Being FutuReady: Reinventing automotive supply chains in the post-Covid world


This article is written by Rajesh KhatriVice President, Passenger Vehicles Business Unit, Tata Motors
The impact of the Covid-19 pandemic on supply chains around the world has been deeply disruptive to say the least. Reeling from sudden shutdowns, fluctuating demand and supply, disruptions and logistical shortages, the automotive industry has been left in the lurch for more than a year and is still recovering from the shock. Global semiconductor shortages continue to haunt the automotive industry even today. What the pandemic has taught us first and foremost is the need to completely rethink our supply chain strategic objectives.
Before the pandemic, most supply chains were focused on optimizing cost and throughput – the priority was sourcing parts at the lowest cost as quickly as possible. We weren’t really thinking about flexibility or business continuity plans, or wondering if customer demands changed drastically overnight? But after Covid-19, these issues have become central to supply chain management. As we venture into the future and plan for 2022 and beyond, it’s time to reinvent our supply chain strategies to be FutuReady.
Cover the Basics—Supply Chain Planning Fundamentals
At the first level, it is essential to ensure that the supply chains that we build function well within certain basic parameters. It is necessary, for example, that we have complete visibility into our global supply chain. We have to see it through the levels, keeping in mind customer demands, the technical aspects of sourcing raw materials, semi-finished products or components that go into our finished products. The further down we go in the supply chain, the more efficient we will be in planning our supply chain. A deep understanding of manufacturing and warehousing processes, logistics, shipping, and third-party logistics can also present opportunities for optimization. Additionally, a solid understanding of unit-level cost structure is very important to avoid sudden vendor outages and can help organizations control costs while maintaining stable margins, even allowing them to take advantage of supplier clusters to minimize costs.
Besides this, there is also a need to diversify the supplier base. It is important that you make sure you have a plan B, plan C, and backup providers in case one provider cannot meet your needs. This may reduce buying power with a given supplier, but it can be a worthwhile trade-off while gaining flexibility, dependency and reliability within your supply chain. Your existing suppliers must also be reliable. When determining vendor reliability, be sure to consider questions such as: are our vendors likely to have to shut down or not operate at full capacity during a tumultuous time? Are they proactively collaborating with their supply chain on changes in demand, capacity needs, and other critical factors? Are they adequately staffed?
Ensure business continuity through supply chain optimization
Once we’ve covered our basics, there are several ways we can optimize the supply chain. Consider, for example, the ways you can simplify products and standardize parts. Overly complex products involving a wide variety of materials make the supply chain complex and prone to disruption. Instead, purchasing a standard catalog rather than product-specific parts can help maintain a lean supplier base, for example: an application-specific integrated circuit in the semiconductor industry. Another way to have a supply chain with minimal disruption is to optimize logistics. Buying coins locally instead of getting them from around the world can help mitigate geopolitical risk.
Demand and supply planning can also be key to improving supply chain efficiency. Companies that can align demand with supply gain an advantage over others. Since this delicate balance begins with proactive demand management, demand planning and forecasting take on critical priority. Aligning with your customers’ needs improves the customer experience, accelerates cash flow and brings benefits to the bottom line. To understand fluctuations in demand, listening to the field and getting in touch with stakeholders (customers, sales representatives and account managers) can be fruitful. On the supply side, it is important to ensure capacity availability and maintain agility and flexibility while consistently delivering on demand.
On a broader level, it is also important that we learn to manage risk proactively rather than reactively. While it is certainly impossible to predict black swan events like the pandemic, one can remain acutely aware of one’s own vulnerabilities, particularly to pressure areas in the supply chain. Having a comprehensive business continuity plan in place can prove invaluable in this regard, providing businesses with a systematic framework for anticipating risks and working to mitigate them. The moment risk is detected in any sector, this BCP must be set in motion. This can play a crucial role in allowing the OEM to insure against long-term damage.
A vision for the future— Digitalsustainable, productive
Ultimately, the supply chain networks of the future must incorporate the broader values ​​of our changing world. Advances in online connectivity and digital technology have emerged and have promising potential to revolutionize the way supply chains work. Digital tools (a supply chain control tower) can provide real-time data, predict trends, provide early warning signals, and closely monitor supply performance. At the same time, we must also stay aligned with the global move towards sustainability. Supply chains must establish roadmaps to achieve net zero emissions, water neutrality and full material recyclability over the coming decades.
Going forward, we must strive to build an agile, productive, resilient, digital and sustainable supply chain, guided by strategic business continuity plans and proactive risk management.
Disclaimer: The views and opinions expressed in this article are solely those of the original author and do not represent The Times Group or its employees.
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