The automotive supply chain is one of the most complex in the world. This industry relies heavily on third-party companies to work together to deliver thousands of parts that are needed to complete manufacturing processes to deliver high-quality products. Automotive supply chain companies are constantly implementing new technology, allowing them access to thousands of inventories and with the help of a global logistics network, goods can be shipped anywhere in the world.
Automotive Industry Supply Chain Challenges
High Labor Turnovers
Turnover in any company is inevitable, however, if you begin to notice a significantly high turnover rate within your organization, it may be time to find out why. Though inflation will most likely bring people back to the workforce, it is equally as important to continuously offer ongoing employee training programs, so that your team feels confident in their jobs and have clarity about their expectations. Another way to retain your employees is to have meetings, so that you can assess any issues firsthand and see how well your employees are handling their current workload so that if necessary, you can reassess to help improve satisfaction and productivity.
Impact of EVs
The transition to EVs has been a major challenge throughout the automotive industry. It is expected that by 2030, 35% of vehicles in North American production will be EV. Though the overall shift toward EVs is more sustainable, EVs have increased the demand for certain components such as batters and semiconductors, which are still in short supply. Since EVs have more advanced features, these vehicles require advanced components which have become increasingly difficult to get due to the rising costs raw materials and lack of readiness in the automotive industry. To help mitigate these risks, it is important for your company to shift focus on diversifying your supply chain, investing in your people, and adopting new technologies.
Lingering Effects of COVID-19
2020 was a rough year for industries all over the world, with several manufacturing facilities experiencing considerable disruption. The automotive supply chain was no stranger to these shutdowns and when major suppliers ran out of parts, OEMs made the difficult decision to stop the supply chain in its entirety. Due to these holds on the supply chain, the automotive industry is still trying to catch up in 2023. Though things are slowly getting back on track, the automotive industry has still found it difficult to fully build up material stockpiles and develop backup plans that have room for assurance.
On September 15th of this year the United Auto Workers (UAW) began their walkout due to demanding a 40% pay raise over their four-year contract. Though this strike is not a full-scale walkout, the automotive industry is still at risk of major impact. According to experts, if the strike lasts long enough, the automotive industry will begin to see their inventories being affected, inflating product prices even further. Unfortunately, with the lack of labor within the automotive industry, supply chain shortages are at risk to be revived and similar to years prior where small disruptions can snowball in the wider system.
Benefits of Partnering with a 3PL
Improved Supply Chain Efficiency
One of the benefits of third-party logistics (3PL) companies is their specialization in supply chain management. By optimizing processes such as transportation, warehousing, and inventory management your 3PL will help lead you to more efficient operations within your automotive supply chain. By leveraging the expertise and technology of 3PL systems, your business can reduce lead times, minimize transportation costs, and streamline order fulfillment, ultimately improving overall supply chain efficiency.
With 3PL integration, your partner can help your company reduce operational costs. Often, your 3PL manager will have established networks and partnerships with transportation providers, which allows them to negotiate favorable rates for both shipping and warehousing services. By outsourcing logistics services to a reputable 3PL, your company can also avoid the costs associated with maintaining your own value logistics infrastructure and workforce.
Scalability and Flexibility
Like any industry, the automotive industry can also experience fluctuations in demand due to seasonal variations or market demands. Luckily, benefits of a 3PL includes scalability and flexibility, which allow your business to adjust your logistics resources and capacity as needed. Your company can also expand or contact your logistics operations without making long-term commitments, making it easier to adapt to ever-changing market conditions.
Focus on Core Competencies
Outsourcing your logistics functions is one of the benefits of using a 3PL. This allows your company to focus more on your core competencies, such as vehicle manufacturing and design, ultimately leading to increased innovation and competitiveness in the automotive industry. Additionally, your organization can redirect your resources and attention to product development, quality control, and marketing, leaving logistics operations to the experts.
Access to Technology and Expertise
Typically, a 3PL benefits from investing in advanced technology and software utilized for supply chain management. Your 3PL partner can help provide you with access to the latest logistics tools, real-time tracking, and analytics. 3PLs will also have a plethora of industry-specific knowledge and expertise. Staying up-to-date with industry trends, regulations, and best practices, ensures that their clients benefit from the latest insights and innovations.
Finding the perfect solution to supply chain issues is a crucial aspect to any manufacturer especially in the automotive industry. If you’re not loving your supply chain, life in the warehouse can become stressful and mistakes can be made. Our expert team here at NewStream Enterprises, LLC provides a plethora of supply chain management solutions to relieve your team of this difficult task. Inventory planning and procurement, vendor management, and kitting and packaging are just a few of the supply chain solutions we provide. Allowing professional SCM providers like NewStream to manage your inventory will assist your company lower friction and costs while also reducing your stress and helping you love all elements of your supply chain.