The automotive industry is about to get a front row seat in the digital business revolution and one of the clear messages coming out of this week’s Automotive Logistics Global conference in Detroit was that, while senior supply chain executives recognise that their business is becoming digital, a high percentage of them feel ill-equipped to manage the transition.
In a recent study by independent and advisory firm Gartner that canvassed supply chain executives across all industry segments about their mission critical priorities, 86% said they would become a digital business in the next five years. However, 60% admitted that their digital business strategy and leadership for that transition was unclear. This is a concern because, as Gartner’s leadership partner Scott Dewicki (pictured on right) explained, the transition in the automotive supply chain to a digital business model marks a shift from success based on cost and throughput to one based on customer value.
“The focus is on optimising profitable delivery of customer value and no longer on the optimisation of costs and the utilisation of assets,” he said.
The same study also suggested that by 2018 50% of the supply chain executives currently in their jobs would be gone because of a misalignment between leadership skills and the digital maturity of the supply chain.
A separate study of 200+ CEOs and chief commercial officers across all industries, asked them to comment on their overall strategy and what they were trying to achieve. This included the strategies and capabilities pursued by chief supply chain officers (CSCOs).
“In many circumstances, CEOs were looking to recruit new candidates to replace CSCOs and most had no idea that their jobs were about to be replaced,” said Dewicki.
Those that successfully make the transition and can develop a level of maturity when it comes to digital enterprise will gain considerable advantage over their industry peers in terms of growth and profit.
“Why is that?” asked Dewicki. “It is because they are competing for business with value propositions that go way past product function. It leads to a customer experience that integrates products, services, supply chain marketing and capabilities from which everyone benefits.”
And while much of the ‘gee-whiz’ elements surrounding the buzzword ‘big data’ are currently hype according to Dewicki, there are plenty of capabilities out there now such as the use of data for accurate demand forecasting, quality and reducing dealer inventories.
Gartner’s research found that the majority of companies were already moving aggressively to build some of the foundational capabilities for product development, engineering, manufacturing operations, supply chain and sales and marketing.
“Governance models on areas such as sales and operational planning (SOP) is one of the means by which insights into customer value and demand are shared across functions so that decisions that balance company financial objectives and the delivery of customer value are quickly and consistently made,” said Dewicki.
Making data actionable
What is important when mining the vast amount of data now available to those operating in the automotive supply chain is making it actionable. In the US alone there are 14 OEMs and 400+ suppliers with millions of transactions being recorded daily, including more than 280,000+ parts movements. Add to that the 250+ LSPs and the 17,500 dealers and you have a rich source of information.
“In the automotive industry there is lots of data available to analyse and draw a perspective,” said Tom Kroswek, senior director of supply chain excellence, at Ryder (pictured above left), adding that the supply of data needed to be seamless and consistent, and it needed to be visualised. Optimising that data with various tools now at the industry’s disposal allowed companies to work at a strategic level, such as using inventory analysis at the tier one supplier level to show how to lower inventory cost, explained Kroswek.
Looking at the inbound sector and the potential for container optimisation Kroswek pointed to the fact that between 80-85% of that was moved by truck.
“What needs to be looked at is the puzzle of how the containers are put together within the truck,” noted Kroswek. “That’s more difficult when you are using different containers and only 30% of all inbound truckloads use one container type.”
Getting greater utilisation out of these containers and enhancing the pooling system was just one example of where data analytics was making the inbound sector more efficient.
However, regardless of how comprehensive the mining of data and is and how accurately it is applied, or made actionable, there will always be outside influences that offer the potential for disruption.
Bruce Arlinghaus, senior advisor at EurBeacon, questioned the accuracy on sales forecasts. “You can have a supply chain that is really slick in terms of the forecast but there are external forces at the OEM that will have a dramatic impact on the plan,” he said.
Dewicki said that concerted efforts had to be made to translate sales forecast data across different time horizons and understand the source of any bias. Importantly it was about getting people collaborating together on the business model for a given year.
“Sales and operations planning is where automotive companies are putting in the effort to clear up the data,” he added.