Future of the Automotive Supply Chain Market

October 6, 2020

The global epidemic is putting the manufacturing supply chains through a demanding year in 2020, with severe supply delays and closing of plants around the world. With China being the largest key supplier of automotive parts, the crisis has been proving the current supply chains to be unsustainable, fuelled even further by trade wars.

Rising complexity of parts showing to be difficult challenge in the industry. When previously suppliers could feel secure providing a steady rate of relatively standard parts, the demand now is moving towards smaller and smaller quantities with rising complexity.

Rising demand for customisation is also a hurdle difficult to overcome for such a complex industry. Current product development cycle can take years whereas customer demand is changing dynamically.

Opportunities & future directions

Diversification of the supply chain to reduce reliance on single large markets. Where large developing economies can increase production volumes, developed economies are looking towards automation to bring down the costs.

Increased collaboration in the supply chain. We are seeing that there are close relationships being developed between the automotive companies and their key suppliers. This takes us away from the traditional purchase order-based ways of procurement to deeper collaborative partnerships. And this will deepen even further, when both Tier 1 and Tier 2 suppliers will work together with the OEM in developing new products. In our experience we are seeing both - companies who are strongly keeping in line with the traditional, siloed customer-supplier relationship as well as companies who are making strong efforts in data sharing to become more than a supplier to the OEM. This new way of working, however, demands fundamental change in order to succeed.

Data driven approach in supplier communication is a direction of active development in the automotive sector. With suppliers of different level producing ever-increasing amounts of data about their products and processes, big data methods are used to ensure quality and increase throughput.

The complexity of the automotive supply chain and the big data generated in its process are giving rise to research in supply chain modelling and simulation. The simulation allows to assess scenarios and identify possible weaknesses.

Benefits of a data driven approach to improve supplier communication

The following benefits have been identified by BDO for a connected communication ecosystem:

·      Traceability

·      End-to-end visibility

·      Real-time context

·      Lower production cost

·      Shorter iteration loops

·      Fewer defects

·      Greater customisation

·      Enables analytics and AI to power insights &automation

There is a lot to gain for all parties in the supply chain from having better knowledge of the process and being able to use relevant data from up and down the value chain.

Feel free to also check out our other posts:

Gap Between C- Suite and Factory Floor: Data-Driven Decision-Making

Digital Twin Use Cases in Practice

6 Things to Consider Before Applying Machine Learning to a Manufacturing Process