Automation: The Competitive Advantage Automotive Manufacturers Need
As a result of an increasingly turbulent global market, a rising number of ride-share services, and complex environmental regulations, the automotive industry is experiencing a difficult transformation. Vehicles, once a rite of passage for young adults and a symbol of independence and freedom, are now seen by some as an optional luxury. Other, environmentally conscious buyers opt solely for electric cars, pushing automakers and manufacturers of internal combustion engines to adapt.
For all automotive parts manufacturers, but particularly small and mid-sized companies, these shifting priorities call for an agile and immediate response. Only organizations willing to adopt new technology and adapt their supply chain for the current market will survive.
How Modern Automotive Manufacturers Compete
Recent technological advancements have impacted nearly every industry, including entertainment, communication, and retail. ECommerce platforms and social media are expanding into the world of augmented reality. Supply chains are more digital than ever, with cloud computing and AI at the forefront. That’s not to mention the advancements in vehicles themselves, from keyless entry and touch-screen controls to hybrid and electric models.
For those affected by rapidly evolving technology, there are two choices: update old technology, or become obsolete. The savviest auto parts manufacturers go further than a simple update. They’re learning to harness the power of digital supply chain automation to remain competitive among larger organizations.
Strategies such as data integration into ERPs, just-in-time (JIT) manufacturing, and drop ship enablement allow for streamlined supply chain management, helping to level the playing field for SMBs. Now, let’s take a closer look at each of these strategies and how they work to enhance the automotive supply chain.
Holistic Supply Chain Visibility
The auto industry supply chain is as complex as it is massive. Most vehicles are made up of up to 30,000 parts, from the hood down to the smallest screw, with countless manufacturers and suppliers providing those parts. The role of visibility is critical to all automakers and manufacturers, but particularly smaller operations for which cost control, speed, and quality are top priorities.
For example, the maker of an ignition box relies on suppliers to provide all the necessary pieces to construct the box. However, without complete, real-time visibility into the status of every component, they cannot gauge available-to-promise levels, forecast demand, or provide delivery dates to customers. In the current market, this lack of information can quickly prove to be an insurmountable obstacle. Any delay in an OEM’s production line costs tens of thousands of dollars. With more insight into their supply chain, these manufacturers can use real-time data to get a holistic view into their supply chain ecosystem.
“Before 1980, most major automakers produced and designed their own parts in-house. Today that work has shifted to outside manufacturers that design and produce about 70% of the industry’s parts,” states research from Case Western Reserve University and Driving Change. Source
Just-In-Time (JIT) Manufacturing
Auto makers can contain costs by operating with low inventory levels, relying instead on suppliers to quickly deliver necessary parts only when an order has been received. This type of inventory system is referred to as just-in-time (JIT), a practice made popular by Japanese automaker Toyota. Auto components like tires, engine blocks, and other bulky items are difficult and expensive for small manufacturers to store in their own warehouses. Utilizing the JIT model, an OEM does not physically carry their products, reducing costs by minimizing warehousing needs. Companies also save money on raw materials because they buy only the resources needed to make the products ordered.
With integrated systems automating the ordering process, parts manufacturers can also easily partner with OEMs to provide parts via drop ship to dealerships, repair shops, and other authorized users. With a powerful integration solution, manufacturers can quickly partner with many different drop ship programs without the manual effort or inventory visibility issues associated with manual order processing. As a result, they can expand their sales channels while strengthening OEM relationships.
Automotive supply chains operate with help from numerous types of software, including electronic data interchange (EDI), customer relationship management (CRM), enterprise resource planning (ERP), warehouse management system (WMS), and more.
Each of these systems automates a specific supply chain process; without an integration solution they are unable to exchange data in real-time. In these cases, when an order is received, manual entry is still necessary to ensure that information is entered into the manufacturer’s ERP. The process of retyping all this information from one system to another often results in redundancies and inaccuracies.
These slowdowns can be eliminated by integrating all of your systems into one cohesive network. When your digital systems are able to communicate autonomously, the benefits are significant.
In addition to a significant reduction in manual entry and associated errors, supply chain automation and integration streamlines the onboarding process. Given the global nature of the auto industry, it’s critical that manufacturers can onboard suppliers quickly, no matter where they are in the world. Once onboarded, the integration provides real-time monitoring, reporting, and business rule violation alerts to ensure that the speciﬁc requirements of each automotive trading partner are met.
Thriving in the Current Automotive Market
Leveraging the power of an automated supply chain, small and mid-sized automotive suppliers are better equipped to act on opportunities to cut costs. While the current market poses new challenges, aligning and integrating technology resources is the foundation upon which organizations can grow and thrive.
About the Author: David Eyes, VP/GM of Automotive Solutions at TrueCommerce, has long been an influential figure in supply chain management and digitalization markets. With more than 25 years of expertise in supply chain business development, David has helped hundreds of businesses leverage integration and automation for greater success. In addition to his position at TrueCommerce, he also serves on the advisory boards for the Alabama Automotive Manufacturers Association (AAMA) and Georgia Automotive Manufacturers Association (GAMA), acting as Chairman of the GAMA Supply Chain Committee. When he isn’t helping business owners, David uses his knowledge and passion to support supply chain education in younger generations, regularly visiting and speaking at schools, colleges and universities about opportunities in the field.