Automotive supply chains are unique and complex, and especially after the pandemic, all across the globe, the globalization of the supply chain is getting defined with a different context.
Now, most of the automotive manufacturers all over the world are deliberating about “Near Shoring,” which means moving their supplier base to a closer and more cost-effective location, thereby avoiding the risks of such natural disasters and pandemics. Of course, like any other supply chain, the need for lower inventories, the need for having visibility all across, optimizing costs, and the need for being responsive shall always remain the priorities.
It is essential to understand that speed and agility in the supply chain refers to the use of responsiveness, competency, flexibility, and nimbleness through which day-to-day operations in the supply chain gets managed. With regards to quality in the supply chain, besides the product quality, it is the quality of the flow of physical goods, and related information, which is of paramount importance. The information has to flow seamlessly across all legs of the supply chain so that visibility is there everywhere and every time. VUCA (volatility, uncertainty, complexity, and ambiguity) atmosphere, which had started creeping into supply chains long back, has assumed more significance across the functions and organizations like never before. This pandemic crisis has proven that statistical modeling and forecasting techniques are not as useful as it used to be.
Along with this, we must keep a close watch on technology trends like Artificial Intelligence, Edge Computing with Supply Chain Analytics, Virtual and Augmented Reality barging into supply chains very fast. Therefore, to combat volatility and uncertainties in the business, supply chain managers need to align their supply chain strategies with different business models keeping technology trends in mind and understanding the key drivers between the VUCA world and sustainable supply chains. Only with these proactive actions, both agility and quality in the supply chains can get further enhanced to gain acceptance from the fast-changing demands of every stakeholder.
Processes in supply chain management
Most of the big automotive organizations have Business Continuity Plans (BCP) in place that ensure dealing with cyberattacks, natural disasters, hurricanes, and major changes in supply prices of critical raw materials etc. But I think what we usually miss is the execution of the same BCP with tier II and tier III supplier base as the absence of this, would make our supply chains vulnerable at any moment.
Any supply chain can be defined as the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. Therefore, managing these end-to-end processes are the key to the success of any supply chain. To take control of these critical supply chain processes, I would still recommend using the Supply Chain Operations Reference (SCOR) model, wherein all business processes from supplier’s suppliers to customer’s customers get covered under the ambit of Plan, Source, Make, Deliver, and Return.
- Plan Process: The most crucial supply chain Planning process involves determining and implementing the necessary planning and scheduling methodologies for different product types (e.g., based on volume, delivery frequency, cycle time) and the resulting supply chain processes (Push, Pull & Flow). Close collaboration with business partners is necessary to align volumes, capacities, and inventory levels. The production scheduling makes use, wherever possible, of flow and pull principles both internally and with the suppliers. The overall objective is to achieve consistent delivery ability without having to rely on just-in-case inventories in parts of the supply chain or the necessity of premium freight to make up deliveries.
- Make & Source Process: In this production planning process, Customer Takt time sets the pace of production to match the rate of customer demand. Deciding on plant capacities/line capacities is of utmost importance for the production planning process. Consequently, implementing and executing these results of planning within minimum inventories, just in time production and avoidance of overproduction.
- Delivery Process: It entails enabling cost-efficient high-frequency deliveries by freight consolidation, cross-docking, and direct shipping methodologies to ensure customers receive their goods in the right quantity and at the right time. As most of the automotive manufacturers would like supplies closer to them, and hence, in between use of #3 PL warehouse is recommended to supply to customers as per their JIT demands.
Future Trends for supply chain management practices
Smart Factory: Under the gambit of Industry 4.0, the smart factory is the step towards moving current supply chains to the autonomous supply network. Within modular structured smart factories, cyber-physical systems monitor physical processes, create a virtual copy of the physical world, and make decentralized decisions. Over the Internet of Things (IoT), cyber-physical systems communicate and cooperate and with humans in a synchronous manner and time both internally and externally. Future factories shall see humans and cobots working in tandem with each other.
Green Supply Chains/ Mobility Revolution: Companies are incorporating environmental impact goals into their business strategy not only to meet regulatory needs but also to improve their brand equity and profitability. Green supply chain management can be defined as integrating environmental thinking into supply-chain management, including product design, material sourcing, and selection, manufacturing processes, delivery of the final product as well as end-of-life management of the product after its useful life. The green revolution or mobility revolution is going to be the change-makers in the automotive industry in the upcoming years.
Supply Chain Risk Management: From the beginning of this year, after the pandemic, in my opinion, this trend is going to be there for the coming years, as every organization has started working on this in different ways. Supply chain risk management (SCRM) is the process of taking strategic steps to identify, assess, and mitigate the risk in your end-to-end supply chain. A comprehensive approach to SCRM involves the management of all types of trouble for all tiers of supply and all risk objects (suppliers, locations, ports, and more).
Artificial Intelligence: The most recent Gartner forecast predicts that AI will create $5 trillion of business value by 2025. However, the full potential of AI has not yet arrived. This will rapidly change over the next couple of years, especially when it comes to supply chain use cases such as decision support and automation. Recent research from McKinsey finds 61 percent of executives report decreased costs, and 53 percent report increased revenues as a direct result of introducing artificial intelligence into their supply chains.
RPA (Robotic Process Automation): This is another trend which has already impacted supply chains and organizations in a big way. In Continental, we have already started to work on this Robotic Process Automation is the technology that allows anyone today to configure computer software, or a “robot” to emulate and integrate the actions of a human interacting within digital systems to execute a business process. RPA robots utilize the user interface to capture data and manipulate applications just like humans do. They interpret, trigger responses and communicate with other systems in order to perform on a vast variety of repetitive tasks.
Business Analytics: Supply chains typically produce vast amounts of data. Analytics represents the ability to make data-driven decisions based on a summary of relevant, trusted data, often using visualization in the form of graphs, charts, and other means. Supply Chain Analytics helps decision making more straightforward, logical, and fast by understanding patterns and trends within this data. Different types of Supply chain analytics include descriptive analytics, predictive analytics, prescriptive analytics, and cognitive analytics.
International Trade Regulations: Management of Trade Regulations is another trend that shall continue to impact supply chains across the globe. In the event of US-China Trade wars, UK’s Brexit, implementation of RCEP without India participating in it, supply chains in different industries need to be on constant vigil regarding non-tariff barriers and different FTAs impacting the supply chains.
This article has been authored by Sandeep Raman Sharma, Head of Supply Chain Management, Continental Automotive India.