Supply chain management encompasses multiple departments, business units, external partnerships and internal supply chain teams. In order to optimize a company’s supply chain, the right people and right processes need to be in place.
This is no small feat for any type of manufacturing company. Mitigating the risks involved in participating in a supply chain requires significant planning, sourcing strategies and logistics. Each of those efforts comes with its own challenges and considerations.
There are many ways that automotive OEM companies and manufacturers can optimize their supply chain management processes to increase operational efficiency, reduce costs, increase revenue and provide an excellent customer experience.
Here are five best practices to establish today in order to refine your supply chain management in the automotive industry.
1. Establish a Supply Chain Optimization Team
The newest technologies and an increasingly globalized market are driving forces in a changing manufacturing industry. However, skilled decision makers can still develop strategies and determine the success of their companies in this changing environment.
Currently, companies across the globe are facing a skilled labor shortage. As of early 2022, there are around 11 million positions open in the manufacturing industry. According to a report from Deloitte Insights, manufacturers are finding it 36 percent more difficult to find talent today than in 2018.
Some companies are taking the initiative to create relationships with universities, establish clear career trajectories and prioritize recruitment efforts.
For supply chain management teams, establishing a cross-business approach is an integral part of developing effective processes. In fact, creating a position that coordinates communication and activities across supply chain departments allows teams to see opportunities for collaboration, strengths and weaknesses and to establish standardized processes.
2. Diversify Supplier Relationships To Avoid Delays
Delays are among the most common disruptions in the supply chain. These disruptions can be caused by:
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A shortage of raw materials
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Import and export issues
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Natural disasters and weather-related issues
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Political and regulatory issues
Although these delays are difficult to predict, communication, strong alliances and a diversified supply chain are key tools for those working to mitigate the risks posed by delays. They can allow:
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Both parties to communicate when an issue arises
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Companies to purchase raw materials in bulk in the case of new tariffs
In another effort to anticipate delays, companies are using software solutions with predictive analytics to show inventory, see how fast it’s moving and determine where it might be in the future.
3. Improve Forecasting
Inventory management succeeds in the narrow space between having too much product and not enough. Either extremes can be costly for companies:
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Too much product might mean sales are down or demand was miscalculated.
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Too little product might mean that sales are up and sales predictions were off.
Both scenarios illustrate inaccurate demand forecasting, which can have significant negative effects on a company’s bottom line. With accurate demand forecasting, companies can ensure they’ll have the correct quantities for present and future needs by taking into account historical sales, forecasts and seasonality.
4. Optimize Inventory Management
Inventory management and forecasting are closely related disciplines. A crucial part of an efficient supply chain, inventory management assists a company in predicting demand, calculating inventory levels and visibility into inventory.
For successful inventory management, companies need to align the practice with supply chain objectives by determining where to adjust operations, fixing inventory-demand mismatches, lowering cost of ownership, accelerating order-to-pay cycle or shortening delivery times.
As they do with forecasting, companies need to use software that tracks inventory in real time and automatically reorders items based on demand criteria. With more data comes better planning and decision making.
5. Practice Risk Mitigation and Compliance
Risks are inherent in supply chains. As mentioned in a previous section, these risks can be man-made, political, environmental or caused by a lack of strong procurement strategies:
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Unknown risks, such as those caused by natural disasters or geopolitical events, are difficult to predict and control.
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Known risks, such as distribution limitations, supplier issues and demand fluctuations, can be measured and managed, making it easier to quantify and anticipate impact to the supply chain.
In any case, diversified solutions are the best way to mitigate the risks posed by both. Alternative suppliers, partners and facilities are necessary components of a risk mitigation strategy.
Some of these solutions do not apply to compliance risks. In order to manage supply chain compliance risks, risk management teams need access to the latest information regarding changes to laws and regulations and documentation processes.
Partner With One of the Globe’s Top Automotive OEM Companies
Among car manufacturers and OEM suppliers, VPIC Group has provided more than just OEM automotive parts to our customers — we’ve also served as consultants who can provide risk mitigation, diversified partnerships and the technology to optimize inventory management.
For a more comprehensive look into best practices for supply chain management, we recommend downloading our supply chain optimization guide.
