Supply chain optimization has always been tough for the automobile industry to achieve, but recent trends in the sector have made those efforts even more difficult. As a result, car makers will likely need to adopt automated data collection solutions to deal with these rising challenges.
Some of these issues are not new, as Hofstra University's Department of Global Studies and Geography noted that many diverse industries and companies must work together seamlessly before a car is ready to be sold. Parts manufacturers need to source supplies like rubber and steel from third-party entities, then the car makers put everything together before shipping the final products to dealerships to be sold to consumers. In comparison to other business models in which the manufacturer sells items directly to the public, the automobile industry's supply chain can be especially convoluted and difficult to effectively oversee.
Common Supply Chain Optimization Issues Faced
This already complicated setup has become even harder to maintain in recent years, automobile industry expert Oliver Reisch recently wrote in Manufacturing Business Technology. For one, supply chain partners are more dispersed than ever before. In the past, car manufacturers almost always sourced their parts from nearby operations. As the global economy became more pervasive and widespread, the number and geographic diversity of the parts suppliers automobile companies used increased as well. For example, a German firm that only a few decades ago got supplies strictly from Europe likely now has partners in the United States, Africa and many other parts of the world too.
Not only do businesses have a more distributed supply chain network, but the number of parts that now need to be ordered has risen too. Reisch noted that the vehicles made today are far more complicated than what was made in the past, as many cars now come equipped with advanced add-ons like built-in navigation systems and rear-view cameras. In addition, even standard parts such as axles and brakes are now far likelier to contain more parts that originated from a greater variety of places. For example, some high-end vehicles currently have more than 60 potential electronic control units, according to Reisch.
Making this process even more difficult to maintain and oversee, Reisch wrote, is the rising consumer demand for customization. The Ford Motor Company may have pioneered the cookie cutter assembly line method for manufacturing, but no car maker can now afford taking such a cut-and-paste approach. Consumers increasingly want a vehicle that precisely meets their exact specifications - and they want it now.
"In today's automotive supply chain the situation has changed: when a customer configures and orders his vehicle at the dealer (or on the Internet), a growing proportion of parts come from distant regions, and the delivery may take several days or even weeks," Reisch wrote. "The variety of parts has increased dramatically. A customer can now choose from a number of features which affect other part configurations leading to a high number of different options."
Solving Common Supply Chain Issues with Automated Data Collection
To address the common pitfalls, some car makers may be tempted to simply order far more supplies than it needs at any given moment to make sure it is always ready to deal with any supply chain issues that may crop up. However, this strategy is likely to fail as demand rises. The Detroit Free Press reported that in the wake of the last major U.S. recession, many vehicle manufacturers and parts suppliers closed up shop. However, over the past few years, supplier output has decreased 30 percent even though overall automotive industry demand has risen 22 percent. Approximately 15 million new cars will be sold in the United States this year, and as a result, all major manufacturers are rushing to fulfill orders and get increasingly hard-to-find parts shipped to them as quickly as possible.
"I think we've been pretty public there is quite a bit of stress on the supply base in terms of its ability to meet demand," said Mark Chernoby, senior vice president of engineering for Chrysler, according to the Detroit Free Press. "And certainly we have to manage week-to-week, month-to-month and day-to-day around some of those problems."
By leveraging barcode software and other automated data collection solutions, vehicle manufacturers can better track all shipments in real time and avoid any potential bottlenecks. This way, car makers can have a more complete overview of their supply chain and make necessary changes to expedite production and shipments as needed.