Supply chain challenges in the automotive industry

The automotive manufacturing industry has a lot of moving parts – and not just the ones on their products. The automotive supply chain is complex and constantly moving as the global economy fluctuates. Companies within this vertical have to make sure their value chains are functioning properly and that money is flowing in the right direction – just like any other industry. But, firms in this space have the added pressure of having to operate in the global marketplace while dealing with recalls and other important issues.

The automotive industry continues to show growth. During periods of such growth, certain challenges arise within the supply chains of automobile manufacturers. When the economy is up, these companies need to address the need for growing inventories while staying on top of any issues that may come up in manufacturing and distribution. 

Key supply chain challenges

Some of the most common supply chain challenges within the automobile industry have to do with keeping inventories well-stocked but not overstocked. IndustryWeek contributor Vincent Pavlak noted that because the growth in the automotive industry over the last few years has been optimistic, it's harder to keep up with increased volumes. This difficulty has led to some supply shortages, and the problem is compounded by capacity loss and the loss of employee knowledge that occurred when the industry experienced its downturn in 2008 and 2009.

Another important issue facing automotive manufacturers is the sheer amount of recalls that have been issued in recent years. The National Highway Traffic Safety Administration has estimated that a staggering 51 million vehicles were recalled in 2015 alone. All of these recalls present a key problem to manufacturers, besides the obvious loss of revenue from the actual vehicles themselves: They have to change their products to fix the issues brought to light by the recalls, and they have to re-engineer their operations – sometimes their entire supply chain – to reflect these changes.

Further challenges of this global marketplace lie in the volatility of demand. Different markets will have different tastes in cars, so automotive suppliers have to find ways to account for the demand for various brands and, complicating things further, for the differing tastes within one brand (for instance, the demand for a blue vehicle versus a red one).

Analytics tools can help automotive companies improve various aspects of their operations.Analytics tools can help automotive companies improve various aspects of their operations.


Analytics tools to help meet challenges

Patrick Burnson, executive editor at Supply Chain Management Review, wrote in late 2015 that in light of the record number of recalls, and the fact that industry executives expect to see even more in the coming months, many of these businesses need to reevaluate their recall management practices. Specifically, they should use advanced predictive analytics to help prevent or, after the fact, manage recalls. In addition, prescriptive and predictive analytics tools can help identify what demand will be in a certain location for a certain brand, thereby impacting how suppliers maintain their inventories throughout the global supply chain.

Investing in analytics tools, therefore, is a great way for managers to ensure that they are accounting for whatever growth may occur in their inventories and how to deal with engineering change orders. Oracle Cloud Inventory Management applications and Inspirage's ECO cost analysis tool are both key solutions for this industry.

Contact Inspirage today for more information.

Nadim Elkhoury

Nadim Elkhoury | Key Contributor

Nadim Elkhoury has been working on Oracle VCP products for over 15 years. He has worked on Oracle MRP, ASCP, ODP, RP, IO, and SPP products, among others. His experience implementing Oracle Value Chain Planning spans across various industries including manufacturing, pharmaceuticals, distribution, and medical.