Nearly all global, regional, and local automotive supply chains in 2020 were impacted by Covid-19. Whether it was through imposed tariffs, Brexit, or electric car success, the automotive industry felt its impacts acutely. However, at the same time, Tesla sales increased 36% from 2019 whereas VW total sales saw a 16% decline. If automotive supply chain actors have learned one thing over the course of the past year, it is that they must rapidly respond and plan for disruptions to their supply chains. Therefore searching for new approaches and new tools in order to deal with disruption in the automotive industry is absolutely necessary.
Disruptions in the automotive industry
The global automotive industry has had to face unplanned, partial shutdowns of car final assembly and supplier plants. These sudden stops and starts, which put significant stress on supply chains, require innovative approaches and new tools to properly manage them.
Automotive suppliers regularly receive Electronic Data Interchange (EDI) demand signals from car manufacturers. These EDIs keep auto makers informed as to the required quantities of components that need to be manufactured in the coming five days, as well as giving them visibility on long term forecasting.
In 2020, as car manufacturers had to change their forecasts two or three times a week with huge variability. Automotive suppliers were in crisis management mode. They had to deal with inventory shortages, checking transportation, raw materials, and electronic component supply and stability; all whilst ensuring the health and availability of their workforce because of the pandemic.
As a matter of course, once suppliers receive an EDI demand signal from a car manufacturer; they compare the quantity requested to the quantity from the previous demand. Then, if manufacturers are confronted with significant variations, they engage in meetings with customers. Those variations usually occur due to ramping up vehicle production or an increased demand for electric vehicles. Such types of periodic reviews provide key information to process planning simulations. These allow planners to view and account for impacts on production and purchasing activities.
An adaptive tool for a shifting demand
In order to deal with disruption in the automotive industry; automotive demand planners should now account for special events within demand planning simulations. Government incentives such as buying electric cars, or carmakers shutting down plants are preventative measures that have been shown to work in the past. As a result, productivity would increase by optimizing machine utilization and eliminate overtime cost.
These simulations calculate component quantities required to fulfill the finished Manufacturing Planning Processproduct demands. In addition, planners can ask suppliers to give feedback with regards to delivery feasibility. As a result of this calculation, planners are able to decide with suppliers the demand level for key components if the demand is greater than the supplier’s manufacturing capacity.
Enterprise Resource Planning (ERP) applications manage EDI demand signals, as well as production and purchasing operations. It is time for businesses to think differently; and explore new options after the erratic business conditions of 2020 to adopt a next generation tool to get an instant supply plan recalculation, allowing easy scenario planning and collaboration.