The automotive supply chain is one of the most complexes 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. Here are the top 5 supply chain challenges the automotive industry is facing in 2021.
Top 5 Supply Chain Challenges in Automotive Industry
1. Lack of Visibility
One of the top challenges for automotive supply chains, like other industries, is visibility. The automotive industry has an 81 percent concern rate, compared to 70 percent for all other businesses. On average, a vehicle consists of roughly 30,000 components that are designed to bring supply chains together for consistent production. Overlooking any part of the manufacturing process can be detrimental to the procurement process, such as inventory shortages and significant delays. Expanding focus on all aspects of communication, part tracking at any stage, streamlined processes, and predictive analytics will eliminate the lack of insight for all parties in the supply chain.
Picture: Supply Chain Challenges Line Graph Source: Jay Malaviya
2. Overstocked Inventories
In the automotive manufacturing industry, having a well-managed inventory is crucial since overstocked raw materials that are not optimized may leave potential profit sitting on shelves. To overcome the issue of overstocked inventories, automobile companies might utilize third-party logistics (3PL) companies that use software to track measurable data and inform them about the demand for their products. Just-in-time production also assists companies in eliminating overstock and making better decisions about what should be on hand each day.
Since 2015, the automotive industry has become more focused on an environmental agenda. It is not only expected but also required, for both manufacturers and third-party partners that vehicles be constructed in an environmentally responsible manner. Unfortunately, with globalization allowing the shipment of goods from all over the world, each location’s stance on sustainability varies, thus creating supply chain issues for the United States.
4. Quality Control Issues
In automotive manufacturing, it is critical to ensure that no errors occur during the assembling process. A lack of control and auditing can lead to quality issues, which can result in recalls, revenue loss, material waste, and tarnish the company's reputation.
5. COVID-19 Impact
During the COVID-19 pandemic, around 51.7% of automotive industry respondents said supply chain disruptions were “very significant,” the highest percentage among the six industries. Due to the part shortages, particularly microchip shortages, a lot of automotive manufacturers cannot complete their vehicle assembly. As a result, automotive OEM supply chains must put long-term plans aside and focus on the immediate future. COVID-19's supply chain issue can be addressed by monitoring real-time supply issues, communicating with parts suppliers, and simplifying access to supply data. Additionally, using a third-party logistics provider can assist automotive companies in resolving this supply chain issue.
Being aware of current supply chain issues does not eliminate the challenges ahead. Determining what automotive supply chain issues exist within your warehouse is the first step into making your company run smoothly with no error. Materials management will be one of the biggest upcoming challenges in the automotive industry, as it requires excellent communication from all parts of the supply chain to ensure that warehouses receive the proper amount of inventory, control what inventory they do have, and find the most suitable solution to downsize current inventory.
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.