4 Myths About Business Transformation in the Automotive Supply Chain

Posted by Nick Ostdick on May 24, 2016 9:00:00 AM

4myths_blog.jpgIn the wake of decades of massive technological and logistical advancements, the automotive production and supply industry is in the process of hitting the reset button. As OEMs, distributors, and suppliers embrace dynamic software solutions to create better fluidity of products and information across all points of the supply stream, the automotive supply industry has found itself in the middle of a business transformation whereby it is attempting to better align the people, processes, and technologies with the core values of lean supply principles in order to ensure sustainable growth and competitiveness in a global supply network.

More or less, companies are taking a moment to rethink their entire production and supply strategies to maximize efficiency and profitability at each touch point in the value chain - production, distribution, transportation, warehousing, resource planning, and all points in between. This horizontal integration is a key driver in cutting through functional silos, increasing communication and collaboration, and providing greater transparency from manufacturer to customer.

But while this increased level of concern as to how companies best equip their production and supply streams to operate as successfully as possible is a boon to the industry at large, this bout of soul-searching also comes with a number of challenges as companies modernize and make strides to adopt more efficient processes. With that in mind, here are 4 myths - and the truths behind those myths - companies should avoid when thinking about business transformation in the automotive supply chain.

Myth #1: Competition only comes from within the industry.

Many manufacturers believe that competition for component parts resides exclusively within the automotive industry - that a production facility for one automotive company is only competing for a certain sensor with another production facility for a different automotive company. While there is some truth to this scenario, it’s much more common in today’s global marketplace for companies to be competing for component parts from OEMs who service several other industries - much like the diversification that happened several years ago with parts and production in the tech industry. In order to combat this competition, automotive companies must leverage supply stream strategies and solutions that engender end-to-end visibility and agility to ensure responsiveness to potential supply breakdowns.

Myth #2: Re-shoring is simply a passing trend with no real staying power.

Part of the business transformation currently underway in the automotive supply industry involves centralizing production and distribution, as well as creating a central location - physical or cloud-based - where planners and managers can communicate, share, and collaborate on actionable data to make cost-effective, efficient demand planning solutions. As such, companies are rethinking of the off-shoring production model in favor of re-shoring in order to increase supply stream visibility and enhance transparency into the chain of custody in planned production and distribution. Essentially, moving production into a company’s backyard offers planners greater control over manufacturing processes, which can be leveraged into competitive advantages across a company’s entire network.

Myth #3: Integrating software solutions isn’t necessary to achieve E2E visibility and breaking down functional silos. 

We could argue with the word necessary, but very few in the supply chain industry would argue with the overall sentiment that integrating and merging a company’s disparate software solutions into one unified method of data sharing is a value-added proposition for a variety of reasons - especially when it comes to breaking down functional silos and enhancing communication and collaboration. Gone are the days when planning, production, transportation, and warehousing systems operated in vacuums creating walls in communication and data sharing that was crucial to decision-making and planning strategies. This integration model - irregardless of the number of software providers - is key whether you’re talking about data analysis, leveraging advanced analytics, real-time reporting, or forecasting capabilities. Implementing an integrated solution into an easily accessible portal is a core element in not only ensuring your supply chain remains productive and viable, but also that it is equipped to handle the demands of an increasingly digitized global network.  

Myth #4: I can survive without optimized demand planning and production software solutions...right?

No. That’s the short answer. But speaking on a more detailed-level, the complexities of today’s global production and supply stream are too rich for a company to parse without incorporating optimized demand planning and production solutions. The days of static planning with spreadsheets are indeed long behind us, and companies must adopt these sophisticated software platforms in order to remain viable and growth-orientated in a variant-rich industry. If the name of the game is business transformation, companies can’t achieve the transformation they seek without implementing software platforms and strategies such as Planning for Every Part (PFEP), BOM management, inventory optimization, and others.

If we redefine business transformation as the evolution of a company’s identity toward a more responsiveness, cost-efficient, and efficient set of logistics, strategies and solutions, it’s easy to see how the above myths - and the truths therein - are crucial drivers for automotive companies to consider as they contemplate modernization in today’s rapidly-expanding supply network. Companies who leverage these truths and the principles behind them will be well-positioned to not only remain competitive as thought-leaders in the supply landscape, but will also be harnessing the power and ingenuity to ensure long-term growth and stability.

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Topics: Supply Chain Planning, Automotive Industry