With 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. Examples include the rise of e-commerce, the prevalence of smartphones, shifting consumer buying behaviors, a growing number of SaaS cloud-based programs, and the increasingly critical role of speed in both service delivery and product production and shipping. For those industries affected by rapidly-evolving technology, there are 2 choices: update old technology, or become obsolete. Today, those in the automotive industry are faced with the same dilemma, leading savvy parts manufacturers to harness the power of supply chain automation to remain competitive among larger organizations.
Strategies such as data integration into ERPs or other back-office systems and Just-In-Time (JIT) dropship enablement allow for streamlined supply chain management, empowering small and mid-sized manufacturers by creating a more level playing field. Automotive supply chains operate with help from a number of different types of software, including EDI, CRM, ERP, WMS, and more. While each software program automates a specific workflow, without an integration solution they are unable to exchange data in real-time. When an order is received, manual entry is still necessary to ensure that information is entered into the manufacturer’s ERP, often resulting in redundancies and inaccuracies. These can be eliminated by integrating all of your systems into one cohesive network able to operate autonomously.
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 have the ability to onboard suppliers as quickly as possible, no matter where they are in the world. Once onboarded, the integration provides real-time AI-infused monitoring, reporting, and business rule violation alerts to ensure that the speciﬁc requirements of each automotive trading partner are met.
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 the plastic housing, screws, bolts, metal labels, internal wiring, coils, etc. Without complete, real-time visibility into the status of every component needed to make their product, small manufacturers would be unable to react to recalls, forecast demand, or provide delivery dates to customers. In the current market this lack of information can quickly prove to be an insurmountable obstacle. With more insight into their supply chain, small 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. Source
Just-In-Time (JIT) and Dropship Enablement
Car manufacturers 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, a manufacturer 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, small manufacturers can also easily partner with suppliers offering aftermarket parts via dropship. These replacement parts are made by a company other than the original vehicle manufacturer, a practice that has gained popularity as a good alternative to manufacturer parts. In many instances aftermarket parts have been found to be superior to OEM manufactured parts, due to their ability to use more expensive materials and/or better technology than a car manufacturer. With a powerful integration solution, manufacturers are able to quickly partner with many different dropship suppliers without the manual effort or inventory visibility issues associated with manual order processing.
Thriving in the Current Automotive Market
Leveraging the power of an automated supply chain, small and mid-sized automotive manufacturers have more options, and are better equipped to act on opportunities to cut costs. While the current market poses new challenges, aligning and integrating technology resources will prove to be the foundation upon which organizations can grow and thrive.
Contact Us today to learn more about supply chain automation solutions, or to speak with an automotive integration expert.