‘Disruption’ is a word we’re beginning to see a lot more of on global, political and industrial fronts and these all impact on the supply chain. In order to thrive, today’s automotive supply chains must be built on resilience and flexibility, as events tomorrow could have a direct impact on a manufacturer’s bottom line. Whether that manifests itself through a decline in customers or average customer spend falling, vehicle-makers and their supply chains must be ready to adapt.
The truth, however, is that the traditional linear automotive supply chain design is not flexible enough to respond to market demands and businesses must start considering more cost-effective models.
As further global change takes place, including the rise of artificial intelligence, smart factories and autonomous transport as well as further natural disasters and political wrangling, carmakers must be prepared ahead of time with bulletproof solutions so they can continue to operate to their full potential.
Integrated technologiesThree key types of decisions must be made in automotive supply chain design to protect against the unexpected – strategic, tactical and operational. And vehicle-makers facing these decisions need to have the right tools in place to prepare for disruption and react accordingly.
Strategic decision-making addresses factors such as how many distribution centres are required to serve demand and where to place a new facility. These decisions can be supported by tools that enable network optimisation. This includes alternative sourcing routes, transport mode selection, production mix allocation and capabilities, as well as calculating what is known as the supply chain’s centre of gravity – in simple terms, placing distribution centres in locations that minimise transport costs.
Tactical decision-making addresses questions such as how to organise the fleet on any given network, which can be quickly solved by the right transport optimisation tools. But it also includes more complicated issues, like the common dilemma of storage once vehicles have left the production line: where should this stock be stored and how long will it sit there? This is where safety stock organisation software comes to the fore.
Operational decision-making tackles even more complicated scenarios, like how a network reacts under uncertainty, whether customer demand is completely fulfilled and how a manufacturer deals with back-orders. This is where simulation and supply chain design can prepare the carmaker for such scenarios before they even occur.
Each of these tools pulls in relevant data from an expansive data pool that, unfiltered, would be overwhelming. An effective supply chain toolset must provide quick outputs, easy data discovery, instant visualisation, flexible reporting and repeatability. Pulling in the relevant data and distributing it to answer a wide variety of questions and ‘what-if?’ scenarios will drastically reduce the risk in decision-making while providing measurable cost savings in the supply chain.
The human touchOther elements must also be taken into consideration. The right use of technology does not guarantee success, but the right mix of talent will ensure the successful integration of technology with business processes. Human capital investment leads to more mature supply chain organisation and a greater possibility of savings, creating more room for improving resilience.
Community engagement is another important factor. A supply chain organisation can learn a great deal by engaging with the wider community, creating more opportunity to absorb valuable knowledge that can improve business processes, leading to potential innovations. Supply chain design communities can benefit from mutual development that enriches the working practices of the wider industry, aiding the development of alternative modelling approaches and better design processes.
Supply chain design should not function in a silo as the traditional supply chain does; it should instead be considered from a holistic approach. It should not just be about the individual person calculating the optimisations, but also the planners who work at the factory, the scheduler who plans for the delivery and every other stakeholder. They, too, must be involved in the design.
As carmakers expand, creating globally dispersed factories and divisions, their staff’s skills are no longer concentrated in one region. So how can automakers make sure different people from different functions work collaboratively? Cloud technology is connecting these people and effective software-as-a-service (SaaS) supply chain design software should provide a cloud platform that connects multiple stakeholders across all locations. This solution should provide different users with different permissions, so that planners focus on scenarios and designers focus on the modelling. This will encourage conversations between supply chain stakeholders, making it easier to run scenarios and plan for any eventuality with contributions and insights from all relevant parties.
Combining the right tools with the right talent and factoring in valuable community engagement in this way will help automakers to fine-tune their supply chains so they become more resilient, and to recognise disruption as an opportunity, rather than a threat.
Tin Leung (pictured above, left) is senior support consultant and Kostas Kanakopoulos (above, right) is supply chain design consultant at LLamasoft