A digital supply chain is essential for automotive companies

The microprocessor shortage that disrupted supply chains in 2021 continues to send shockwaves rippling across many high-tech industries. The automotive sector, one of the most severely impacted, has experienced major stoppages and losses as manufacturers have delayed production waiting for critical chips. Combined with other instabilities brought about by a global pandemic, these supply chain volatilities bring new challenges that have made agile supply chain planning truly essential.

Why are supply chain needs and operational techniques changing?

Supply chain strategies, like many other parts of a modern organization, must continue to evolve if they are to stay in line with overall business objectives. In an increasingly data-driven world, challenged with typical supply chain issues as well as COVID and economic shocks, all firms must be more focused and proactive with their supply chain efforts.

Companies need supply chain tools that deliver competitive advantages while tapping into extended resources, providing greater visibility, control, and engagement with supply partners across a wider and distributed network. This requires businesses to connect all parts of the business with trading partners to improve operations and knowledge across demand and supply planning, supporting more flexible and dynamic production schedules.

To support these efforts, modern supply chain tools can be deployed within an organization’s technology stack to digitally transform the supply chain, improving resilience and innovation. Through automation and advanced analytics delivered in the cloud, companies can synchronize production and distribution activities to grow with demand across wide business supply ecosystems.

For automotive firms, the current issue is how to deal with lost production. The latest estimates show that the shortage led to a loss of production of 7.7 million vehicles in 2021, costing $210 billion in lost revenues. Global volatility is another growing problem for the automotive industry. Hot on the heels of global tariff battles in 2018, commodity prices rose rapidly. Then came COVID and, now, the impact from the semiconductor industry and wider supply chain problems.

 

Operational and practical benefits of digital supply chains

Cloud-based, digitalized supply chains are already proven to bring tangible business benefits, as results from Infor’s global customer base illustrate above.

These benefits and the improvements in operations enable companies to deal with the ongoing issues facing automotive brands and suppliers of all sizes. Recent practical examples of how automotive firms worked to mitigate and manage their supply chain across the COVID crisis include:

• A UK manufacturer recently claimed a world-first, trialing a digital supply chain for leather parts using blockchain technology. Using a digital twin system to track the entire leather production process using GPS, biometrics, and QR codes from source to vehicle.
• GM and Ford took a pragmatic approach to the chip crisis, researching efforts with semiconductor vendors to reduce the number of microcontroller units it uses by 95%. They are co-developing, sourcing, and manufacturing new products to restore predictability in their supply chain.