Disruption in Supply Chains for Automotive Industry

Ever since the COVID-19 outbreak, supply chains have faced major disruptions in the automotive industry. Several manufacturing companies have had to modify their approaches as a result of the impact of the pandemic on the supply and demand from customers, businesses, suppliers and governments.

According to a recent survey conducted by PwC, organizations are being challenged to examine how their supply chains are adapting to an evolving marketplace. In order to determine how companies can become 'supply chain digital champions', they surveyed over 1,600 supply chain executives in 33 countries worldwide. According to PwC, a supply chain digital champion is an organisation that is successful in connected and autonomous supply chain ecosystems.

The study found that four out of five respondents in the UK had seen a positive impact of implementing supply chain capabilities. In the UK, however, companies face two main challenges: managing profitability and ensuring supply chain security.

In terms of transforming the supply chain, PwC found that it was based around:

Supply chain visibility

Flexibility and agility

Resilience and cost control

Digitisation

Automotive supply chain management: key factors

Supply chain visibility

In the survey, 77% of UK digital champions in the manufacturing sector had implemented measures to improve visibility across their end-to-end supply chains. This was recognised as a key priority and compares with 62% of global respondents. The following benefits can be derived from investing in an advanced supply chain:

Lower costs

Increased revenue

Better overall supply chain performance

The UK invests slightly less in advanced supply chain technology than other countries, yet only 29% of companies have implemented supply chain transparency and control tower processes globally. Although this is forecast to reach approximately the UK level (36%) over the next five years, there is still a long way to go before a country is deemed to be a ‘digital champion.’

As a result of disruptions in parts production in China, the automotive industry has suffered damage to its supply chain even before the pandemic began. With evidence suggesting that vehicle demand had already begun to reduce, it is essential for the industry to have a clear understanding of its supply chain to meet demand without wasting money.

Flexibility and agility

According to global results, 81% of digital champions have achieved external collaboration or end-to-end orchestration. There has been a significant shift in the planning area, with 14% of the companies demonstrating synchronised closed loop planning across the entire value chain.

The UK is behind the rest of the world in terms of external collaboration and end-to-end orchestration across its supply chain (26% versus 36% globally). It is estimated that only one in five businesses in the UK recognise end-to-end supply chain planning as a priority, while a third have no plans to implement this system.

To meet the needs of customers, the automotive industry may wish to increase collaboration with dealer networks in order to encourage the use of digital tools during the purchasing process. Furthermore, manufacturers can take advantage of these features to maximise transparency and identify potential problems as early as possible.

Resilience and cost control

As a result of implementing resilience and cost control, a better risk management system can be implemented, along with improved sustainability and a more efficient utilisation of assets.

Increasing supply chain transparency, including near real-time visibility of product, financial and logistical information, can assist businesses in improving their supply chain resilience and achieving their sustainability goals.

In comparison to the UK, 47% of digital champions have implemented near real-time visibility of supply chain execution through a control tower. Additionally, 36% of UK companies regard embedding advanced analytics as a key priority for developing the next-generation supply chain organisation, compared to 42% of digital champions.

From the customer's perspective, they are increasingly interested in knowing where their products are sourced. In making these fully traceable, companies will be able to track them and provide customers with the information they need. Furthermore, companies will be able to identify when and where damage has occurred to their products.

It would be advantageous for the automotive industry to implement technology transformation tools to identify cost-cutting opportunities. While the decision of a company to save money is not new, knowing which investments will result in a return on investment in a damaged economy can be a critical part of the company's long-term success.

Digitisation

Using artificial intelligence to improve supply chain efficiency and logistics is referred to as digitisation. In the UK, 67% of respondents use Artificial Intelligence (AI) in at least one area of their supply chain, with the three highest priorities being:

Cost to serve

Supply chain transparency

Supply chain segmentation

It is only slightly behind the global statistic and that of the digital champions. As AI is accelerating supply chain improvements, it will eventually become the norm.

More than a third of companies are currently implementing artificial intelligence (AI) to support integration and collaboration between suppliers and customers (36%). Approximately 73% of digital champions have implemented supply chain segmentation, ensuring customer centricity and balancing service levels, costs, and margins over time.