It’s no secret that automotive supply chains have been on a bumpy road lately (with plenty of hairpin bends and unexpected obstacles). Auto enterprises have ridden out the three-year global semiconductor shortage, navigated the increasing popularity of hybrids and electric vehicles (EVs), and withstood a whole host of geopolitical disruptions – most recently the threat of US tariffs on automotive imports. To do more than survive in this unpredictable landscape, it’s essential that auto businesses bolster their resilience against supply-chain disruption by finding new efficiencies and embracing agility.
Yet automotive supply chains are complex, with sprawling and multifaceted processes which involve several tiers of suppliers – from original equipment manufacturers (OEMs) to aftermarket suppliers. Each of these factors creates dependencies that not only make it difficult to monitor and minimize the impact of supply chain disruption, but also make optimization a major challenge without the right tools.
The good news: there are technologies and approaches that can legitimately transform the automotive supply chain. So join us as we take a closer look at the most advanced and fruitful strategies for optimizing different components of the supply chain process.
The unique complexities of the automotive supply chain
Cars have a lot of moving parts. Specifically, the average internal combustion engine vehicle (ICEV) contains around 30,000 separate parts. As you’d expect, that makes automotive supply chain management uniquely complicated. But what are the other key factors contributing to the complexity of automotive logistics?
A tiered supply network
Automotive enterprises rely on a multi-layered network of suppliers, from each Tier 1 supplier (parts manufacturers) to Tier 3 raw materials providers. Not only does this siloed structure require highly-coordinated procurement, but can also obscure risks, and makes promptly responding to disruption a serious challenge.
JIT and JIS delivery
With a Just-in-time (JIT) or Just-in-Sequence (JIS) approach to inventory management, auto businesses can minimize excess storage and ensure they only receive parts when they’re actually needed. But this supply chain strategy means one delayed part can bring production skidding to a halt, so real-time visibility is crucial.
High product complexity
The tens of thousands of automotive parts required in a modern vehicle are often sourced from across the globe – and then customized to order. Automotive supply chain managers are therefore juggling specs, lead times, and interdependencies to ensure efficient assembly and avoid expensive down time.
Demand volatility
Maintaining an accurate understanding of fluctuating demand is also a big challenge for auto enterprises. They’re grappling with shifting consumer preferences, the impact of geopolitical uncertainties, and economic instability.
The slow transition to EVs
Several US states – and many other nations – have clear roadmaps for phasing out fossil fuel-powered cars. Naturally, this gradual switch to EVs is already impacting the automotive supply chain. For many auto enterprises, their legacy systems and supplier relationships are rooted in ICEV production, requiring a complete overhaul.
A rapidly changing regulatory environment
Emissions targets shift with every new government, along with trade policies and evolving safety regulations. To keep pace, automotive manufacturers and logistics companies alike must adapt quickly. They need to harness emerging technologies and embrace operational agility to monitor regulatory compliance, adopt real-time reporting, and modify processes quickly (and effectively).
- Take a look at our customer story with MAHLE to discover how the automotive supplier boosted transparency and agility in the supply chain using Celonis Process Intelligence – and achieved a 20% inventory reduction group-wide.