The automotive supply chain, which manufactures automobiles, trucks and other vehicles, is one of the world's most complex industries. It is also getting more global, second only to the electronics industry in terms of global suppliers, manufacturers and other third parties. adds a layer of complexity to the automotive supply chain that necessitates practical answers from automakers and brands. It must be noted that globalisation isn't the only idea causing problems for auto suppliers and manufacturers. The vehicle supply chain network for raw materials, parts and finished autos is impacted by changes in production methods, consumer demands and new disruptive developments. Internal and external forces drives automotive supply chain managers to save costs, improve manufacturing and distribution and make sure that parts and products reach the right people at the right time. Let's look at a few of these challenges.

Routing of parts and poor visibility results in delays to automobile manufacturing

Around 30,000 separate parts make up the average automobile. Each of the components is either made in-house or purchased from a third-party supplier. The manufacturing and delivery of vital components can be slowed by a single piece of the supply chain, resulting in the production line shutting down. Any disruption in the smooth creation and distribution of vehicles means inventory shortages and revenue loss, as automakers and brands migrate toward just-in-time manufacturing. To streamline parts, manufacturing and distribution; automotive supply chain managers must be able to collaborate effectively with thousands of manufacturers and suppliers. Managers have a few alternatives when it comes to optimising automotive parts’ visibility, inventory management and supply chain routing. They can:

• Create a universal automotive order and supply chain platform: This improves visibility for a central view of parts and enables early detection of delays or other problems. • Use IoT and related technology: These gadgets can show where vehicle parts and items are located as well as when they are expected to arrive. • Make the flow of parts efficient: Everyone in the automotive supply chain can be ready to accept and process parts rapidly as a result of making parts between vehicle suppliers, manufacturers and other third parties more efficient. • Understanding future demand: By using predictive and prescriptive analytics and AI modelling, you are able to understand the expected future demand for automotive parts and automobiles based on customer demands, external risks and other factors.

Staff and supply shortages

According to the latest numbers provided this week by the Society of Motor Manufacturers and Traders (SMMT), the United Kingdom's auto industry group, UK vehicle makers produced 69,097 units in June 2021. While this is an improvement, it is still the lowest June total since 1953, as the global chip shortage brought on by the Covid-19 pandemic and other causes continued to wreak havoc on output. The SMMT said that in the first six months of the year, roughly 499,000 cars were produced, a 38 percent decrease from the five-year average. According to the SMMT, the gulf represents an £8.5 billion loss.

With supply instability anticipated to last until 2022, the current position for UK manufacturers remains tough. Despite this, major long-term investment in the UK automotive industry has recently been announced, which is greatly needed after four years of Brexit uncertainty and some recent manufacturing closures. The SMMT applauded manufacturers' new investments in the first half of the year, which included a new battery factory for Nissan's Sunderland plant and confirmation that the Ellesmere Port plant will have a new future under Vauxhall's parent company.

SMMT chief executive, Mike Hawes, said: "While the UK automotive industry continues to suffer the effects of the global pandemic, with first half year production down significantly and a tough few months looming, the sector has the capability to recover. "The latest investments into new models and battery production show a bright future is within reach, yet the industry still faces headwinds most notably from global semiconductor shortages and staff absenteeism as a result of staff being 'pinged'. "Businesses have ensured their facilities are Covid secure but urgent action is needed, such as bringing forward the 16 August target date for exempting fully vaccinated adults from self-isolation and introducing a 'test to release' scheme to support those employees not yet fully vaccinated."

Transition to zero emission vehicles

Changing consumer needs, such as the shift to more electric vehicles and improved fuel efficiency are causing purchase patterns to shift. The industry will need to hasten the transition to zero emission vehicles as the government has been warned that phasing out new petrol and diesel automobiles by 2030 will be a "major task." Battery-electric, plug-in hybrid and self-charging hybrid electric vehicle production in the United Kingdom has been consistent, accounting for 22.6 percent of total vehicle production. The SMMT on the other hand, claims that the sector is struggling to speed up the transition from fossil fuel to zero-emission vehicles. This will necessitate major investment in vehicle manufacture, battery production and supply chain reform, as well as a clear commitment to improving the United Kingdom's automotive competitiveness.

A possible end to car ownership

Price increases for new and used cars have come from supply chain challenges and chip shortages. Meanwhile, the introduction of hybrid working has resulted in decreasing demand as daily trips have become shorter. All evidence points to a shift away from car ownership and toward alternate modes of transportation. While vehicles will continue to be used in locations where infrastructure is lacking, alternative modes of transportation are on the rise again, primarily in cities, following a first wave of car-sharing and car-pooling schemes at the turn of the century. According to R/global GA's research on the future of mobility, there are predicted to be 38 million members of car-sharing schemes around the world by 2025 and 1.4 billion people will have used ride-hailing and taxi services.

Access to a single means of transportation is no longer considered mobility. It is defined by providing people with the option and freedom to employ a variety of means of transportation. Mobility brands and original equipment manufacturers (OEMs) have a significant opportunity to shift gears to satisfy consumers' changing mobility demands. According to R/GA research, almost a third (37%) of UK customers feel they will become so reliant on mobility services in the next decade that they will contemplate selling or leasing their own car.

In conclusion, Insight and Strategy Director at Cox Automotive Philip Nothard says that “the automotive industry within the UK and globally is having to change and rethink distribution strategies. This can lead to a delay in the movement of goods into the UK. In addition, there are pending issues facing manufacturers because there will be new vehicle tariffs applied to new cars coming into the country when production does catch up.

“There’s also the planning or adaptation of agency model strategies by vehicle manufacturers in the sales process of new cars. Consumers are increasingly buying online which also extends to cars for those who decide not to follow the traditional sales process in dealerships. The pandemic has given manufacturers and dealers time to reflect on how they sell cars and the increasing ways that it can take place.”

Nothard expects that new car supply constraints will last through 2022, fueling the present used car price boom. However, he believes that once winter hits, the furlough ends and the economy reopens, the situation will stabilise, causing customers to spend their money elsewhere and allowing the government to begin recouping loans.

Many of the challenges facing the automotive industry have been highlighted above, however there are many more areas one can improve on in the vehicle supply and manufacturing industry. Such as:

  • Accurate inventory control of raw materials, parts and finished vehicles.
  • Aligning production cycles with consumer demand trends.
  • Ensuring that all makes, models and trims of vehicles are in stock.
  • Predicting future requirements based on shifting consumer preferences.

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