Declining global sales, pressures to reduce inventories, high levels of demand variability – these are all contributing factors to the increasing complexity of the global automotive industry. In 2012, we have seen major disruptions in the automotive supply chain due to events like the territorial dispute between China and Japan has deeply affected the industry as sentiment in China against all Japanese products, including cars, has been strong and marked by sometimes violent protests.
It’s not surprising that car makers struggling in the current economic and competitive market environment have experienced quarterly losses; however, it’s important to note that even those that have reported growth have had to go through some serious transformations in order to achieve profitable growth in their operations – General Motors and Chrysler being two great examples of companies willing to innovate and adapt in order to do business and meet demand in the “new normal” economy.
Every modern supply chain is complex, but the automotive industry faces special challenges. If not addressed and well-managed, these challenges can result in lost sales, underutilized global assets and significant investments in facilities, people, new products and other initiatives that fail to achieve a full payback. Additionally, they can result in surplus inventories that need to be purged through customer incentives – or conversely – inventory shortages that benefit competitors.
Here is the silver lining.
Forward-looking supply chain leaders can achieve operating margin improvements of 15 to 20 percent, even in uncertain market environments. The key is to create a dynamic, demand-driven supply chain.
Automotive manufacturers and suppliers can become more dynamic and responsive to today’s global challenges by employing the following must-have core competencies to confront the new imperatives for the automotive industry – synchronization, data-driven decision-making, flexibility and agility:
- Accurate, real-time forecasting
- Truly global sales and operations planning
- Enhanced supplier collaboration and monitoring
- Global inventory optimization
- More efficient assembly
- Transportation optimization
- More effective pricing and promotions
- Fact-based vehicle portfolio management
- Effective space parts planning and replenishment
For more information, I encourage you to check out a new whitepaper on this topic.
Which of these capabilities do you think is the most challenging for businesses to achieve? Which capabilities do you think play the most vital role in linking supply and demand to support more collaborative supply chain and business processes?
I discussed this very topic in a video interview during JDA’s FOCUS 2012 conference. Would love to hear your thoughts:
Driving Success in Automotive Whitepaper