For over a century, the global automotive industry has centered around one primary technology: the internal combustion engine. However, the digitalization of modern cars is now transforming the industry, with significant implications for the entire supply chain.

As vehicles become more connected, autonomous, electric, and customizable, automotive manufacturers are increasingly evolving into technology companies. Unlike traditional manufacturers, technology companies operate with greater agility and responsiveness. To stay competitive, automotive companies must adopt this approach, continuously delivering cutting-edge features and functionalities. They need to be nimble, ready to adapt swiftly as automotive technology and consumer demands evolve, marking a substantial departure from their traditional methods.

The 2024 Finished Vehicle Logistics North America Conference, which took place May 21-23 in California, was a good place for automotive companies to learn about innovative strategies and solutions to drive their supply chains forward.

As the industry transitions to an electric, digital, and sustainable future, fragmentation, volatility, and variability in production are challenging traditional equipment, network capacity, and service levels. What we heard at the conference is that tougher environmental targets and longstanding issues such as driver and labor shortages, underinvestment, and lack of visibility, are driving up costs and inefficiencies. This results in longer lead times, reduced fulfillment levels, and declines in quality standards and customer satisfaction. Congestion across networks, labor shortages, transportation delays, capacity constraints, port bottlenecks, and cost pressures highlight the need for automakers to strive for greater supply chain resiliency.

As we heard at the conference, the vehicle logistics industry is responding. Manufacturers and logistics providers are increasingly turning to digitalization and automation to enhance network efficiency. The finished vehicle supply chain has become a primary focus for industry leaders and boardroom executives. The capability to deliver vehicles promptly and cost-effectively is now seen as more crucial to overall operations, business strategies, and profitability than ever before.

We saw an increased focus on the supply chain and closer alignment with other business areas, including sales. Previously, logistics was invisible to sales as long as dealers had sufficient inventory. Now, the sales team is more aware of the logistics challenges in bringing vehicles to market and understands what is needed to maintain profitability.

In addition, other strategies to enable supply chain resiliency that we heard included strategic relationships, improved collaboration with logistics providers, and the possibility of bringing 3PL/4PL in-house to reduce transportation and warehouse costs and gain more control over logistics operations.

Some of the key learnings from automotive-led sessions that we attended include:

  • Ford’s Paul Roosen and Subaru of America’s Lisa Kline discussed the organizational and technological changes necessary to prepare for EVs, highlighting the importance of partnerships, and shared KPI’s with providers to create an end-to-end connected supply chain with consistent network flow.
  • Anu Goel from VW Group of America emphasized the benefits sharing and collaborating on demand and supply plans across long, medium, and short terms with carriers, and integrating operations in Mexico, Canada, and the U.S. into a unified control tower view to enhance network visibility — something the carmaker has not previously done.
  • Steve Jernigan from Nissan North America and Raúl Gamboa from BMW Group’s Plant San Luis Potosí addressed insourcing, capacity issues in Mexico, and challenges in ports and rail.
  • And, GM’s Prashant Swadia discussed building trust and a win-win long-term partnerships while maintaining flexibility and fostering trust and transparency.

As we heard from the speakers, currently at many OEMs, the planning, scheduling, transportation, warehousing decisions are being made in silos by different teams leveraging a home-grown legacy system. This fragmented approach results in latency in decision-making, parts shortages, increased transportation and labor costs, reduced throughput, expedited premium freight, and inefficiencies in labor. VINs (Vehicle Identification Numbers) scheduling typically occurs without insight into parts availability, resulting in vehicles arriving at the Vehicle Processing Centers/ Vehicle Distribution Centers lacking necessary parts. This necessitates manual rescheduling and expedited procurement of parts. Additionally, there’s operational risk due to the use of disparate systems and the potential loss of expertise with system knowledge.

Technology has come a long way and some of the strategic priorities, challenges, use cases and workflows that were highlighted by the speakers can now be enabled through an end-to-end integrated planning and execution platform that will help reduce latency, accelerate time to value and reduce TCO include:

1.         For example, Anu Goel from VW Group of America emphasized the benefits of sharing demand and supply plans with the relevant stakeholders in an organization. Long-, medium-, and short-term demand and supply plans for the VINs can now be communicated to Yard Management Systems (YMS), Warehouse Management Systems (WMS), and Transportation Management Systems (TMS) to enhance planning for parts, labor, space, yard, warehouse storage, handling, and transportation capacity. Also, demand and supply plans can incorporate labor and transportation capacity constraints into planning to generate executable supply plans. This will help improve plan adherence, reduce expedite and labor costs, and maximize on-time, in full (OTIF) and employee productivity.

2.         The demand and supply plans for the VINs can respect transportation load building constraints, constructing executable transportation loads directly in planning. There can be continuous feedback and updates from the TMS to planning regarding constraints such as equipment availability and precise transit times. This will aid in reducing buffer stock, in-transit inventory, and improving customer service levels.

3.         Demand and supply plans for the prioritized VINs for the next 4-6 weeks can be shared with Order Slotting and Sequencing. The final Slotting Output and Detailed Schedule will then be communicated back to planning, which will lead to increased throughput, less parts shortages, and reduce labor costs and overtime.

4.         Order Slotting and Sequencing will relay the Detailed Schedule/Work Orders to the WMS and the planned VINs for transportation to the TMS. Dynamic Schedule updates can be communicated as well to update outbound load plans and parts/labor planning. Subsequently, the updated status of VINs/Work Orders can be communicated back to Order Slotting and Sequencing.

5.         Yard/Warehouse and TMS can communicate VIN status and load plans to align outbound staging/parking of vehicles to drive efficiency with driver loading to improve hours of service and vehicle throughput.

6.         The end-to-end integrated planning and execution platform (Planning, TMS, WMS, OSS) can offer comprehensive visibility throughout the journey of VINs in transit within containers, the availability of parts at the Parts Distribution Center, the movement of VINs into the Yard, and further into the VDC until they reach the outbound staging area en route to the dealer.

As can be seen from the above workflows, the goal for OEMs should be to establish and integrate an end-to-end supply chain, allowing them to deliver vehicles to customers and dealers that meet their specific preferences, on time, and in a cost-effective manner. Breaking down silos between Procurement, Planning and Logistics is critical – siloed supply chains will help increase agility, speed, responsiveness, and reduce expediting, excess inventory, which are exacerbated today by rising customer expectations and increased volatility. In the face of such uncertainty, complexity and volatility, automakers should create a variety of “what-if” simulations and contingency plans based on demand realization and supply disruption scenarios.

Overall, the Blue Yonder team enjoyed attending the event and connecting further with automotive companies to share our capabilities to support their efforts. To learn more about Blue Yonder’s offerings visit blueyonder.com.