In times of the globalization of the automotive supply chain, the industry is challenged by the increasing complexity and interconnectivity of the globally distributed supply chain. Automotive supply chains are among the most complex supply chains in the world, with each vehicle containing more than 20,000 parts originating from thousands of different suppliers located in different parts of the world. Orchestrating the movement of the individual parts worldwide is a complex task in the automotive industry. The efficient management of the journey of various parts from a supplier to a manufacturing plant, from a manufacturing plant to retailers and from retailers to the end user is critical.
The markets of automotive industry demand the availability of spare parts and accessories at the best-in-class and just-in-time level i.e. at right time in right quality and quantity while reducing safety stocks, inventory and cost pressure. Over the years, the automotive industry has been a pioneer in developing sound data-driven strategies to optimize manufacturing processes. With the integration of Lean and Six Sigma methodologies into every facet of the manufacturing process, OEMs and their suppliers have achieved incredible levels of efficiency and quality control. However, they are still lagging behind in achieving such quantitative optimization on the automotive supply chain side. The rising complexities and concerns for achieving the competitive advantage now make it essential for companies in the automotive space to achieve the required supply chain optimization. Supply chain visibility can address many of the issues by revealing blind spots and inefficiencies, providing real-time info on the location and condition of goods with easy access of data to all stakeholders.
One approach towards optimizing selected automotive supply chain and logistics processes is by implementing IoT enabled, wireless sensors for monitoring the movement of goods along the supply chain. These IoT enabled sensor devices are installed on the cargo, collecting and transmitting real-time information to a cloud-based user dashboard, offering unprecedented visibility into the location and condition of goods in transit. By implementing IoT technology for monitoring goods in transit, automotive manufacturers, as well as their suppliers, can benefit from multiple benefits. The collected data enables data-driven decision making while also providing input for improving planning efficiency, inventory management and also logistics provider and cost assessment.
So how can supply chain visibility increase the efficiency of the automotive supply chain?
- Real-time information on the location of goods in transit to mitigate risks of Just in Time product delivery
Most of the automotive manufacturers follow just-in-time philosophy that means materials, goods, and labor are scheduled to arrive or be replenished exactly when needed in the production process. Any delay of products in transit due to supply chain disruptions can halt the production line. When the production line stops in the automotive industry, losses both financial and reputational add up minute by minute. To demonstrate the financial significance of such delays, according to a recent EY report, OEMs are charged as much as 50% more for last-minute orders by carriers, while a stalled production line due to supply chain disruptions can waste hundreds of thousands of dollars a day. With shipments arriving daily from hundreds of suppliers, coping with delays by ordering last-minute replacements or by stopping production can lead to quickly skyrocketing costs.
These supply chain disruptions can be minimized; however, by implementing end-to-end visibility to supply chain processes. Some supply chain visibility solutions are capable of alerting supply chain professionals in forms of real-time emails and notifications, informing them if a shipment has been damaged or will be delivered late. Instead of waiting for the arrival of goods and discovering damages only afterward, supply chain and logistics professionals can take immediate actions to tackle arising issues. Thanks to supply chain visibility, logistics and production activities can be optimized and Just in Time deliveries managed efficiently as supply chain visibility helps supply chain and logistics professionals to know the location and condition of the products in transit in real time.
Thanks to supply chain visibility, logistics and production activities can be optimized and Just in Time deliveries managed efficiently
- Continuous data flow on the condition of cargo to support quality control and prevent recalls
For the logistics and supply chain units, recalls represent a complex set of procedures that impact the entire logistics network. While they affect production schedules at manufacturing plants and suppliers they also have negative effects on transport and inventory costs, as well as available space and service capacity at dealers. Automotive manufacturers have suffered a sheer amount of recalls in the recent years. The National Highway Traffic Safety Administration has estimated that a staggering 51 million vehicles were recalled in 2015 alone in the US. The recent and anticipated recalls are putting new pressure on automotive suppliers towards stricter quality control throughout the supply chain.
Having IoT enabled end-to-end supply chain visibility in place, can help automotive manufacturers to reduce the number of recalls by supporting quality control processes. Thanks to network-connected smart sensors, manufacturers and suppliers can monitor the environment of products-in-transit; receiving objective information on indicators such as the temperature or humidity inside a shipping container or truck at any given moment. As an illustration, after a shipment of sensitive engine parts has experienced significant shocks or humidity fluctuations, supply chain and quality management professionals can uncover this in real-time. This will enable them to identify deliveries where special quality checks might be required, coordinate inspection and eliminate potentially damaged parts before they become incorporated into the final product.
Continuous data on cargo integrity enables organizations to prevent, rather than react to recalls.
- Data-driven inventory optimization techniques to reduce safety stock and working capital
In any retail business, inventory management is a delicate balancing act. Hold too little and frustrated customers will be forced to shop elsewhere; but piling stock on your shelves puts a strain on working capital and if what you bought isn’t what customers want, you have little choice but to sell your inventory off at discounted prices. In the car business, those challenges are amplified by multiple factors. The products are high in value, bulky and expensive to store or move around. Additionally, complex product portfolios with multiple options make it especially difficult to match supply with real customer demand. With proper inventory management, businesses are well-equipped to handle any changing and challenging customer demands. An organization should keep inventories well-stocked, but not overstocked. Delayed products in transit lead to increased lead time, forcing companies to carry more inventory. Overstocking inventories not only increase working capital but also occupy additional warehousing capacity, leading to additional expenses for the automotive industry in long run.
With real-time visibility over the location and condition of goods in transit, manufacturers can follow lean best practices to reduce inventory, further reducing operational costs. When managers have confidence that delays will be identified with enough time to make alternate arrangements, it is no longer necessary to rely on excess safety stock to avoid outages. Thus, supply chain visibility supports lean methodologies helping companies reduce waste and cut costs across the board. It helps to optimize inventory levels, cash-to-cash cycle time and ensure regulatory compliance when transporting hazardous or temperature sensitive goods.
- Automated processes to decrease inefficiencies and administration efforts
The automotive supply chain consists of many stakeholders involved in getting a product into the hands of a consumer including raw material gatherers, manufacturers, transportation companies and many more. Traditional methods of communicating and collaborating among stakeholders across the supply and logistics chain are not efficient. They can lead to administrative mistakes, missed deadlines and damaged deliveries. To demonstrate, just in the UK alone, businesses waste about 3 hours per shipment to request and funnel data from the partners. In sum, more than 100 million hours at the annual cost of £1.5 billion are wasted. IoT enabled supply chain visibility platforms visually display intermodal shipment information, offering a holistic view on all cargo in transit as well as related logistics processes. The platform can be easily accessed by all stakeholders simultaneously, enabling seamless information flow as well as the automation of various logistics processes. Thanks to IoT enabled supply chain visibility, administrative efforts, as well as communication hurdles, can be eliminated from the logistics chain.
- Theft prevention to protect your high valued cargo giving you enhanced security
Thefts from the cargo in transit is one of the serious problems faced by any industry. Parts of automobile industry being very expensive and high value, it is a more challenging problem costing shippers billions annually as reported by FBI. In the United States alone, an estimated $30 billion worth cargo theft is recorded annually with an average of 63 cargo thefts per month. Often the thieves target a high valued as well as high-risk goods that are often in great demand in the black market which helps them earn more money. As demand and prices for certain goods rise, cargo thieves update their lists of commodities to target and fence. Automobile parts being very expensive are thus more vulnerable to thefts along with other high-value goods.
To overcome the losses suffered from cargo thefts, businesses are now pressured to protect their vulnerable high-value products all along the supply chain, even when the products are sitting “securely” inside a locked cargo in transit. Unfortunately, many businesses take these risks for granted, rather than taking advantage of the solutions that can save them billions from the cargo thefts. Thanks to the transparency provided by end-to-end supply chain visibility solutions, companies are able to track and trace where the cargo is at any particular time. Additionally, one can get notification alarms when the door of cargo is opened by anyone thus letting you know of any intrusions happened to the cargo in transit. Thanks to the constant flow of data and insights provided by real-time cargo monitoring, companies are able to uncover the unknown, by revealing supply chain cargo thefts. In-transit visibility creates vast opportunities for supply chain optimization. It reveals insights that enable logistics and supply chain professionals to optimize shipping routes by defining safe and optimal routes, to improve the security of cargo and to reduce business risk.
To overcome the losses suffered from cargo thefts, businesses are now pressurized to protect their vulnerable high-value products all along the supply chain, even when the products are sitting “securely” inside a locked cargo in transit.
The question today is are you doing enough to get rid of rising inefficiencies within the automotive supply chain? Are you able to do enough to have the required level of real-time inventory management? How is the prevention of cargo theft a part of your overall risk prevention strategy? Are you working strategically with your supply chain partners in this area, or will you be caught by surprise if cargo theft happens to you? Supply chain visibility is the answer to these questions.
Thanks to the IoT enabled end-to-end supply chain visibility, automotive manufacturers, as well as their suppliers, can be benefited in multiple ways. It helps supply chain and logistics professionals to get real-time information of the cargo in transit thus avoiding any inefficiencies and production halts with Just in Time deliveries maintained well. Moreover, the quality of the products in transit remains intact with real-time conditions monitoring helping you prevent recalls and safe transit of hazardous or temperature sensitive goods. Thanks to the real-time visibility over the location and condition of goods in transit, manufacturers can follow lean best practices to reduce inventory, further reducing operational costs. Moreover, IoT enabled supply chain visibility platforms enables easy access to data by all stakeholders simultaneously leading to automation of logistics processes supporting seamless communication. The transparency provided by supply chain visibility solutions also enables you to get rid of cargo thefts by continuously knowing the real-time location updates along with any intrusion happening to your cargo in transit being empowered to take action.
Thus, an IOT enabled end-to-end supply chain visibility solution offers you an opportunity to unleash several benefits helping your business optimize supply chain well.
How can Arviem help you to reap the benefits of IoT enabled supply chain visibility in your automotive supply chain?
Arviem’s supply chain visibility solutions support their users in the efficient management of strategic, operative and financial supply chains via supporting real-time data-driven decision making. Arviem offers a wide array of services that are transforming supply chains by combining the latest sensor technology, big data, and clever data analytics methodology. Arviem’s pay-as-you-use cargo tracking and monitoring services are enabling our customers to efficiently manage and optimize their operative and financial supply chains without the need for investing in assets or technology.
Learn more about how your pain points are addressed by our innovative solution here.