly returning to the questions:

  • How many days of on-hand or in-transit inventory can I reduce?
  • How long are parts and finished goods sitting around collecting cost?
  • How long does it take me to build a certain system?
  • How long does it take me to quality check that system?

Achieving greater efficiency is more critical than ever, especially for an industry plagued by constant supply chain disruptions. The most resilient automakers understand that using systems and management tools that create true end-to-end visibility enables real-time collaboration, which ultimately generates new pools of efficiency. Visibility allows automotive manufacturers to generate agile responses to demand changes caused by disruption, while maintaining costs and margin.

Embracing business model shifts

Manufacturers who have implemented lean framework have spent years honing their manufacturing processes. For highly repetitive industries like automotive, significant gains are often quickly realized. Just-in-time (JIT) allows supply chains to operate with minimal inventory, which certainly creates levels of risk due to the optimized nature of the supply chain remaining fragile in the face of disruption.

Regardless, JIT has optimized the manufacturing process, and incremental gains are not necessarily significant. Manufacturers now can stretch efficiency across their network, as a clear “wild west” can be explored beyond the factory walls. This will become increasing apparent as the new trends continue to migrate closer to the customer, with experiential showrooms in dealerships and sales executed online. This will inevitably continue to enable efficiency gains beyond the factory walls and challenge the timeless question of “Who is my customer?”

These concepts will also require increased levels of visibility and collaboration. How does an automotive manufacturer optimize their end-to-end supply chain, support collaboration, and improve execution beyond the factory walls? Traditionally, once a vehicle is delivered to the dealer, risk is exchanged and the working capital shifts to the dealer. However, the opportunity of true end-to-end visibility presents itself when the supply chain is extended to the final end-customer, unlocking new service and business models, and enhanced customer experience.

To learn more about how automotive manufacturers and suppliers can ensure quality and safety compliance from their trading partners, download the comprehensive 21st Century Automotive Supply Chain best practices guide.

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