The Future of the Automotive Supply Chain

The automotive industry sat at a crossroads even before the health crisis of 2020. Evolving technology, globalisation, urbanisation and environmental concerns have converged to change the role of the car within our daily lives. What’s more, the development of both autonomous vehicles and electric vehicles change supply chain best practices, inject new players into the industry, and require updates across the industry to keep pace.

Fundamentally, a lot of different puzzle pieces need to work together seamlessly in order to produce a finished vehicle. Although COVID may have actually reinvigorated interest in personal vehicle ownership, it also revealed the fragility of global supply chains. OEMs, retailers and component suppliers all need to reconsider best practices and develop more sustainable and robust supply chain relationships in order to accommodate the change afoot in the industry.

At Data Interchange, we’ve spent decades working within the automotive industry to help improve supplier relationships using EDI (Electronic Data Interchange). In fact, our co-founder Philip Friend helped develop the industry’s first EDI communications protocol, OFTP, back in the 1980s. A lot has changed since then. However, EDI developments remain at the forefront of supply chain management best practices.

Here, we are going to explore different futures for the automotive industry, and use our experience within the industry to provide strategic advice on how to best adapt to these changes. Fundamentally, we will argue that the adoption of modern EDI strategies, using a combination of self-service tools and managed services (a trend we call EDI-as-a-Service), is critical to the future of automotive supply chains. Let’s get started.

New technology and players

The rapidly accelerating electric vehicle (EV) market has a major impact on supply chains. In 2019, the global sales of EV units were more than two million. This is expected to grow further as some governments propose a ban on selling diesel, petrol and hybrid vehicles. For example, the UK government is expected to implement such a ban in 2035.

The result will be a boost in demand for electric motors, motor controllers, and batteries. There are also other complementing components, such as thermal systems, battery pack, and charge ports. This provides opportunities for new businesses within the industry, with China emerging as the most active EV market.

These new suppliers and OEMs need ways to integrate into the industry without adding the existing global supply chain complexities. New entrants, such as Lucid, Nikola, and Rivian, are already making major strides — but success demands more. You want to build stellar relationships with clients and suppliers to scoop a share of the growing EV market.

Just as importantly, OEMs need to look beyond their typical offerings — retaining a strong brand image, looking at new services to offer (during the buying process and for aftermarket sales), and creating seamless customer experiences. The automotive future is still largely unpredictable, and things like autonomous cars and ride-sharing platforms will only continue to have an impact. Supply chain visibility can help you plan around these future scenarios.

Strategies to help

EDI-as-a-service can help to future-proof your supply chain and ensure quality relationships with suppliers. Taking advantage of different types of EDI, for example, WebEDI and EDI via VAN ensures a seamless exchange of data between parties. It makes managing invoices and purchasing orders hassle-free, thus eliminating errors, improving cash flow, and reducing manual effort.

You can use cloud-based tools to accelerate the deployment of your EDI system, even when you have a complex supply chain. EDI-as-a-Service models also allow you to work with managed service providers to create customised solutions and deliver effective outcomes for both your in-house teams and supply chain partners.

Expanded service models and new customer relationships

Innovation and technological advancement are not the only drivers for the automotive industry. Today, the ever-shifting consumer behaviour and preferences have pushed car manufacturers to offer innovative solutions and frictionless experiences using new technologies. Dealerships are also rethinking their offerings with the increasing impact of Transportation as a Service (TaaS).

Social distancing accelerated an existing shift towards online sales. Most customers were already leveraging online platforms for pre-purchase research and comparison — about 80 per cent. The new reality that dealers need to accommodate in the desire not only to research products online, but close sales online as well.

The shift to online shopping creates challenges and opportunities. Traditionally, showrooms and dealerships have been the avenues for pre-purchase research. With customers moving online, more retailers and brands have been forced to develop a blended experience, offering the best of both in-dealership and online experiences.

Retailers and retail arms of OEMs are even focusing more on offering financial services and bundling services with car purchases — creating more seamless customer experiences. Acura, BMW, Audi, General Motors, Fiat-Chrysler, and Ford are some of the car manufacturers offering financial services. With many customers using these services, brands need an effective system to manage their expansive payment plans and programs.

Strategies to help

EDI plays a crucial role in the strategic supply chain, contributing significantly to different customer service components. It helps it to improve or address:

• Distribution flexibility
• Product availability
• Distribution information
• Order cycle time
• Distribution malfunction

EDI improves the traceability of commercial operations and transactions. Moving from paper-based documents improves the efficiency and processing speed of handling customer’s orders. It also enables optimal visibility of inventory, making it easy to update clients and customers about their shipments. However, to achieve that, businesses need to ensure high levels of EDI adoption and effective access to tools that simplify interfacing with EDI workflows. This is where modern EDI-as-a-Service trends come into play.

The outcome of a seamless supply chain operation is improved levels of communication and better delivery of service. As a result, you will be able to upgrade your customer experiences and satisfaction rates — as well as plan more effectively around changing customer expectations.

Closer yet more flexible relationships

Car manufacturing is a global process. With suppliers, OEMs and retails often spread across multiple continents, it’s critical to find flexible solutions to supply chain relationships — enabling quick communication and the ability to source the right parts at the right price. While the geographical element is a challenge, integration skills are just as important to overcome in order to deliver the flexible outcomes manufacturers need.

EDI has been exceedingly valuable in ensuring seamless globalisation in industries, including the automotive industry. Tools like WebEDI make it easy to have positive stellar relationships with suppliers in different countries through seamless communication and data exchange — regardless of their EDI experience or expertise.

Some organisations will adapt by creating stable, long-term strategic partnerships. Others will diversify and expand, relying on larger numbers of fleeting supply chain engagements. While others will embrace the components of both strategies. In all cases, better visibility, flexibility and communication are critical to success — and you need an EDI system that can match.

Strategies to help

Whatever your case, your number of trading partners and suppliers is likely to increase. This demands an effective system for the fast onboarding of new parties. It should be able to integrate stakeholders’ resources, capabilities, and activities for optimal harmonisation.

This is where modern updates to EDI become critical. EDI-as-a-Service creates a flexible platform able to integrate multiple types of EDI and accommodate a full spectrum of EDI standards and protocols. The outcome is a seamless ability to onboard new suppliers, regardless of their existing EDI system. Your supply chain management teams are able to work with different partners and suppliers at different levels to bolster close relationships. It provides a single source of truth while reducing errors and improving data quality for proper communication.

Planning for the future requires visibility

The automotive industry relies heavily on the supply chain to ensure timely production. Car manufacturers depend on suppliers in different countries to secure their inventories. For example, the U.S car industry is the most reliant on Chinese parts, spending more than $1.5 billion in 2018.

Most manufacturers find it cheap to buy car components from suppliers instead of making them. There are companies that produce body panels, starter mechanisms, tyres, seats, engine parts, brakes, steering wheels, electric vehicle components like batteries and more. This means that manufacturers work with dozens or even hundreds of suppliers to sustain their production lines.

Today, a lot of factors create difficulties for the automotive supply chain. This includes globalisation, disruptive technologies, consumer demands, and changes in manufacturing processes. Attaining optimal supply chain visibility is key to staying on top of such challenges, and this is possible with the use of EDI. EDI-as-a-Service takes that capability to the next level by introducing simplicity and end-to-end integration of all supply chain partners.

If you want a full assessment regarding how an EDI upgrade can improve your business, get in touch, we’d be happy to help, and can provide both managed services and self-service tools. For a full exploration of how EDI and supply chains strategies can deliver a competitive advantage in 2021 and beyond, check out our free ebook — The Supply Chain Centred Business.