Car manufacturers face various challenges in managing their supply chains. Since globalization has interwoven the world's economy, disturbances in one part of the supply chain could spread to the entire branch.
In this blog post, the software development team at Fidelity Solutions discusses the top six supply chain issues the automotive industry is battling today and gives examples of how companies use supply chain management software to address such challenges.
What Is the Automotive Supply Chain?
The automotive supply chain ranges from sourcing raw materials—bitumen, rubber, and electronics—to delivering the finished cars to dealerships. It involves manufacturing, assembling parts, logistics, and distribution. Numerous companies and suppliers must work together to produce or deliver various components to build cars.
What Is Supply Chain Management Software?
What does supply chain management software do? It’s a digital tool that helps companies track, plan, and manage the flow of goods, materials, and information throughout the supply chain.
Supply chain management software allows businesses to coordinate production, monitor suppliers, manage inventory, handle logistics, and predict potential issues like delays or shortages, all in one platform. As a result, companies can improve efficiency and respond quickly to disruptions.
6 Supply Chain Challenges in the Automotive Industry & Real-World Solutions
The automotive industry faces many supply chain challenges that can significantly impact production and efficiency. This section will explore six key obstacles and showcase real-world solutions companies implement to navigate these issues effectively.
1. Semiconductor Shortage
Challenge: The need for semiconductors is causing significant issues for the car industry's supply chain. Cars nowadays heavily rely on chips for various functions such as entertainment and safety features. This shortage has led to delays in production and lower vehicle output. The automotive industry is estimated to face a total loss of $500 billion due to the semiconductor shortage by the end of 2024.
Example: General Motors (GM) uses a supply chain management software suite to monitor and forecast semiconductor availability. Adjusting real-time production schedules helps GM minimize downtime and meet customer demand.
2. Supplier Risk Management
Challenge: In 2024, automotive companies are focusing on managing risks in their supplier networks, especially for high-risk materials such as semiconductors and EV battery components. According to KPMG's Global Automotive Executive Survey (2024), 60% of automotive executives consider managing supply chain risks their top priority for keeping production running smoothly.
Example: BMW uses cloud-based supply chain management software Infor Nexus to view its entire supplier network in real time. The platform helps BMW quickly find disruptions and shift production to other suppliers when needed.
3. Sustainability & Regulatory Compliance
Challenge: Sustainalytics reports that major car companies aim to decrease CO2 emissions from their supply chains by 20%. Europe's growing focus is on using more recycled and eco-friendly materials in vehicle manufacturing to promote sustainability. Automakers are reevaluating their supply chains due to increasing regulations for sustainable production and lower emissions.
Example: Volkswagen uses Siemens' MindSphere, an industrial IoT solution, to monitor the environmental impact of its supply chain operations. By tracking energy use, emissions, and waste production, Volkswagen ensures compliance with regulations and improves sustainability.
4. Labor Shortages
Challenge: Labor shortages affect automotive supply chains, particularly logistics and manufacturing. According to RSM US, the automotive industry needs 20% more skilled workers for production. Because of the shortage, companies are increasing wages by an average of 12% in 2024 to attract and keep workers.
Example: Nissan uses Blue Yonder’s Workforce Management solution to manage work schedules better and predict labor needs at its manufacturing plants. Nissan can schedule shifts more efficiently and forecast labor requirements, reducing the impact of labor shortages on production.
5. Cybersecurity Threats
Challenge: As car companies use more digital technology in their supply chains, they become more likely to be attacked by cybercriminals. Experts expect a record number of cyberattacks on car companies and their suppliers in 2024. Cyberattacks such as ransomware and data breaches disrupt production and access suppliers' private information. It's important to note that 45% of these attacks have targeted suppliers' weaknesses.
Example: Tesla uses IBM's Watson Supply Chain platform, which has cybersecurity features to monitor potential threats across its supply chain. Protecting sensitive supplier and production data from cyberattacks ensures the integrity of their operations.
6. Electric Vehicle (EV) Supply Chain Complexity
Challenge: The increasing demand for electric vehicles (EVs) has complicated the supply chain for essential materials like lithium, nickel, and cobalt. VinFast predicts a 15% shortage of crucial battery components by the end of 2024, which will delay the production of new EV models and raise production costs. Due to these supply challenges, the growth of the U.S. EV market in 2024 is slowing down despite increasing demand.
Example: Rivian, a growing electric vehicle (EV) manufacturer, uses Llamasoft’s supply chain design software powered by artificial intelligence (AI) to simulate and improve its supply chain for battery production. This software helps Rivian predict disruptions in material sourcing and test different supply chain setups to make them more efficient.
How Fidelity Solutions’ Custom Supply Chain Management Software Helps Automotive Companies
Fidelity Solutions can design supply chain management software for automotive companies with cutting-edge features, such as:
Real-time tracking
Risk management tools
Optimized inventory levels
Automated processes
Timely delivery
Global insights
Contact us today to schedule a free one-on-one consultation to learn how our custom software can help you overcome supply chain challenges!
댓글