How to Make Your Supply Chain a Vehicle for Growth

Posted by Nick Ostdick on Mar 9, 2017 9:00:00 AM

Automotive supply chain as a vehicle for growthFor companies in the automotive industry, growth in large part depends on the success or failure of your supply chain. In a global, volatile, and variant-rich industry, the ability to seamlessly move products from the production floor to your customer’s door is top priority for supply chain planners and managers, and companies that achieve this desired result are able to leverage significant advantages over competitors when it comes to growing profits, revenues, and customer bases.

A 2014 survey released by professional services group Deloitte showed 79 percent of companies with high-performing supply chains achieved revenue growth greater than other companies within their same industry. If nothing else, this clearly illustrates the connection between a well-structured, highly-functioning supply chain and business growth and profitability.

Yet, even with such data, many companies within the automotive industry still lack a fundamental understanding of the relationship between optimized supply chains and growth. Or, perhaps even more detrimental to success, companies misunderstand the role of the supply chain in creating opportunities for growth. Regardless, companies in the automotive supply landscape must grasp the connection between the supply chain and business outcomes and objectives if they wish to grow, expand, and increase efficiency and profitability.

With all this in mind, here are several elements automotive companies should consider to make their supply chains a vehicle for growth in the short, mid, and long-term.

Supply chain strategy

A supply chain should and needs to be an enabler for automotive companies to realize their business goals and objectives. However, a recent survey conducted by Tompkins Consortium revealed about 50 percent of business leaders viewed the supply chain as a standalone operation and not part and parcel to a larger operational platform. The alignment of an automotive company's supply stream and its business goals is a core driver in how well that company performs year over year. Sales and operations planning, procurement, production, inventory management, transportation, and other elements of the supply chain greatly impact how an automotive company reaches its business goals and what those business goals look like in the first place.

Supply chain architecture

Just like how supply chain strategy works in tandem with growth and performance, the design of an automotive company’s supply network is just as crucial in leveraging productivity and profitability. Automotive companies must closely examine their supply structure, its needs, and its ability to respond to changing variables and constraints across the entire value chain in order to fulfill their business goals. Factors such as a centralized production hub or multiple facilities, warehouse or container management strategies, supplier partnerships, inventory management, and others play an important role in a company’s ability to communicate, collaborate, and break down functional silos, each of which is critical to creating opportunities for business growth and return on investments.

Supply chain costs

Inaccurate forecasting. Poor inventory management. Undisciplined job or workload allocation. Each of these elements results in waste across the supply chain which is a key reason why automotive companies fail to reach their business goals or create opportunities for long-term, sustainable growth. If the name of the game in today’s global supply network is cost reduction by leveraging lean manufacturing principles, then automotive companies must seriously consider their overall cost structure when setting business goals and objectives and charting a course to meet those goals in a specified period of time.

Integration of supply chain technology

Today’s automotive supply chain is driven in large part by technology and the ways in which companies deploy software solutions. Companies may leverage multiple solutions at any given time for a variety of tasks and integrating these solutions into one unified platform is an important step in reducing technology costs, but also bringing greater visibility to the viability and efficiency of a company’s technology solutions. Integrating various supply chain technology platforms also help automotive companies view their supply stream in a more holistic way rather than several disparate parts working independently of each other.

Efficiency of supply chain partners

An effective, growth-oriented supply chain relies on the productivity and efficiency of partners across the entire network. As such, making sure supply chain partners — suppliers, distributors, and other key players — are aligned with an automotive company’s business goals is an important factor to evaluate when attempting to achieve business goals. This is where communication, collaboration, and the sharing of data, reporting, and other benchmark metrics are core drivers for companies in realizing their business goals and enabling strategic growth companies can use to inform their short, mid, and long-term planning operations.

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Topics: Sales & Operations Execution (S&OE), Sales & Operations Planning (S&OP), Supply Chain Management