A previous blog post focused on the many challenges created for the world’s automotive manufacturers by demand uncertainty, especially related to electric vehicles (EVs). The uneven global adoption of EVs makes it difficult for automakers to get the product mix right by channel and region as they simultaneously manufacture internal combustion engine (ICE) models, EVs and hybrids. 

While EV demand volatility creates planning challenges across the supply chain, battery planning is especially fraught with complexity and risk. EV batteries get a lot of attention in the industry for their use of innovative materials, as well as manufacturers’ evolving designs and power technologies. Batteries are also in the headlines because their weight — 1000 pounds on average — is seen as a key engineering challenge. A heavier battery produces more power, but that weight also limits power efficiency and driving range. 

From a production planning perspective, batteries are seen as critical for yet another reason. With their high development costs, long lead times, use of scarce materials, and transportation challenges related to hazardous materials, weight and sustainability, batteries represent a critical piece of the automotive planning and production puzzle.  

If they forecast too high, automakers end up with incredibly expensive, heavy component inventories on hand that require special handling and storage. Worse, that inventory is aging quickly, as battery innovation picks up speed. If the forecast is too low, manufacturers miss sales opportunities in an industry that’s recently seen declining revenue and margin.  

Batteries are made to stock, in a make-to-order supply chain 

Compounding the problem of accurate EV planning and production? Automakers use two entirely different approaches to plan and manufacture EVs and their batteries. 

Most car and truck manufacturers — in partnership with their battery suppliers — use a make-to-stock, supply-driven approach for producing and sourcing EV batteries, based on the availability of scarce materials like lithium, nickel, manganese and cobalt. Raw material supply forecasts, production capacities and supplier availability are the main constraints. The goal is to replenish EV battery inventories on a continuous basis, as they are used in finished vehicles. 

When batteries enter the traditional production planning process for vehicles, however, they’re now part of a demand-driven, discrete manufacturing operation. Batteries move into the production stream as cells, electronic components and finished packs, creating a slew of mixed production planning and component integration challenges. Their special handling requirements create practical and financial challenges during inbound transportation, storage at the production facility and vehicle assembly. The flow of batteries into EV production lines is the opposite of seamless, predictable and easily managed.   

The end result? The “push” of EV battery production rarely meets the “pull” of EV vehicle demand with any degree of precision. 

It’s easy to see how automotive manufacturers ended up in this predicament. The rare materials used in EV batteries are increasingly constrained, specifically due to geopolitical events like the Russia-Ukraine conflict. There’s a real sense among procurement specialists and battery production planners that this single constraint must necessarily drive EV manufacturing schedules and outputs. 

On the other hand, there’s no confidence that consumers will be waiting to buy an EV once it’s produced, complete with battery. While over a million EVs are sold in China every month, demand is lower and much less predictable in the rest of the world. 

Needed: A smarter way to match supply and demand 

It’s understandable why automakers began using this combined push- and pull-driven approach, which is often at odds with itself. But this dated approach is neither smart nor economically sustainable in today’s enormously volatile EV production landscape. Manufacturers can’t afford to keep stockpiling heavy, expensive and highly regulated batteries without a reasonable expectation that they will be incorporated into vehicles that will be sold immediately. 

So what’s the answer? At Blue Yonder, we strongly believe in a dynamic, integrated approach to production planning, powered by artificial intelligence (AI) and machine learning (ML). 

Imagine if all the digital capabilities needed to plan supply, demand, transportation, warehousing and production — for both components and finished vehicles — were integrated on the same platform. What if they shared the same real-time, end-to-end data? And what if this visibility extended beyond the automaker’s internal supply chain, to include key vendors and partners? 

In this idealized environment, planning, production and logistics would be intelligently orchestrated with one another. An exception at one supply chain node — like a battery material shortage, a halted assembly line or a drop in EV demand — would be recognized across the network. AI and ML would autonomously and immediately find an optimal solution, such as a new materials supplier, to keep supply and demand profitably and optimally balanced. 

To achieve this vision, automakers need to identify a technology partner who can coordinate the entire end-to-end supply chain — from sourcing to last-mile delivery — via a set of interoperable solutions, united on an edge-supported platform. In dynamically matching supply with demand, these AI-infused, interoperable solutions would ingest real-time data and apply advanced analytics to enable smarter decisions, faster responses and more connected, predictable outcomes. 

Every day, the headlines are filled with news on EV battery innovations. Recently Panasonic,  Stellantis, Ford, startup Slate, and Chinese giant CATL have announced big performance improvements and technology innovations. Despite the uncertain global demand for EVs, it’s clear that leading automakers and their suppliers are betting big, and investing heavily, in the future of vehicle electrification. 

It’s time they matched product innovation with an equally innovative, charged-up approach to supply chain planning and collaboration. It would be great to achieve the perfect EV battery design — but automotive supply chains still need to deliver it profitably and reliably to consumers as part of a finished vehicle. 

Learn more about Blue Yonder’s comprehensive capabilities for automakers that can help manage EV-related production uncertainty, as well as other supply chain challenges. Or contact us for a one-on-one conversation.