Four Automotive Supply-Chain Problems, and How to Fix Them

The auto industry is at the forefront of needing immediate supply-chain transformation.

That’s especially the case when considering change that historically has taken 10 years must now occur in a matter of months because of COVID-19.

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Basically, for the auto industry, too many parts being sourced from too many countries means too much risk. What had been working is now broken.

Here are four problems – and ways to fix them.

Pivot quicker with local sourcing.

Although sourcing from low-cost countries with complex global supply chains has been working for decades, the how – and where – of automakers’ source components is changing.

One of the key lessons from the COVID-19 crisis is that the automotive industry must prioritize developing local supply chains, enabling quicker pivots.

Even with more expensive parts and labor, it’s still more costly to automakers if they’re forced to shut assembly lines over supply issues.

From logistics systems offering local warehouses to the auto industry reducing the number of component variants, the efficiency and transparency of the supply chain has never been more important.

Overhaul legacy software systems.

Getting product from Point A to B is only part of the problem. The automotive industry’s delicate supply chain is less about the physical movement of the goods. Instead, the fragility resides around the legacy software systems and stagnating processes to move product and business data.

A tremendous amount of raw-material production is sourced from China, so when COVID-19 hit, production of automotive parts virtually halted. Knowledge around the availability of raw materials is uneasily shared through data systems. A lack of knowledge caused confusion and panic in automotive sectors.

Optimize data transparency.

As the virus spread to the United States, local assembly lines halted because of insufficient data on available parts.

In some cases, businesses hoarded products, while other assembly lines were immediately converted to handle other tasks, such as ventilator components.

Since manufacturers shared little to no forecast data, product availability ceased, as well as insufficient infrastructure to distribute and sell the products.

Also, the demand for personal protection equipment made it even more difficult for paint and body shops to acquire proper N95 masks and other protective gear. While these businesses still needed to function, the lack of data was crippling. There was limited to no knowledge on availability, and scarce information on whether PPE products met safety standards. Many companies were struggling to know, “Is this N95 mask that we received from a different source really safe for a paint shop?”

Understand the industry’s critical role in the economy.

For a time, there was uncertainty on whether automotive-parts stores would be considered essential businesses.

This confusion stalled product orders, which caused a ripple effect upstream to manufacturers.

As maintaining emergency vehicles became glaringly clear, auto-parts stores were finally deemed essential. But, the limited and siloed information about product availability continued to delay parts orders.

Moreover, the political challenges with tariffs and restricted imports of goods exacerbated the limited transparency on where to acquire automotive products and whether they met specification requirements.

So, what now?

It boils down to needing collaborative data for a vital supply chain. The automotive industry is littered with siloed operations, some of which still rely heavily on technology and processes from the 1980s. That’s forty years ago!

Even newer systems that were activated by more innovative manufacturers and distributors had rules and configurations based around siloed operations. The lack of data-sharing and collaboration between systems and supply-chain partners dealt a powerful blow to the automotive industry.

Clearly, the automotive industry is not immune to this crisis. Having one of the most complex supply chains in the world, the auto industry also is one of the most susceptible to disruption.

Rob Bailey

Our collective global supply chain disruption makes it clear that the time to bring transparency and efficiency is now.

Rob Bailey is CEO and founder of BackboneAI, an intercompany data-automation platform.