The automotive industry is considered the most intricate and information-intensive sector, with countless companies requiring thousands of parts delivered to complete their manufacturing process. Supply chain of the automotive industry can be termed as the network of processes, organizations, and resources necessary for the creation and delivery of vehicles and their parts to end users.

In early 2020, the COVID-19 pandemic caused manufacturers of automobiles, electronics, and other tech products to expect a decrease in sales, leading them to reduce semiconductor orders. However, three years later, the industry is still bemused from that decision, as reducing semiconductor orders resulted in a global shortage of chips that are used to power everything from artificial intelligence to medical equipment, causing some manufacturers to even pause production. In the automotive industry, for example, US car inventory reduced to less than 1 million units in the US in the second half of 2021—roughly one-third of the pre-pandemic level. The semiconductor supply chain was already under stress before the pandemic, and COVID-19, combined with recent challenges related to power outages, natural disasters, and geopolitical uncertainties, has widened the gap between chip supply and demand across all semiconductor-enabled products.

Consequently, companies like Nissan, Toyota, etc. are increasing chip inventory levels, along with the incorporation of IoT and 5G, in order to respond to unforeseen circumstances.

Struggles of Automotive Supply Chain: 4 Major Factors

·         Industry’s Uncertainty After 2020

For the automotive industry, the pandemic made it unclear whether people would buy cars sooner, again, putting various OEMs in a complex position of dealing with uncertain production volume. As a result, when factories reopened, delays in production and revived customer interest created a supply-demand gap. This standstill continues to have an impact. In addition, the automotive industry was already in the midst of a transition toward electric vehicles (EVs) prior to 2020. The pandemic's impact on consumer preferences, regulatory changes, and investments in EV infrastructure added an extra layer of uncertainty to this shift. Automakers had to balance their existing combustion engine production with the emerging EV market.

·         Dual vs Multi-Sourcing Debate

Prevalence of multiple tiers is one significant reason for fragility in automotive supply chains. Coordinating and managing multiple suppliers can be complex and require efficient logistics and communication channels. It can also increase the costs related to supplier relationship management and potentially reduce the leverage a company has with each individual supplier when negotiating terms. The decision to use dual- or multi-sourcing in the automotive supply chain depends on various factors, including the availability of suppliers, the complexity of managing multiple suppliers, and the potential risks of supply chain disruption.

·         Absence of Visibility

Visibility is among the top challenges for automotive supply chains. On average, a typical vehicle consists of roughly more than 30,000 components, designed to bring supply chains together. Overlooking any part of the manufacturing process can result in inventory shortages and significant delays. Without accurate visibility, it's challenging to provide customers with accurate delivery estimates or updates on order status. This can lead to dissatisfaction due to missed delivery promises or lack of communication.

·         Environmental and Sustainability Concerns

Increasing emphasis is being seen in the adoption of environmental sustainability across majority of the sector, including automotive supply chains. However, its initial traction comes with certain obstacles. Integrating sustainable practices requires rethinking the design of vehicles and components. This involves developing new technologies, materials, and manufacturing processes that prioritize energy efficiency, reduced emissions, and recyclability. Therefore, a holistic approach of designing eco-friendly vehicles, collaboration with suppliers, and adapting to changing regulations is important to secure a safe future for the automotive industry and its supply chain.

According to TechSci Research Report “India Automotive Blockchain Market - Global Industry Size, Share, Trends, Competition, Opportunity and Forecast, 2017-2027F”, Segmented By Application (Manufacturing, Supply Chain, Mobility Solutions, Financial Services, Others), By Mobility (Personal Mobility, Shared Mobility, and Commercial Mobility), By Provider (Application & Solution, Middleware, and Infrastructure & Protocol), By End User (OEMs, Vehicle Owners, Mobility as a Service Provider, Others), By Region, Competition, ”the India automotive blockchain market is expected to witness a growth of robust CAGR in the forecast period, 2023-2027.  Increased demand for automotive blockchain technology for logistics & transportation, insurance, secure transactions, and advantages such as low operational costs and improved security are expected to be the primary drivers for India's automotive blockchain market for the next five years.

Reimagining the Automotive Supply Chain in 2023

In the year 2023, the automotive sector finds itself amidst a dynamic environment marked by transformative technological shifts, evolving consumer preferences, and heightened environmental consciousness. In response to these challenges and opportunities, automotive supply chains are embracing innovative strategies designed to foster efficiency, adaptability, and eco-sustainability.

Customer-centric approach proves itself as a crucial focal point, recognizing the pivotal role of personalization and smooth experience in the automotive realm. Supply chains are shifting towards more flexible production systems that can accommodate customized orders and rapid shifts in demand. Collaborative digital platforms are fostering closer engagement with consumers, empowering them to configure and trace their vehicles' progress throughout the manufacturing process. This approach not only augments customer satisfaction but also minimizes the wastage associated with producing unsold vehicles.

• Prioritizing customer needs, preferences, and experiences in decision making.
• Gaining required traction due to personalization in products and smooth interactions.
• Shifting away from traditional large scale standardized production.
• Incorporation of interactive platforms, facilitating easy configuration and choices for the customers.
• Aligning the production with actual demand, thus virtually reducing costs, and streamlining planning with production.

Furthermore, developing better monitoring systems in the automotive industry is crucial for many reasons. Firstly, it relies heavily on third party companies to work together to deliver thousands of parts. Secondly, changes in disruptive trends, consumer demands, and manufacturing processes are other brainy challenges. Therefore, by adopting better monitoring systems, automotive companies can address these challenges, leading to their supply chain operations’ optimization. Additionally, monitoring supply chain enable companies to also identify quality issues on early basis. Through this, companies can take the required corrective action to ensure overall quality of the product.

Adding on, lean principles offer a valuable methodology for automotive OEMs and suppliers aiming to optimize their supply chain operations. A key benefit of embracing these principles lies in the potential to reduce lead times and production expenses, all while retaining superior product quality. Through the integration of practices like continuous improvement, value stream mapping, and standardized work, organizations can significantly reduce wastage, elevate product quality, and enhance operational efficiency. Moreover, enterprises must ensure that their workforce undergoes consistent training and skill development, guaranteeing their competence in instituting and maintaining lean principles.

The automotive supply chain could become more collaborative with closer partnerships among manufacturers, suppliers, and even competitors. Sharing resources, knowledge, and even production facilities could lead to increased efficiency and innovation. Closer collaboration with suppliers can lead to better communication, synchronized production schedules, and improved inventory management. Suppliers could have more visibility into their customers' needs, enabling them to provide just-in-time deliveries and reduce the risk of shortages.

Market Insights: Technological Relations

IoT devices and sensors are used to monitor various aspects of the supply chain, such as tracking the location and condition of goods in transit, monitoring vehicle performance, and optimizing inventory management. This real-time data enables better decision-making and enhances supply chain visibility. This also helps companies to identify potential disruptions and take proactive measures to mitigate risks.

Cloud B2B platforms provide several benefits in the automotive supply chain. They enable real-time communication and data sharing between suppliers and manufacturers, improving overall supply chain visibility and efficiency. These platforms also facilitate the automation of various supply chain processes, such as order management, inventory tracking, and logistics coordination. By digitizing and automating these processes, companies can reduce manual errors, improve accuracy, and enhance the speed of transactions.

Telematics is the use of informatics and telecommunications to transmit data from a vehicle to a remote location. Similarly, in-car technology refers to the use of technology a vehicle uses to improve safety, efficiency, and convenience. It can provide real-time data on the location and status of vehicles and products in transit. This enables companies to track inventory and optimize logistics operations, improving overall supply chain visibility. Therefore, by providing these features, automotive companies can enhance the overall efficiency of their production.

Industry 4.0 introduces the concept of smart factories, where machines, equipment, and processes are interconnected through the Internet of Things (IoT). Industry 4.0 facilitates end-to-end visibility across the supply chain. Sensors, RFID tags, and GPS tracking enable real-time monitoring of goods in transit, enhancing traceability and reducing the risk of disruptions. Demand forecasting, inventory management, and distribution are enhanced, reducing lead times, and minimizing excess inventory. Industry 4.0 also promotes collaboration across the supply chain ecosystem. Manufacturers, suppliers, and partners share data and insights, improving coordination, responsiveness, and overall efficiency.

For instance, Accenture, on July 27, 2023, acquired Strongbow Consulting, which is a data driven firm with deep expertise in helping organizations plan and also execute technological transformation strategies. It aims to bring in desired capabilities to optimize supply chains and IT infrastructure, thus bridging the gap between old and new technologies.

Helbiz, Inc., a leader in micro-mobility and shared transportation, completed its acquisition with Wheel Labs, Inc. This merger is expected to strengthen their manufacturing operations, creating a diversified business model, enhancing the financial profile of the company. It happened in November 2022.

On May 16, 2017, SHIFTMobility Inc., world’s most advanced telematics enabled automotive platform, announced its partnership with eBay Motors. This new partnership focuses on explosive growth in the automotive supply chain market. It also provides a powerful and simplified shopping experience.

Through the SAP Business Network, BMW and Mercedes-Benz have worked together to streamline their transportation processes. The businesses discovered opportunities for shared transportation and consolidation by collaborating on logistics planning and sharing transportation data.

Through the SAP Business Network, General Motors and Isuzu have also teamed up to improve transportation cooperation. By utilizing the platform, the businesses were able to coordinate shipments, share real-time data, and optimize their logistics operations. In order to cut down on empty miles and improve transportation efficiency, they were able to find opportunities for joint transportation involving vehicles from both companies.

According to TechSci Research Report “Smart and Mobile Supply Chain Solutions - Global Industry Size, Share, Trends, Competition, Opportunity and Forecast, 2026F”, Segmented By Enterprise Size (Small & Medium Enterprises and Large Enterprises), By Industry (Third Party Logistics (3PL); IT & Telecom; BFSI; & Others), By Region, Competition, ”the global smart and mobile supply chain solutions market is valued at USD14 billion and anticipated to grow at CAGR of around 10% during the forecast period. The global smart and mobile supply chain solutions market is expected to witness progressive growth in the next five years on account of increasing demand for industrial automation and rapid increase in e-commerce activities. Moreover, increasing storage demand coupled with the need to cut order backlog and miss-ships is further propelling the smart & mobile supply chain solutions market globally. However, factors like lack of infrastructure and system scalability are likely to hamper the growth of the market in the coming years.

Conclusion

Looking ahead, the road ahead for the automotive supply chain is both exciting and complex. The rise of electric vehicles, the integration of autonomous technologies, and the increasing emphasis on sustainability will further shape the landscape. As automotive companies redefine traditional paradigms and embrace innovation, they're not just transforming supply chains—they're driving the evolution of an entire industry.