“Never Let a Good Crisis Go to Waste” – Key Insights from the Automotive Logistics
“Never let a good crisis go to waste. » – Sir Winston Churchill
Having just returned from the 2023 Automotive Logistics and Supply Chain Global conference in Detroit, these words are very fitting to encapsulate the essence of the event.
It was indeed an honor to participate in a panel discussion alongside distinguished industry leaders, including Michael Schad, General Manager at Toyota and Lexus Service Parts Fulfillment, Toyota North America; Greg Toornman, Global Vice-President of Materials, Logistics, and Demand Planning at AGCO Corporation; and Adam Jones, Director of Business Development and Sector Strategies at Unipart Group. Our panel delved into the critical theme of “Bridging the gap between network planning and operational execution in production and service parts logistics.”
From the array of presentations shared during the conference, I have distilled several key insights:
- Fostering Collaboration: Disruptions, such as UAW strikes, COVID-19, and chip shortages, have become the new norm, occurring with greater frequency and magnitude. It is imperative to establish transparency, cooperation, and collaboration across the entire supply chain ecosystem, encompassing Tier 1, 2, and 3 suppliers, OEMs, logistics service providers, and even dealers. Short-term visibility at the Purchase Order/ASN level is insufficient. OEMs and Tier 1 suppliers should consider long-term forecast collaboration and capacity cooperation with their Tier-n suppliers. Building strategic relationships, enhancing collaboration with logistics providers or 3PLs, and internalizing 3PL/4PL functions to gain more control over logistics operations are all strategies that contribute to supply chain resilience. Additionally, early detection of disruptions, impact analysis, scenario planning, and proactive risk mitigation strategies are essential. This involves creating a range of “what-if” simulations and contingency plans based on demand fluctuations and supply disruptions.
- Breaking Down Barriers Between Planning, Procurement and Logistics: The existence of isolated supply chains between procurement, planning, and logistics can lead to latency, reduced responsiveness, expedited processes, excess inventory, and substantial inefficiencies. These issues are further compounded by heightened customer expectations and increased market volatility. To address these challenges, automotive industry stakeholders should explore “Synchronized Planning and Execution” strategies, aiming to minimize latency and enhance agility, speed, and responsiveness, while simultaneously reducing Total Cost of Ownership (TCO).
- Balancing Lean and Resilience: Historically, supply chains have primarily adopted a “one-size-fits-all” lean approach, emphasizing operational excellence to boost efficiency, reduce waste, and eliminate non-value-adding activities. However, as businesses navigate unprecedented disruptions, they must consider segment-specific strategies that enhance resilience and mitigate risks across different segments. Strategies like production postponement and risk pooling exemplify how lean and resilient practices can complement each other. Balancing these approaches shifts inventory upstream in the supply chain, reducing finished goods inventory while concurrently enhancing resilience by proactively allocating inventory to downstream locations experiencing disruptions.
- Mitigating Supply Chain Risks: The objective here is to diversify manufacturing and supplier bases across various regions rather than relying solely on offshoring, nearshoring, or onshoring. By reconfiguring global and regional supply chain flows through a multi-sourcing and multi-shoring approach based on needs, cost considerations, service requirements, and risk scenario analyses, organizations can bolster supply chain resilience in the face of disruptions in specific regions.
- Diversity in Supply Chain Talent: As supply chains grow increasingly intricate, job roles and skill requirements evolve. The automotive industry faces fierce competition in attracting and retaining top talent. Enhancing job satisfaction involves transitioning planners into roles that involve more value-added activities, such as supplier and customer collaboration and scenario analysis, rather than limiting them to spreadsheet tasks. Cultivating an inclusive and diverse workforce is paramount for driving supply chain performance, nurturing creative and productive work environments, and addressing labor shortages spanning the entire value chain.
To learn how Blue Yonder can help you face uncertainty and supply chain challenges visit www.blueyonder.com.