How to Optimise Your Automotive Supply Chain Processes

The automotive industry’s continued utilisation of just-in-time (JIT) manufacturing processes has made smooth and reliable supply chains necessary. The coming together of various trading partners from across the globe, each with their own set of preferences, priorities, and techniques, also makes optimisation essential to the efficiency of automotive supply chains. 

Unfortunately, global supply chain complexities and the disruption caused by both Brexit and COVID-19 have contributed to a growing number of automotive supply chain challenges. Furthermore, increasing demand for hybrid and electric vehicles (EV) has complicated matters further by necessitating the onboarding of new supply chain partners.

Even industry leaders are experiencing delays, meaning that processes which ensure timely delivery in line with consumer demands are crucial. As a result, a sharper focus on the optimisation of an auto supply chain strategy is essential in order to remain agile and competitive.

In this article, we’re going to consider five ways the industry can ensure supply chains are being operated at maximum efficiency. Let’s get started.

The importance of an optimised supply chain

When we look at the challenges COVID-19 presented to a whole host of industries, the importance of optimisation speaks for itself. Global supply chains simply can’t function without smooth operations that allow supply chain managers to foresee and respond to unexpected events. 

Research has also shown 79% of companies with high-performing supply chains achieve revenue growth greater than the average within their industry, demonstrating the importance of supply chain optimisation to a successful enterprise.

For the automotive industry, achieving the levels of optimisation that might have helped mitigate the estimated $60 billion global chip shortage still causing production line issues is imperative. Lean logistics, market insights, and increased visibility are among the benefits of optimisation that stand to provide automotive manufacturers, OEMs, and suppliers with a far better opportunity to access the estimated 9% of market growth experts have recently predicted.

Optimising your supply chain

Significant shake ups within the automotive industry may make it seem like optimisation is further out of reach than ever. However, these ongoing challenges highlight the importance of positive change, and provide an incentive to place more focus on optimisation. 

Fortunately, there are a number of ways automotive supply chain managers can enhance the flow of parts through optimised processes. Let’s take a look at some of the most effective and straightforward to implement for rapid results. 

1. Use electronic data interchange

One of the most effective methods the automotive industry can deploy to combat the issues that have plagued supply chain operations is the implementation of electronic data interchange (EDI).

EDI is the computer-to-computer exchange of business documents that enables the free flow of information between different companies in a single supply chain. The multiple advantages of EDI implementation within automotive supply chains include:

• Higher levels of efficiency
• Increased supply chain visibility
• Simplified processes
• Greater flexibility

The improved planning and simplified communications that are made possible with EDI are particularly useful within the context of JIT inventories utilised within the automotive industry.

Unfortunately, issues with legacy EDI, including complex onboarding processes and an inability to accommodate the full range of EDI standards and protocols, have hindered its potential for optimisation across the supply chain.

That’s not to say that EDI isn’t worth pursuing if you’re looking to optimise your supply chain processes to improve business outcomes. Rather that modern challenges require modern solutions. 

Here at Data Interchange, we’ve responded to the deficiencies in legacy EDI by developing a new solution that we refer to as EDI-as-a-Service. By accommodating a range of standards and protocols, our 21st-century EDI overhaul enables agile onboarding processes for partners regardless of their prior EDI experience. This has allowed suppliers to begin receiving, processing, and creating EDI documents much quicker than was previously possible with legacy solutions.

In addition to this, the deployment of managed services allows partners to develop a customised hybrid EDI solution to meet the specific demands of their supply chain. Moreover, our team delivers EDI-as-a-Service by helping to ensure that the system runs smoothly at all times, whilst also liaising with customers and suppliers to ensure EDI messages are sent in the correct format.

2. Deploy analytics tools

Proactive and predictive analytics help automakers to better manage the efficient and precise JIT inventories that we’ve touched on above. Furthermore, harmonised analytics databases are key to managing internal and external operations. This includes not only inventory optimisations, but also flexibility of service, on-demand deliveries, and informed investments into new models, like EVs. 

Unfortunately, access to large reams of data has the potential to overwhelm before it informs supply chain process optimisation. As a result, systems that simplify the management and oversight of crucial analytics are also essential.

3. Implement artificial intelligence

The effective utilisation of artificial intelligence (AI) has the potential to allow the automotive industry to begin the automation of both warehouse and inventory management. This frees up both time and resources, which can then be directed elsewhere to drive further efficiencies across the organisation. 

Further to this, systems that also incorporate predictive analytics and machine learning (ML) have the capacity to make significant improvements to both planning and decision-making processes moving forward.

4. Foster productive supplier relationships

Mutually beneficial and collaborative relationships with supply chain partners are essential in order to improve automotive supply chain processes, and can be achieved with supplier relationship management (SRM). Deploying SRM helps determine the performance and contribution of each trading partner with the following steps:

1. Categorising partners in order of importance to overall success.
2. Using data insights to develop supplier strategies to help build successful long-term relationships through increased trust and simple communication.
3. Deploying SRM strategies while monitoring to ensure immediate recognition of deficiencies.

Given the centralised communications it allows within supply chains, EDI-as-a-Service helps ensure effective SRM. Furthermore, EDI-as-a-Service can take SRM to the next level by:

• Increasing supply chain visibility, making it easier to understand supplier contributions.
• Allowing effective two-way communication between supply chain partners.
• Merging communication, visibility and automation for increased control and reduced costs.

These benefits come together to ensure increased collaboration, resulting in stronger, more effective strategic partnerships across the supply chain.

5. Focus on agile supply chains

Agile supply chains capable of responding to disruptive events have the capacity to mitigate and overcome the lost production that has plagued the automotive industry since the onset of the pandemic. Responsive supply processes should now be a priority in the face of new challenges, such as:

• The emergence of different suppliers in light of EV evolutions.
• Requirements for alternative routes as supply shortages and Brexit delays put an end to existing partnerships.
• The pursuit of new lines of business, such as online trade, EVs, and technological developments.

By delivering rapid onboarding processes and real-time communication between supply chain partners, EDI-as-a-Service offers an adaptable and agile alternative to previously inflexible processes. 

Furthermore, the managed services element of EDI-as-a-Service opens the door to industry-leading expertise. This includes custom EDI mapping that allows multiple EDI standards to be converted to in-house formats that integrate with existing systems. These custom EDI maps can help traditional automotive companies deal with new suppliers, like those who deliver electric vehicle components, for example, with limited industry experience. 

Suggested reading: For more on the importance of an agile supply chain, check out our free eBook — Agile Supply Chain

A modern solution for modern supply chains

As we have seen above, there are various ways the automotive industry can look to optimise supply chain processes to drive improved performance. As well as offering its own unique set of benefits within the supply chain, EDI implementation complements a number of the other methods businesses can deploy as they look to enhance their supply chain outcomes.

Even with the vast potential EDI has in the context of automotive supply chain process optimisation, carefully choosing the right EDI provider and solution is essential to success. Whilst legacy EDI provides clear benefits to businesses, global automotive supply chains require an up to date solution. That’s where EDI-as-a-Service can help.
Our modern approach to EDI makes complete supply chain visibility a reality, facilitates more agile supplier relationships, and provides a cost-effective way to observe and oversee supply chain operations. The final result is more opportunities for efficiency, reinvestment and optimisation. See for yourself how your business could access these benefits and more by talking to an expert today.