Transforming the automotive supply chain for the 21st century

In order for the JIT model to work, the quality and supply of raw materials, production of goods and customer demand for it must be in alignment. If any link in the chain is broken, stalled or out of sync, the impact on the supply chain across the world can be felt immediately. For companies, unable to deliver on time orders, they risk losing not only efficiency gains but also brand credibility, market share and revenue.

Now, companies are looking for new ways to manage their supply chains that offer greater flexibility and transparency. In the automotive sector, some companies, including Nissan and JIT leader Toyota, are increasing the level of chip inventory, while other companies, including Volkswagen and Tesla, are trying to secure their supply of rare metals. But technologies, including the Internet of Things (IoT), 5G, and business applications, also provide companies with new ways to avoid disruption and respond to unforeseen circumstances.

Disruption and change

The automotive supply chain is changing in an increasingly-digitized world surrounded by environmental concerns. As climate change concerns intensify, and governments around the world are forcing industries to switch to more environmentally friendly practices, the automotive industry and its supply chain network are undergoing serious changes. Automotive manufacturers are focusing on electric or hydrogen as an energy source in zero-emission, carbon-neutral electric or autonomous vehicles, moving away from internal combustion engines and mass production. Autonomous vehicles, for example, are seen as “server 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), accelerating the already hot race in the EV market.

According to the International Energy Agency, global sales of electric cars reached 6.6 million in 2021, accounting for 8.6% of all new car sales: more than double the market share compared to 2020 and only 0.01% in 2010. Business Insights provider IHS Markets estimates that the number of EV models in the U.S. will increase 10-fold, from 26 in 2021 to 276 in 2030. At the same time, the number of charging stations alone will need to increase from 850,000 in 2021 to about 12 million in 2030. To meet the growing demand for battery-powered vehicles, manufacturers must establish a new partner ecosystem that supplies the parts and accessories needed for the successful production and operation of these alternative vehicles. According to Transport Intelligence research, “the supply chain for the entire powertrain will change and the types of components, the logistics processes used to move them, the tier character of the original and destination markets as well as the automotive supply chains will change.” There are effects.

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

As manufacturing becomes more digitized, so does consumer behavior. Automotive brands are introducing direct-to-consumer sales models, enabling consumers to complete the sales process through digital channels. While new players are adopting an online-only approach to the sales model, executives are adopting digital initiatives in partnership with dealers where fulfillment, after-sales and services are still provided by the dealer. In 2020, 69% of dealers in the US added at least one digital step to their sales process. And 75% of dealers agreed that they would not be able to survive in the long run without moving the online sales process further. Both models need more visibility in the supply chain to ensure inventory and availability are accurate.

How manufacturers respond

Already more connected customers, factories, automobiles and supply chains generate a wealth of data. Collecting and analyzing this data can help manufacturers become more agile by reducing business risk and identifying potential supply problems, increasing efficiency, and giving customers a more accurate timeline. Predictive analysis, for example, prompts manufacturers to ask “what if?” Can help answer. Actively minimizes the impact of queries and potential supply chain disruptions. Digital traceability enables companies to track products and goods as they move along the value chain, providing them with accurate information about inputs, supplier sourcing practices and conversion processes. Mohammed Rafi, SVP and CTO of Infosys, says, “On the demand side, customers expect a real-time view of when the automobile will be delivered to them and the state of service, spare parts and accessories.”

To use data and develop more visibility across businesses, manufacturers are using a variety of technological solutions, including business applications, including a suite of software designed to support business operations. By teaming up with cloud services, the right business applications can give organizations more access to advanced technologies, which can then be managed on a scale and address the need for visibility, analytics and cybersecurity. As everything becomes more connected and more autonomous, “there needs to be technology that can scale with demand. This is where the cloud and business applications play a very important role, “says Pro, adding that manufacturers are embracing both private and public cloud to create hybrid clouds with the support of private 5G networks.

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