The automotive industry has shown itself to be brave in recent times, in all areas but one: the supply chain. In order for logistics, procurement and distribution to align with the general advancements of the industry itself, these critical areas must give in to a more comprehensive transformation. It all starts with a bolder approach to planning.

“Brave” in this context points to a never-ending stream of innovations in the automotive space. Electric vehicles are now embedded in our society, while the infrastructure that supports them continues to evolve, both technologically and commercially. Simultaneously, the growth of shared mobility models, of enhanced communication and use of IoT, and of overall mobile connectivity, are now equally familiar to consumers. Meanwhile, on the horizon, we still have the prospect of autonomous driving becoming a reality and not just a prototype race.

Essentially, automotive isn’t now just a manufacturing entity. It is a technology frontier, with cars now better framed as data centers on wheels.

What these advancements have shown is how challenges can become great opportunities, when blue sky thinking is applied, and when there is an urge to be brave with decisions. Merging the traditional with the explorative, the industry’s general approach to digitization also makes it better equipped to deal with unseen challenges, or ever-changing consumer trends.

And with the historic pace of change likely to feel like a Sunday stroll compared to what’s to come, it’s now imperative that the supply chain matches this level of manufacturing bravery, to align itself more appropriately with automotive’s road ahead.

Short-Term Responses to Ever-Evolving Challenges

Delving into those challenges, a lot has been discussed about external, “black swan” events that have disrupted supply chains across most sectors in recent years. The responses to events such as COVID-19, chip shortages, the Suez Canal blockage, the ongoing Russia-Ukraine conflict, and general economic turmoil, has been to try and become more efficient… to perfect stocks.

The transition from just-in-time (JIT) and just-in-sequence (JIS) approaches, to adding second and third supply sources or even reshoring, epitomizes this strive for resiliency and a defensive attempt to avoid risk.

While the transition has promoted resiliency, it has rather lost the essence of innovation along the way. Regardless of whether companies are still trying to hit productivity phases with pinpoint accuracy, or whether they’re diversifying supply sources and reshoring, the same core challenges remain. There is not yet a strong enough synchronization between planning and execution, with dedicated digital solutions as the middle filter connecting the two.

This could prove to be a more serious issue in the years to come, as consumers also change their behaviors, and veer more towards the notion of subscription models and mobile flat rates, rather than classic purchase-and-ownership models.

The overarching themes in this new world of multi-channel e-commerce are speed and agility. Knowing that a vehicle is being produced in an efficient sequence, or that you’re now contracted to two suppliers rather than one, will be of little comfort if the end product isn’t readily available, almost before the buyer has signed the contract.

When the Chips are Down: Surviving or Thriving?

It’s important to look at how this change of mindset might play out with a specific, recurring issue. One that stands out is the chip shortage, which is – still! – keeping supply chain leaders and manufacturers up at night.

There are a number of different ways to combat the challenge. Again, changing supplier is one option, cutting out typically awkward regions or supply routes. Multiplying the number of suppliers is another, to reduce risk should one partner’s capacity drop off. Increasing order sizes is a third possibility, to try and get ahead of the game and always house excess stock.

However, none of these are instigated with any great level of accuracy. And without accuracy, there can never be true optimization of efficiencies and costs. In an era of intense environmental scrutiny, companies are also opening themselves up to greater waste through these approaches as well.

What organizations are lacking through these mitigation attempts is the ability to forecast required inventory, lead times, partner capabilities, and customer demand.

Digitized, automated demand and allocation management solutions are now a must to truly transform supply operations, to ensure the perfect balance between availability and waste, and to guarantee quick turnarounds of products to an expectant, global customer base.

A Brave Culture Shift

The likes of Mercedes-Benz, Michelin, Adient, Ford, Paccar, Yazaki, and Bridgestone are just some of the automotive brands to have reached this realization in recent years. Their approach to supply chain transformation has transitioned from base-level logistical overhauls, to a data-led journey with complete visibility of what is needed, where, and how best to meet that need.

It all starts with improved planning. Knowing what is needed, both in the short- and longer-term, for each part, based on historic and real-time capabilities, within the given climate and industry context, and inclusive of evolving customer demand, results in more precise stock assortment. This is only possible, not just with advanced artificial intelligence (AI) and machine leaning (ML) technologies, but with a synchronized network of technologies connecting data across the entire value chain.

With a connected ecosystem of microservices feeding off each other’s real-time analysis of the supply chain, businesses can achieve n-tier visibility. They can perfect order slotting and sequencing. They can make promises to customers, across sales channels, without fear of unforeseen circumstances breaking them mere days later.

Having a seamless flow of data between supply partners, warehouses, distribution channels, procurement, and – at the head of it all – internal planning, supply chains can finally operate on the same plane as the broader automotive sector.

It requires a dedicated digital transformation partner to ensure its successful execution. But, first, it takes a brave step away from simple, reactive solutions towards a more agile and sustainable culture based on digital innovation.

Learn how Blue Yonder can help transform your automotive supply chain here.