One of the world's largest in revenue, the global automotive industry is an ever-shifting landscape that experiences changing trends each day. While the highly volatile market faces more automotive supply chain challenges due to increasing globalization, recent happenings have shaken the demand-supply equilibrium even more.
As asset and inventory tracking moved from barcodes to RFID tags to BLE beacons to GPS-based automotive supply chain tracking systems, the automotive sector has come a long way from manual track and trace. Real-time visibility, even though relatively new, has brought a real digital transformation in supply chain in the automotive industry.
The automotive industry is known to be a technology innovator. You're least likely to find an industry as technologically advanced as the automotive industry. This is clearly visible through the rate at which the automotive supply chain is digitalizing over the years.
The global automotive industry employs more than 27 million people worldwide, with a market size of $20,321 million. The industry is projected to grow at a rate of 4.8%, and we can see automotive supply chain digitalization moving at the same pace. To remain competitive in such an industry, you need to commit to long-term digital transformation, which can only be achieved with an infallible visibility system.
Key Automotive Supply Chain Challenges
If you are familiar with how the automotive supply chain works, you would know there are many legs in the journey of auto parts, finished auto products, and even packaging assets. In such a setup, a lack of reliable visibility — whether in yards, service bays, or in transit from factories to dealer networks — can lead to under or overstocking inventory or loss of sales. As a result, the industry loses billions of dollars every year due to supply chain management challenges owing to logistical inefficiencies caused by a lack of visibility and control.
Let’s look at the major challenges that automotive supply chain management professionals face and their solutions:
Automotive Supply Chain Challenge 1: Returnable Assets
Loss of reusable assets is a bigger problem than it might seem. The lack of optimal utilization of reusable assets like huge containers, pallets, bins, tubs, and totes adds a lot to costs. Packaging is critical to the safe movement of auto parts and thus required to keep the auto supply chain up and running. Although it sounds like a less important part of the whole picture, it plays a vital role in the auto supply chain accounting for more than 2-4% of total product costs.
However, as packaging costs rise with no apparent value to end customers, automotive manufacturers are now looking at avenues to mitigate the capital expenditure incurred on packaging. Although RPA (returnable packaging assets) has emerged as a viable alternative to provide a sustainable and cost-effective solution to packaging, considerable investment still goes into procurement, management, maintenance, and reverse logistics.
A lack of visibility into the RSA inventory often leads to high handling costs caused by operational inefficiency. Delays or loss of RSAs could be costly, also adding to replenishment costs.
The Solution: An Intelligent Returnable Asset Tracking System
Implement a solution that would give you complete control over returnable inventory at the factory, yard, warehouse, and dealer locations. What is required is an end-to-end returnable asset monitoring solution that works well for your enterprise and in storage, transit, and last mile.
The solution would help you reduce the risk due to delays in RSA availability when required, saving a lot on costs. Such a comprehensive IoT-based tracking solution would use devices that can travel into returnable containers. The devices should have sufficient battery capacity, enable easy installation, and easily manage container flow, providing reliable end-to-end visibility indoors, outdoors, and in transit over long distances.
An integrated platform would enable data aggregation for actionability through timely alerts and prescriptive analytics. This intelligent returnable asset tracking system would allow cost optimization through better RSA availability and unbroken visibility data no matter where they are in the supply chain.
Automotive Supply Chain Challenge 2: Finished Goods Visibility
One of the biggest challenges for the automotive industry is its finished goods supply chain visibility. A lack of real-time visibility could mean suboptimal utilization of inventory or even a loss of sales. Most auto manufacturers probably still must rely on their 3rd party logistics (3PLs) service providers to distribute their finished products to the dealers. Most of them use various transportation modes, including ocean and land, to get their finished goods across to their customer in another city, country, or continent.
Automotive supply chains also face the risk of theft or damage of costly auto parts and finished vehicles in transit. Damage is prevalent in the automotive distribution chain. Such damage is often caused by in-transit shock impact or improper handling. This can increase costs for repairs and drive up insurance premiums.
In such a scenario, if you’re unable to provide precise and reliable ETAs to your dealers, there’s a high chance of losing a huge sale to a competitor’s product. Handling such a competitive demand-supply situation is already challenging; intermodal/multimodal distribution adds another layer. In such an arrangement where all you can do is rely on second-hand information; data accuracy is the biggest challenge.
The Solution: Real-Time Tracking and a Better Risk-Management Plan
The need of the hour is a cost-effective solution that provides real-time visibility, accurate ETAs, dependable damage mitigation, and timely alerts to the right person. Such shipments require in-transit efficiency and higher security. This is only achievable with a solution that would ensure better on-time delivery and predictability with your dealers across all modes of transportation. Such a system would enable end-to-end supply chain monitoring at a package level through road, rail, ocean, and even air.
Implementing a risk management plan that uses real-time cargo security and alerts would help reduce risks. Placing a tracking device in your container and using a 24x7 control tower can help reduce the chance of damage with its smart analytics and timely alerts.
The idea is to implement an end-to-end visibility system blended with a real-time loss and theft prevention solution that would help monitor pallets, vehicles, and individual packages in transit and warehouses. The most advanced solution for theft prevention is to use keyless, GPS-enabled, smart locks that provide wireless security & access control for vehicles, containers, and facilities. These locks enable internet-based unlocking and provide insights into breaches. The solution must also have alert features enabling timely action on route deviation and unauthorized stoppage. Package-level visibility would help keep a check on loss and theft regardless of the location of goods and the mode of transport used.
You need a solution that provides dedicated asset monitoring, enabling every supply chain participant to get first-hand package-level visibility — a well-integrated platform coupled with sensors that would capture demand signals, optimizing inventory, RSA, and packages from first to last mile.
Automotive Supply Chain Challenge 3: Inventory Management
The automotive industry has a supply chain more complicated than most industries. Imagine manufacturing a vehicle using close to 30,000 spare parts from different suppliers all over the world. And these auto parts are costlier than most industrial inventory, making handling inventory and keeping the supply chain lean difficult, add to it the efforts to optimize cost and reduce losses.
Inventory overstocking is a huge challenge in the automotive supply chain since there's extensive production involved. Inventory optimization requires an accurate demand-supply balance, which isn't achievable without accurate demand estimates.
Most automotive companies work with third-party logistics partners, from where they receive second-hand inventory visibility data. With such inaccurate and unreliable visibility, it is hard to make good inventory decisions.
The Solution: Real-time Inventory Monitoring
Efficiently utilizing inventory and reducing its loss can drive improved bottom lines for your company. First, you need to find a solution that provides package-level visibility both at the warehouse and in transit. The idea is to integrate all the auto part dealers, manufacturers, and suppliers into a common platform. Once the scattered visibility is managed, it would be easy to get a comprehensive view of inventory, enabling early detection of delays or other anomalies in the supply chain.
The system would help finger point the breach in the supply chain. You’ll know precisely where each auto part is, using IoT-based sensors that constantly stay with it. These devices would be able to keep you updated with the location and accurate ETA, so you're never out of touch with them.
The system should be designed such that it's able to streamline the flow of auto parts between manufacturers, suppliers, and carriers throughout. This will allow every automotive supply chain participant to be in the know and quicken the process. Such a system would leverage AI (Artificial Intelligence) and prescriptive analytics helping you understand the inventory status and demand-supply predictions based on current and historical data analytics.
Automotive Supply Chain Challenge 4: The Cost
The instances of damage, theft, and inventory management problems end up adding a lot to the supply chain costs in the auto industry. The costs are not just the visible ones but also the hidden cost of production delays, lost business, dissatisfied customers, market reputation, and other long-lasting business effects.
Most automotive manufacturers, distributors, and suppliers provide and source auto parts and finished products globally. This makes it harder to reduce costs, as well as to have control over the supply chain since the operations are spread internationally. All this, combined with mismanagement of costly inventory and replenishment costs, makes it harder to contain costs.
An added challenge when working globally is to comply with international quality & safety standards, documentation, and regulations. This becomes a high-risk area, especially when dealing with 3PLs; you need to make sure they fulfill all supply chain compliances. Failure in meeting SLAs and compliances also adds to operational and other costs.
The Solution: A Cost-Effective Visibility Solution & Better Supply Chain Control
Sourcing and providing inventory and finished products internationally make it hard to gain complete visibility and control on each supply chain element and contain costs. 3PLs give visibility to a certain point, but that only allows partial automation leaving considerable gaps.
One of the most significant cost reductions would automatically happen once inventory management is handled, since inventory is the costliest in auto supply chains. However, additional cost reduction can be achieved through better delivery compliance, asset monitoring, and theft & damage prevention using complete visibility and reliable demand signals. You can do this by implementing a cost-effective solution that provides real-time visibility, reliable ETAs, and steadfast damage mitigation. Moreover, better utilization of factory and dealer yards using real-time visibility would also help improve your ability to get more vehicles out to the market in a shorter time, saving more on real-estate costs.
What you need is end-to-end visibility and smart analytics for more informed decision-making. Real-time visibility would help you to constantly be with your shipments virtually. Without real-time visibility data, it isn't possible to implement a successful future growth plan.
In Summary…
Although it must look very complicated from the outside, any automotive supply chain professional would know how you can track almost every problem related to supply chain in the automotive industry back to the lack of visibility.
Your automotive supply chain needs a business improvement solution, not just tracking devices.
To deal with both the cost as well as the lack of control over the supply chain, you need to have complete, unbroken visibility. Of course, you could get visibility data from your transporter or 3PLs, but not all data is useful data. What a perfect automotive supply chain requires is actionable data. In short, look for an end-to-end visibility solution that provides you real, real-time, and relevant data, based on which you could make informed decisions for better business
