Covid recovery: adapting the automotive supply chain
28 July 2021
COVID-19 has caused major disruptions to the automotive supply chain. Due to the impact the pandemic has had on the supply and demand from customers, businesses, suppliers and governments, companies within the manufacturing umbrella have had to modify their approach.
Pwc carried out a global digital operations survey which challenged organisations to closely look at how their supply chains are transforming within an evolving marketplace. They surveyed over 1,600 supply chain executives in 33 countries worldwide to investigate how companies can stabilise their supply chains to be recognised as a ‘supply chain digital champion’. According to Pwc, a supply chain digital champion is an organisation that is successful in connected and autonomous supply chain ecosystems.
The results found that four out of five of respondents in the UK had seen a positive impact from implementing supply chain capability. However, managing profitability and supply chain security were recognised as the two main challenges facing companies in the UK.
In terms of transforming the supply chain, Pwc found that it was based around:
- Supply chain visibility
- Flexibility and agility
- Resilience and cost control
In this blog, we focus on these areas to explain how organisations had to adapt their supply chains and what this could mean for the automotive sector.
Automotive supply chain management: key factors
Supply chain visibility
The survey found that 77% of UK digital champions within 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 benefits from investing in an advanced supply chain included:
- Lower costs
- Increased revenue
- Better overall supply chain performance
Although investment in advanced supply chain technology is slightly lower than in the UK, a mere 29% have implemented supply chain transparency and control tower processes globally. While this is expected to grow approximately to the UK level (36%) over the next five years, there is still much room for improvement before ‘digital champion status’ can be achieved.
The automotive sector has suffered damage to its supply chain partly due to parts production disruptions in China, even prior to the pandemic. 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
Global results show that 81% of digital champions have achieved external collaboration or end-to-end orchestration. This includes moving to an advanced state in the planning space with 14% of them demonstrating synchronised closed loop planning across the whole value chain.
UK organisations are behind those from the rest of the world in terms of achieving external collaboration and end-to-end orchestration across their supply chain (26% vs 36% globally). In fact, end-to-end supply chain planning is only acknowledged as a priority for one in five businesses in the UK with a third of them having no plans to implement this system at all.
The automotive sector may wish to increase collaboration with dealer networks to encourage the use of digital tools during the purchasing process that are designed to meet customer expectation. In addition, manufacturers can use these features to maximise transparency and detect potential issues from the outset.
Resilience and cost control
Implementing resilience and cost control can lead to better risk management, improved sustainability and increased asset utilisation.
Adopting greater supply chain transparency including near real-time visibility for product, financial and logistical information can assist businesses in improving their supply chain resilience and reach sustainability goals.
The stats show that 47% of digital champions have implemented near real time visibility of supply chain execution through a control tower compared to 7% in the UK. In addition, 36% of UK companies see embedding advanced analytics as a key priority in developing the next level supply chain organisation vs 42% of digital champions.
From the customer’s point of view, they are increasingly seeking information about where their products are sourced from. Making these fully traceable allows for companies to track them and provide customers with the required information. In addition, companies will be able to identify when and where products have been damaged.
The automotive sector would be wise to implement technology transformation tools to identify cost-cutting opportunities where they arise. Although a company opting to save money is nothing new, being aware of which investments will see a ROI in a damaged economy can be a critical factor to a company’s long-term success.
Digitisation is the adoption of AI to accelerate the supply chain improvement and smart logistics. The stats reveal that 67% of UK respondents use Artificial Intelligence (AI) in at least one area of their supply chain with the three highest priorities including:
- Cost to serve
- Supply chain transparency
- Supply chain segmentation
This 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.
Over a third are currently implementing AI (36%) to support supplier and customer integration and collaboration. 73% of digital champions have implemented supply chain segmentation, enhancing customer centricity and allowing them to continuously balance service levels, costs and margins.
A QMS would be an effective approach to implement AI that provides tangible results. Quite often, manufacturers within the automotive sector are in several locations across the globe. For this reason, a centralised system would increase supply chain transparency and ensure investment is made in the right areas.
Due to an inconsistent market largely influenced by the COVID pandemic, demand is constantly changing, which means that companies must adapt to ensure long-term success. The modern automotive supply chain, like the entire automotive operation, requires careful and controlled quality management.
Guide to Covid recovery for the automotive industry
Our step-by-step automotive industry recovery guide provides insightful analysis and guidance to help automotive quality professionals overcome the challenges presented by the COVID-19 pandemic and chart a path to recovery.Read now