Monday, June 27, 2022

Transforming the Automotive Supply Chain for the 21st Century

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Shreya Christina
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In order for the JIT model to work, the quality and supply of raw materials, production of goods and customer demand for them must be aligned. If one of the links in the chain breaks, gets stuck or becomes out of sync, the impact on the supply chains that crisscross the world is immediately felt. For companies unable to deliver orders on time, they risk losing not only efficiency gains, but also brand credibility, market share and revenue.

Now companies are looking for new ways to manage their supply chains that offer greater flexibility and transparency. In the automotive sector, some companies, including Nissan and JIT pioneer Toyota, are increasing chip inventories, while others, including Volkswagen and Tesla, are trying to secure their own stocks of rare metals. But technologies, including Internet of Things (IoT), 5G, and enterprise applications are also providing businesses with new ways to avoid disruptions and respond to unforeseen circumstances.

Disruption and transformation

The transformation of the automotive supply chain is taking place in an increasingly digitized world, plagued by environmental problems. With climate change concerns mounting and governments around the world forcing industries to switch to more environmentally friendly practices, the automotive industry and its supply chain networks are undergoing a profound shift. Automakers are moving from combustion engines and large-scale production to zero-emission, carbon-neutral electric or autonomous vehicles with a focus on electric or hydrogen as energy sources. For example, autonomous vehicles are seen as “servers on wheels” that rely on batteries, wiring, laser technology and programming rather than combustion engines. Tech giants such as Japan’s Sony and China’s Baidu have also announced plans for their own electric vehicles (EV), fueling an already heated race in the EV market.

According to the International Energy Agency, worldwide sales of electric cars have increased 6.6 million in 2021accounts for 8.6% of all new car sales: more than double the market share as of 2020, up from just 0.01% in 2010. Business Insights Provider IHS Markit estimates that the number of EV models in the US will increase 10-fold, from 26 in 2021 to 276 in 2030. charging stations will need to increase from 850,000 in 2021 to nearly 12 million in 2030 alone. To meet the increasing need for battery-powered vehicles, manufacturers must establish a new ecosystem of partners that provide the parts and accessories needed for successful production and operation of these vehicles are alternative vehicles. According to Research from Transport Intelligence, “The supply chain for the entire powertrain will be transformed, changing the types of components, the logistics processes used to move them, the origin and destination markets and the tiered nature of automotive supply chains.” This has huge implications for the way the automotive supply chain is organised.

Meanwhile, everything in the automotive sector, from the cars themselves to entire factories, is becoming more connected, with the support of technologies such as AI, IoT, 5G and robotics. In the past months, Nissan has unveiled its “Intelligent Factory” initiative at its Tochigi factory in northern Tokyo, which uses AI, IoT and robotics to manufacture next-generation vehicles in a zero-emission environment. And Volkswagen has implemented a private 5G wireless network at its headquarters in Wolfsburg, Germany, to test new applications of smart factories.

As production becomes more digitized, consumer behavior also increases. Automotive brands are rolling out direct-to-consumer sales models, enabling customers to complete more of the sales process through digital channels. While new entrants are only approaching the sales model online, incumbents are embracing digital initiatives in partnership with dealers where fulfillment, aftersales and services are still delivered through a dealer. in 2020, 69% of dealers in the US they have added at least one digital step to their sales process. And 75% of dealers agreed they couldn’t survive long term without moving more of the sales process online. Both models require greater visibility into the supply chain to ensure inventory and availability are accurate.

How manufacturers react

More and more connected consumers, factories, cars and supply chains are generating a wealth of data. By collecting and analyzing this data, manufacturers can reduce business risk and become more agile by identifying potential delivery issues, increasing efficiency and providing customers with more accurate timelines. For example, predictive analytics can help manufacturers answer the question “What if?” questions and proactively reduce the impact of potential supply chain disruptions. Digital traceability enables companies to track products and goods as they move through the value chain, providing them with precise information about the origin of inputs, supplier sourcing practices and conversion processes. “On the demand side, customers expect real-time visibility into when a car is delivered to them, and the status of service, spare parts and accessories,” said Mohammed Rafee Tarafdar, SVP and CTO, Infosys.

In an effort to leverage data and develop greater visibility across the business, manufacturers are using a variety of technology solutions, including business applications: software suites designed to support business functions. Combined with cloud services, the right business applications can give organizations greater access to advanced technologies, which can then be managed at scale and address the needs for visibility, analytics and cybersecurity. As everything becomes more connected and autonomous, “there is a need for technology that can grow with demand. This is where cloud and business applications play a very important role,” said Tarafdar, adding that manufacturers are embracing both private and public cloud. to create hybrid clouds, with the support of private 5G networks.

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