Suddenly supply chains are hot news. Whether it’s the delivery of vaccines or the shortage of chips halting manufacturing at car plants, mainstream media are talking about supply chains in a way they’ve not done recently. After the shock of COVID exposed the brittle nature of many global supply chains, focus has shifted to resilience, a necessary consideration, but importantly not the only one. How can automotive companies get the right balance between agility, resilience, quality, service and cost in today’s dynamic market? Granular, integrated data and the insights it delivers through analytics provide at least some of the answers.
No longer king of the hillThe current chip shortage is a useful illustration of the pace and scale of change in the automotive industry and the emerging risks which must now be considered. Vehicles now rely on an enormous number of chips; components until recently more commonly associated with mobile phones, computers or games systems. Unlike many traditional suppliers, chip manufacturers do not rely on automotive sector for the bulk of their business. In fact, despite rapidly increasing demand, the industry still buys a fraction of the chips that the big tech players consume.
As auto manufacturers cut demand during COVID, the tech industry, fuelled by growing demand for networking and home entertainment equipment, purchased more. Chip manufacturers flipped production to meet this demand and offset the drop in automotive orders. So, when car factories reopened and supplies of chips were needed, the industry suddenly found itself in the novel position of being at the back of the queue!
The point being that the visibility and understanding needed within supply chains is broader as well as deeper now. Understanding competing demands for key components from outside of the sector is just one example of a new risk that needs to be taken into consideration. Without visibility it is impossible to assess and understand where either traditional or these new and emerging risks lie in the supply chain. However, end-to-end visibility through all the tiers of a supply chain is still hard to achieve even within a single OEM, or for a single product line.
Single view, end-to-endTraditionally supply chains are split into silos for ease of management, it is simply too hard for human systems and processes to manage the complexity and scale of end-to-end granular supply chains. But this creates discontinuities of data, information and visibility between silos. Each sees only its own inputs and outputs and will try to maximise its own performance with no visibility of the impact on the rest of the supply chain.
However, now it is possible to manage this level of complexity using data and analytics at an enterprise scale. The leading automotive companies are already investing in integrated data platforms and creating digital threads that connect every aspect of their manufacturing and supply chain operations. Building on a single shared data platform, they can begin to shift focus to serving the end customer, not just the next node in the network.
End to end visibility, operating in real time, at a granular level for both the physical supply chain and the demand signals, is the essential foundation of resilience. Automated analytics can spot issues, even multiple small seemingly unrelated ones, early and recommend interventions so the operator doesn’t need to be constantly monitoring the whole supply chain. Simulation allows both identification of risk paths and the trial of potential mitigation strategies. When combined this delivers a powerful ability to identify and resolve potentially significant risks while they are in their embryonic stage. Equally, while ‘Do nothing’ is a very unnatural response for driven supply chain professionals, if the end customer is not impacted it may well be the best response. Non-essential intervention often leads to disruption elsewhere in the chain.
Just the beginningOperating in this way will allow companies to create the perfect balance between agility, resilience, service, cost and quality for their specific products, and allow them to constantly tune their supply chains to changing needs. This vision for supply chain may sound like a fantasy, or science fiction, but the reality is that the technological capabilities exist now, and leading companies have already started their journeys to implementation. However, considering the power of the digital thread, even this supply chain vision is just the beginning, the possibilities are limited only by our imagination.
Imagine being able to harness real time connectivity into online configurators to gain insight into what options customers are selecting right now to ensure appropriate capacities are available in the supply chain. In the event of a supply chain capacity issue with a specific option customers could, again in real time, be incentivised to select an alternative.
The future is very bright for those companies with the vision to embrace the customer service, quality and cost advantages that digital threads of integrated data and the associated analytics promise. Resilience becomes a by-product of this visibility and agility rather than a stand-alone or even conflicting requirement. Those that can implement this technology and drive the cultural change needed to fully leverage this approach will survive and thrive whatever the next crisis throws at them.