In recent years, automotive supply chains have been under severe pressure resulting from geopolitical instability, rising commodity prices and ever-tightening regulations. So how do you secure your logistics processes and prevent downtime on the production line? Learn about effective strategies and technology solutions that provide answers to these challenges!
The biggest challenges for the automotive components supply chain
The difficult geopolitical situation in many regions of the world, recurring natural disasters linked to climate change or, lately, pandemics, put the stability of global supplies of raw materials and semi-finished products in question. The situation is exacerbated by the rising price of the energy required to extract and process these materials. All this can lead to downtimes and serious financial losses.
The situation with the limited availability of microchips, which has led to a halt in car production in many parts of the world, has proved the importance of a secure supply chain for the competitiveness of businesses. Relying on single suppliers generates the risk of not only delays, but even interruptions in production when key partners are facing problems of their own. In today's increasingly complex world, companies operating in the automotive industry can no longer afford not to have sophisticated systems that enable production process mapping as well as digital monitoring and supply management. Particularly, as they must now additionally comply with new environmental regulations related to waste recycling, production CO2 footprint or ESG (Environmental, Social and Governance) requirements, all of which result in the need to trace the origin of raw materials and semi-finished products.
Strategies to boost the resilience of the supply chain
The simplest and most effective way of dealing with uncertainty in many regions of the world is to diversify suppliers geographically. Using partners operating in different markets minimises the risk of holding up the supply of needed raw materials and components in a potential situation when one of them experiences a disruption. Looking for local sub-suppliers can also be a good solution, which shortens transport distances, therefore reducing costs and enabling more flexible supply management. Working with multiple suppliers requires the implementation of real-time digital delivery monitoring solutions. Using the latest IT solutions and developments in Industry 5.0 such as ERP, AI and big data analytics make it possible to seamlessly track the flow of raw materials and even predict potential risks. Artificial intelligence automatically analyses the risks and allows us to react to potential delays in advance.
It is also advisable to use the services of proven logistics companies that provide operational flexibility. Downtimes can be effectively avoided by rapidly changing delivery routes and diversifying modes of transport. On the other hand, it is also advisable to maintain strategic stocks of raw materials in high-risk situations. To this end, adequate storage space must be provided to keep the key components required to maintain production continuity. This is part of the just-in-case model, which replaces the traditional just-in-time strategy.
Applications of new technologies in supply management
Artificial intelligence is already assisting many manufacturers in optimising routes and anticipating problems in the supply chain. Appropriately designed algorithms process huge amounts of data and automatically recommend alternative sources of supply. Intelligent transport systems can furthermore optimise routes in real time to avoid delays. Blockchain technology also plays an important role in smart logistics processes of today. The digital data chain keeps the flow of components fully transparent and eliminates the risk of fraud. A virtual collaboration platform makes it possible to expedite the resolution of product quality issues or complaints. In addition to external processes, a key aspect is the efficient management of internal logistics, including through the automation of warehouses and transport processes. Robots are able to handle deliveries 24 hours a day and thus reduce operating costs.
Read also: How does Machine Learning affect production quality in the automotive sector?
Sustainable supply chain – new requirements and benefits
An undeniable influence on the development of secure supply chains today is the ESG approach. The environmental regulations adopted in the European Union enforces the reduction of the carbon footprints – not only in production, but also in transport. Sustainable supply management is also expected by customers and investors, who often make decisions to purchase a product or work with a potential contractor on this basis. Implementing green transport strategies is therefore becoming a necessity. These include the use of low-emission transport modes and optimising routes for fuel consumption. For example, carbon-intensive air and road transport can be replaced by rail and sea transport. A sustainable supply chain also includes production with a focus on minimising waste and recycling raw materials. Reusing materials from worn products or production waste is fully in line with the principles of the circular economy and is used by many manufacturing companies. Renault, for example, has developed the 'RE-Factory' initiative to create Europe's first vehicle refurbishment facility, recycling batteries and parts and converting regular vehicles to EVs. General Motors, on the other hand, has introduced a 'Zero Waste' programme to reduce waste going to landfills. The company recycles and reprocesses metals, plastics and textiles.