Emerging Challenges in the Truck/Automotive Industry (and How to Handle Them)
Brian Hoey - October 01, 2020
In January and February of 2020, exports out of China’s manufacturing sector fell 13% as a result of the coronavirus. Though governments wouldn’t really start taking measures to combat the virus in the West for weeks or months after this slowdown started, the impact on the global value chain was palpable. As supply streams across the world have become more connected and the dream of the “global factory” has inched closer and closer to being a reality, the susceptibility of the average supply chain to disruption has slowly crept up. Where once your truck of auto manufacturing plant might have only sourced raw materials from local suppliers—meaning that you could keep easy tabs on upstream events—the modern manufacturing chain can be impacted by events happening tens of thousands of miles away.
Of course, the pandemic also showed that events close to home can be just as unpredictable as those happening around the world. Among the manufacturers who are starting to reopen, many are facing the shock of suppliers and partners who have disappeared altogether, markets where demand hasn’t re-materialized, and trade routes that may never open back up fully. How are automakers and other commercial vehicle producers supposed to deal with these new realities? First of all, they need to gain a clear-eyed understanding of the challenges they’re going to face—then, they need strategies for managing, and ideally reducing, costs up and down the supply chain.
Business Process Challenges
As with so many things in society, the recent pandemic has had the effect of strongly highlighting issues that were already lurking beneath the surface of the global value chain. Reliability and flexibility are both key to success when you’re trying to navigate the complexities involved in creating an entire motor vehicle—and yet, many manufacturers rely on static transport plans that are definitionally inflexible and increasingly unreliable. When it comes to production planning and inventory planning, things are essentially similar—which means that if, say, a huge demand spike puts your ability to fulfill orders at risk, you might be stuck laying out a ton of cash at the end of the cycle to secure premium freight, or risk failing to deliver on your commitments to customers.
Especially in the wake of an event that has in many cases obliterated the structures that recurring and static planning flows are based on, manufacturers need to establish processes that enable them to respond effectively to the unexpected. For transportation planning, this might look like a process that allows for dynamic replannings of delivery routes and tours to account for changing conditions. Fully operationalized, dynamic planning processes put you in a position to sense demand changes, immediately act on those changes by adjusting your production ratios, and find the cost- and time-optimal pathways for finished goods to take to their destinations—all while maintaining a relatively lean inventory. The trick is to furnish planners with the right tools and the right data.
Building an Integrated Supply Chain
So, what are the tools and data that planners need to revitalize their business processes, and how can you turn them into smarter sequencing, scheduling, and transport planning? Well, that brings us to our next emerging challenge: the need to pivot away from inflexible legacy IT solutions. Simply put, flexible software solutions can power flexible processes in a way that, say, a heavy, old-school ERP monolith can’t. Too many truck and automotive companies are relying on supply chain systems that can’t power real-time information flows, that aren’t equipped with advanced analytics systems, and that ultimately can’t facilitate quick decision-making and implementation.
The trick here is to prioritize supply chain integration—i.e. networking together your IT solutions across touchpoints and up and down the supply chain. This might begin with process mapping to help you understand the ways that your current process needs do and don't line up with your IT reality. From there, you can work to adopt the right software solutions and connect them to relevant data streams. How do you know which solutions are the right ones? For starters, you need to look for systems that increase visibility—a solution that’s just a fancier Excel spreadsheet will defeat the whole purpose. You should also strive for increased connectivity, and look for features that enable you to be proactive rather than reactive in your various business processes. Eventually, the goal is to put production, inventory, and transport planners in a position where they have an enormous amount of relevant information at their fingertips and the ability to analyze that information in order to find the optimal plan at the drop of a hat.
Optimizing Network Structures in the Truck/Automotive Industry
With a fully integrated supply chain, you can visualize the likely outcomes of various planning scenarios and choose the right one for your given parameters and restrictions. In this way, you can decrease your need for manufacturing rework, you can reduce unplanned trips, and you can get by with a leaner inventory—all of which helps you to save significant costs. The catch here is that you need to have the right production and transport networks structures in place to actually operationalize those plans in a timely way. Like we saw above, the coronavirus crisis is already causing huge changes to global value chains, which presents a real challenge for planners who may be realizing that the suppliers and transport routes that they relied on are no longer around.
Like most challenges, this also presents an opportunity. Supply chain planners the world over have to rethink the very structures of their networks—so why not rethink them with an eye towards empowering the sorts of flexible systems and business processes we described above? This might look like introducing smart technology like IoT devices into plants and warehouses to beef up your data collection—and it might look like utilizing advanced prescriptive analytics to examine your transport network to uncover and root out areas of waste and inefficiency. In this way, you’re able to keep refining your networks over time to make sure they’re offering you the best possible value. Plus, when something unexpected strikes, you’ll have enough visibility and transparency up and down the chain to find the right path forward.