Top 5 Challenges for Automotive

8/3/2019 Top 5 Challenges for Automotive

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Top 5 challenges for automotive: Supply chain visibility, cost containment, risk mgmt, increasing

customer demands and globalization

Smarter supply chains need all these three:

1. Visibility Issue: 8/10 lack visibility; 84% have implemented real time supply chain informationtransparency inside &outside the enterprise but only 13% have done it extensively; Only 30% feel theircollaborative practices as effective; Top supply chains are 5 times highly effective at sharing real time

demand & inventory data than automobile supply chain.

Top barriers: Organizational in nature

1) Organizational silos inhibit collaboration (45%) Top SC (38%)

2) Performance measures not aligned to reward management (42%) Top SC (35%)

3) Individuals too busy to assist others across the organization (42%) Top SC (48%)

4) Collaboration not viewed as important (36%) TOP SC (23%)

5) Technological tools do not effectively support collaboration (19%) (34%)

6) Concerns about intellectual property limit effective collaboration (6%) (15%)

How to increase visibility: Use of smart devices like RFID tags, sensors to track and optimize themovement of materials from suppliers to receiving docks and throughout assembly. Embedded

systems and software are also aiding as these sensors provide data on leading indicators of

potential failure in turn providing demand visibility of parts & services thus helping the

manufacturer to improve the quality & reduce warranty costs.Smarter automotive supplychains are also highly interconnected even across extended dealer networks e.g. parts

inventory. Adv: Sourcing quantities, safety stock levels and replenishment thresholds are

calculated using accurate information and sophisticated analytics. If this is achieved then the

other challenges of cost containment, risk, increasing customer demands and globalization

issues can be overcome.

2) Cost Cutting: The struggle is to find out areas where we can cut the cost. So for that they have

implemented variable cost structure i.e. aligned costs with fluctuating revenues. 20% have done it


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extensively which is at par to industry best supply chains. The finding showed that the outsourcing can

be the best area to cut the cost. So for that they have implemented variable cost structure i.e. aligned

costs with fluctuating revenues. 20% have done it extensively which is at par to industry best supply

chains. The finding showed that the outsourcing can be the best area to variablize the cost.

1) Maintain optimum inventory of incoming materials, finished products, spare parts and accessoriesspread across distribution centers and thousands of dealer repair shops.

2) Intelligent forecasting, inventory management and dynamic pricing of parts also capture the expected

growth in the service segment as consumers hold onto their vehicles longer.

3) Spare parts forecasting and planning is done at a lower level of detail even in the presence of

thousands of parts and millions of part-location combinations it can simulate different scenarios and

tailor replenishment strategies for each individual part

4) Sophisticated algorithms help to better predict sporadic demand fluctuations. The entire value chain

saves money by carrying fewer inventories and reducing obsolescence through better parts utilization

5) Use of analytics to optimize distribution networks

3) Risk Management: 1/3rd

of all the supply chain fails to manage risk on a formal basis. 37%

acknowledged no formal practices for monitoring risk. Automotive companies trail top supply chains in

implementing risk management practices currently 61 have incorporated risk mitigation into their

supply chain planning processes which will rise to 75% in 3 years. With sophisticated demand planning,

variable cost structures and better integration with suppliers, the smarter automotive supply chain is

more capable of flexing supply up and down with demand. Stronger build-to-order capabilities also

reduce the risk of having dealer lots full of unwanted inventory. With vehicles staying in use longer, the

demand for spare parts is rising, along with it the incidence of counterfeit and gray market parts. Its a

trend that threatens one of the industrys most profitable segments.

4) Increasing Customer Demand: Across industries, demand planning with customers is the leastfrequently implemented process for synchronizing supply and demand. Only 26 percent collaborate with

customers to a significant extent, as compared to 77 percent who use internal sales and operations

planning processes. In context, these findings suggest that automotive companies ability to collaborate

effectively with customers is inversely related to the speed and frequency of the interaction required. In

other words, automotive supply chains excel at periodic customer collaboration. But when real time,

transaction-level interaction is required, the industrys collaborative capabilities fall short. Although it

may be difficult for light vehicle OEMs to create these capabilities because of the size and varying levelsof IT capabilities among their dealers, other automotive companies should seize the opportunity to

connect with large customers and dealers. The smarter automotive supply chain also addresses rising

customer demand for configurable products. Its vehicles are designed to be tailored either during

manufacturing or upon arrival at the dealer. Because the smarter supply chain is appropriately flexible

and interconnected, customers can adjust an order until just a few days before manufacturing begins.


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5. Globalization: Automotive is one of the most global industries second only to electronics, it has

been at the forefront of establishing global infrastructure.

The smarter automotive supply chain is focused on integrating its global supply chain by integrating the

product lifecycle management and enterprise resource planning systems of all its partners. To facilitate

integration, the smarter supply chain establishes common processes and terminology

Consumer Products 2010: Assess the impact of seven key trends on the marketplace of Asiaconcentrating on four key regions:

Japan: Giant for most consumer products companies, with its own rules and market dynamics. &

Stagnant over an extended period of time. India and China: Vast areas of largely untapped growth

potential, but both offer growth at an acute understanding of regulations and cultural shifts. ASEAN:

Diverse range of markets with dual challenges of consumer spending power and consumer preferences

that varies wildly country by country. Deals with IBM identify five deep-seated global trends and two

other trends that will impact consumer products Companies in 2010.


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Trends:

1. Consumer value drivers fragments

Significant trend driving change is the increasing diversity of consumer characteristics and behavior

patterns across the world: micro-segments. Trading down to low-cost commodity providers and

trading up to high-value, premium brands. Driven by demographic fragmentation. India, Indonesiaand Philippines with higher birth rates will have large youthful populations. Consumer demands andrequirementsfor the graying populations in Japan and China will be dramatically different compared

to the youthful populace of India or Indonesia.

2. Gatekeepers become more guarded

Enabled by new technology and regulation, consumers are exerting greater control over their

interactions with businesses. Western markets - consumers have learned to protect information from

marketing organizations. In China, Low credit card usage poses barriers for consumer data collection.

Mature Asian markets, government in many instances plays the gatekeeper. Gatekeeping behavior isexpected to continue to vary widely across Asia.

3. Information exposes all

Consumers are becoming incredibly empowered through access to information wherever and whenever

they want it. Points of sale, Internet, mobile devices customers gather information on the products

they intend to buy. Online population is predicted to reach 1billion by 2010.

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Top 5 Challenges for Automotive