{"id":6285,"date":"2023-06-23T11:46:00","date_gmt":"2023-06-23T16:46:00","guid":{"rendered":"https:\/\/www.mhisolutionsmag.com\/?p=6285"},"modified":"2023-07-05T16:38:18","modified_gmt":"2023-07-05T21:38:18","slug":"automotive-industry-emphasizes-visibility-to-tackle-challenges-and-chase-opportunities","status":"publish","type":"post","link":"https:\/\/www.mhisolutionsmag.com\/index.php\/2023\/06\/23\/automotive-industry-emphasizes-visibility-to-tackle-challenges-and-chase-opportunities\/","title":{"rendered":"Automotive Industry Emphasizes Visibility to Tackle Challenges and Chase Opportunities"},"content":{"rendered":"
\n

Industry Focus<\/h4>\n
BY TOM GRESHAM<\/span><\/div>\n
<\/div>\n
\"automotive
<\/figcaption><\/figure>\n

A<\/span>s with many other sectors, the supply chain of the automotive industry has come under increased scrutiny in recent years. Before the pandemic, “things had sort of been humming along,” said Edgar Faler, senior analyst for the Center for Automotive Research. Then the industry experienced a myriad of fresh challenges associated with the pandemic\u2014from production shutdowns to semiconductor shortages. Those unexpected complications arrived as the industry was experiencing “an enormous transition” to electrification, Faler said.<\/p>\n

As Yogesh Goswami, managing director, Deloitte Consulting, said, “We\u2019ve all seen a tremendous amount of disruption in the automotive supply chain in the last couple of years.”<\/p>\n

The recovery is ongoing.<\/p>\n

“The industry is still working through all the disruptions due to the COVID-19 pandemic affecting production,” said Jason Miller, interim chair of the Department of Supply Chain Management at Michigan State University. “Using 2018 and 2019 assemblies as a baseline, from March 2020 through February 2023, we have a cumulative shortfall of light truck production of [approximately]2.375 million units. This helps explain why inventories to sales for motor vehicle and parts dealers remain historically low. For example, through Q4 2022, inflation-adjusted inventories at motor vehicle and parts dealers were down 19% from Q4 2019 levels.”<\/p>\n

After post-pandemic issues such as components shortages, electrification, due diligence requirements and the Inflation Reduction Act, auto manufacturers are prioritizing visibility and transparency in their supply chains\u2014both to prevent the challenges of the past and to take advantage of the opportunities of the future.<\/p>\n

Faler said the challenges of the pandemic have driven automakers to strengthen visibility across the supply chain, going beyond tier one suppliers to the lower-tier ones, too\u2014areas where visibility has been lacking in the past.<\/p>\n

“Some of these things started back with the COVID lockdown, really intensified around the semiconductors shortages and will stick with us as we go to electrified vehicles,” Faler said.<\/p>\n

Component shortages<\/h4>\n

A high-profile challenge of the pandemic for auto manufacturers was the sudden shortage of semiconductors, an essential component of contemporary vehicles.<\/p>\n

“Component shortages are not new in the sector, but the pandemic basically amplified it because there were lots of [shortages]at the same time, especially in the chips and semiconductor industry,” Goswami said. “There was a lot of turmoil.”<\/p>\n

Although the picture has improved, Tanya Bolden, vice president of corporate responsibility for the Automotive Industry Action Group, said the industry continues to feel the effects of the semiconductor shortage.<\/p>\n

“There has been some improvement in the availability of semiconductors, but we\u2019re not completely out of the woods yet,” Bolden said.<\/p>\n

Goswami said one major takeaway Deloitte took from the semiconductor shortage was that auto manufacturers often were not aware of decisions that lower-tiered auto suppliers made and how those decisions could have ramifications on them two or three tiers up in the supply chain.<\/p>\n

“The manufacturers had no visibility beyond the immediate supplier, the tier one,” Goswami said. “Some automotive manufacturers were a bit more prepared because of past experiences and had created some buffers, but most of them were scrambling to create capabilities for multi-tier illumination, risk sensing, risk mitigation, etc.”<\/p>\n

As a result, strengthened visibility in the supply chain, particularly among lower-tiered suppliers, has been a point of emphasis among many auto manufacturers, Goswami said. The focus is on identifying and mitigating potential risks to the stability of their supply chains.<\/p>\n

“They are definitely better equipped than they were two years ago, but it\u2019s a work in progress at most places,” Goswami said. “They are still developing it. Most everybody started to set up a semiconductors taskforce of some sort or a cross-functional critical supply management team. But they\u2019re trying to expand that to other commodities in the supply chain as well. It\u2019s a lot of work to first illuminate, then understand where the risks are and then have processes and governance approaches in place to mitigate those risks.”<\/p>\n

Due diligence<\/h4>\n

It\u2019s not just the lessons of the semiconductor shortage that have manufacturers obsessed with visibility. Through various forms of new legislation passed in many countries, due diligence requirements for the supply chain have toughened, touching on issues such as carbon emissions, forced labor and the use of responsible minerals. Because auto supply chains can be particularly complex, Bolden said, creating the necessary transparency to meet those requirements can be challenging.<\/p>\n

Bolden noted that new entrants into the auto industry due to the cutting-edge technology being used in vehicles\u2014such as solutions related to electrification and artificial intelligence\u2014only deepens the complexity of the supply chains.<\/p>\n

“It\u2019s not always a very linear approach to the supply chain, and as the technology and the innovation of vehicles increases, we touch other sectors,” Bolden said. “You have a lot of electronics in vehicles. We are all painfully aware of the number of semiconductors that are in vehicles. You have a supply chain that is shared between automotive, heavy equipment, even aerospace. So, there could be a supplier that\u2019s providing a bolt that has 1,000 applications. Trying to manage that tangled web of tiered suppliercustomer relationships is challenging. And then with the requirements of these various pieces of legislation to gain that transparency, it\u2019s making a complex situation in a lot of cases even more complex.”<\/p>\n

The diverse mix of suppliers in the auto industry use different systems and applications, deepening the challenge to share data and create the transparency the modern supply chain demands, Bolden said.<\/p>\n

Bolden believes that the need for more transparency in the industry is “going to drive better coordination within companies, between customers and their suppliers and then in the industry as a whole.”<\/p>\n

Click here to read the full feature.<\/strong><\/em><\/a><\/p>\n

ISTOCK.COM\/PHONLAMAIPHOTO<\/a><\/span><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Industry Focus BY TOM GRESHAM As with many other sectors, the supply chain of the automotive industry has come under increased scrutiny in recent years. Before the pandemic, “things had sort of been humming along,” said Edgar Faler, senior analyst for the Center for Automotive Research. 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