Overcoming Supply Chain Visibility Issues in the Automotive Industry
Transparency has long been a prerequisite of success across automotive supply chains, which are seconded only by the electronic sector in terms of global supply chain complexities.1
Unfortunately, the vast majority of the industry has so far failed to achieve the levels of transparency needed within efficient modern supply chains. As a result, the COVID-19 pandemic, and complex bureaucratic processes facilitated by Brexit, have caused a considerable amount of turmoil, and made visibility over supply chain processes as difficult as ever.
Parts shortages, such as those that resulted in production cutbacks even amongst industry frontrunners like Ford, Nissan and Toyota, further highlight the importance of supply chain visibility to ensure the flexible processes that can help facilitate recovery during difficult and uncertain times.2
This article highlights why supply chain visibility has caused the automotive industry so much disruption, and considers how supply chains can overcome this moving forward. Let’s get started.
The importance of supply chain visibility
The ability to track individual components and products as they make their journey from supplier to manufacturer and, finally, to the consumer, is essential across automotive supply chains.
On average, a car is made up of a staggering 30,000 parts.3 A typical combustion engine has around 200 parts, while an electric vehicle engine takes that number down to around 20.4 So, with parts being sourced from around the globe, it’s vital that all the necessary components come together at the right time to ensure a smooth production process.
The timely delivery of vehicles relies on the ability to track parts in real-time across lean just-in-time (JIT) inventories. This system requires close supplier collaboration to ensure raw materials arrive as production is about to begin, no sooner or later.
As well as allowing effective JIT inventory management, achieving transparency across supply chains enables a range of benefits that can help drive improved business outcomes in the automotive industry, such as:
- Data-driven results: Only through complete visibility can suppliers across all automotive tiers access advanced analytics that simplify processes and contribute towards competitive delivery time frames.
- Increased speed: Data that provides up-to-date information around inventories, capabilities, and delivery times means both suppliers and manufacturers can move faster as they know what’s coming and when.
- Mitigate disruptions: Better oversight of potential supply chain issues allows a far more agile approach, meaning appropriate changes can be made and a new auto supply chain strategy implemented to prevent disruption.
- Ensuring ethical/sustainable product sourcing: Complete visibility over partner processes and ethics ensures beneficial relationships that prevent reputational damage.
- Meeting customer demand: An understanding of supplier processes, capabilities, and weaknesses is essential to continue meeting the demands of customers who, in some cases, discovered the immediate gratification of online vehicle sales during the pandemic.
Visibility issues in the automotive industry
Parts shortages and a resulting 40% production cut for manufacturers like Toyota can be linked back to visibility issues that prevented the flexible, responsive approach that both Brexit and the pandemic required.5
The ongoing failure to address this makes further supply chain disruptions possible, particularly in light of still-uncertain finalisations in Brexit regulations and increasingly strict environmental expectations.6
Disruptions as a direct result of insufficient visibility over supply chain processes have already resulted in setbacks that include:
- Interruptions in the supply chain: An inability to foresee and mitigate risks prevents the efficient and agile disaster recovery required to ensure processes continue running smoothly. This played a major part in the loss of 1.7 million automotive units throughout the pandemic.7
- Poor data: A lack of access to and understanding of relevant data can both complicate all-important supplier relationships and create operational silos that, in light of increasingly location-specific automotive challenges, could soon create escalating issues with both legality and efficiency.
- Impact on JIT manufacturing: Lacking visibility also has a significant impact on the efficiency of the JIT lean manufacturing model pioneered by Toyota that is used across the industry. Unmanageable and unforeseen delays just days or moments before vehicles are set to launch have proven especially problematic throughout the pandemic.
Increase visibility using EDI
As we have seen, a lack of visibility can cause problems in the automotive industry. Fortunately for suppliers, manufacturers and consumers, solutions are available. That’s where electronic data interchange (EDI) comes in.
EDI has enabled the digital transfer of crucial business documents across supply chains in the industry for over forty years.
By replacing paper-based documents, such as invoices and purchase orders, with a standard electronic format and automated transactions, EDI has bought a whole range of benefits into supply chain processes, including:
- Increased efficiency: Prompter processing of immediately accessible, accurate business documents makes it easier to see full supply interactions in real-time, thus reducing potential delays due to stock shortages.
- Reduced manual errors: Increased transparency across digitised supply inputs that tend to be far more accurate than manual processes ensure faster turnovers, and an increased understanding that keeps JIT inventories lean and efficient.
- Greater speed and accuracy: The ability to easily and quickly access information across supplier tiers reduces key industry cycle times by as much as 97%, which itself can result in 30% faster customer-facing deliveries.8
- Improved supplier relationships: The seamless exchange of documents and data made possible by EDI also simplifies mutually beneficial relationships, helping them stand the test of ongoing industry changes and trends.
Despite this, whilst undeniably helping to improve visibility across the industry, legacy EDI solutions have failed to bring the transparency and resilience required in modern, global automotive supply chains.
Legacy solutions need to accommodate wide-ranging standards and protocols, resulting in increased supply chain complexities that leave the enhanced levels of oversight required across supply chains out of reach. Furthermore, legacy EDI can also involve ongoing manual processes that cost time and money, while complex onboarding can be particularly difficult and time-consuming where partners have little to no prior EDI experience.
Take the next step with EDI-as-a-Service
Despite the benefits legacy EDI has provided, there is undoubtedly room for improvement. Modern challenges require a modern approach. The application of both cloud-based tools and managed services to EDI solutions has already increased accessibility and simplicity. At Data Interchange, this is a trend that we call “EDI-as-a-Service.”
By utilising different types of EDI, such as Web EDI and EDI via VAN, EDI-as-a-Service helps ensure quality supplier relationships by eliminating errors and reducing manual effort. The flexibility of this modern approach to EDI is also on hand to provide:
- A Single-source of truth: JIT inventories especially stand to benefit from single-source communications. This makes it possible to see entire supply processes from one centralised system for improved planning and communications.
- Simple onboarding: Accommodation of wide-ranging protocols and standards drastically simplifies onboarding times, making it far easier to keep single-source communications afloat while hastening the process of onboarding suppliers.
- Analytics: EDI-as-a-Service allows you to gather, store and transfer supply chain data into additional analytics systems to facilitate improved oversight of supply chain processes.
- Managed support: Managed support from experts experienced in both EDI and its automotive integrations ensure a flexible approach to efficient EDI.
The simplified communications and onboarding EDI-as-a-Service provides is of particular value from an automotive visibility standpoint. By making onboarding simple for suppliers with limited or no EDI experience, EDI-as-a-Service helps drive up EDI adoption throughout the supply chain — enabling increased oversight at a time when it’s never been more valuable.
Modern supply chains require modern solutions
The challenges that modern supply chains face require solutions built with resilience in mind. Our first-hand experience of automotive supply chain challenges here at Data Interchange has allowed us to develop an approach to EDI that caters to the industry’s specific needs.
Increasing visibility and overcoming the challenges that make supply chain oversight difficult will be central to success in the automotive industry as we look to 2022 and beyond. See for yourself how EDI-as-a-Service can help deliver these benefits and more by booking a demo with us today.
Further reading: Learn how you can gain a competitive advantage using EDI by downloading our free eBook — The Supply Chain Centred Business
1Top 4 Automotive Supply Chain Challenges and Solutions
2From chips to seating foam to plastics, parts shortages continue to cripple auto industry
3102 Interesting Facts About Cars That You Should Know
4How Many Parts Are in a Car?
5Toyota will cut global output by 40% on chip shortage
6CO₂ emission performance standards for cars and vans
7Coronavirus damages China’s auto industry as outbreak worsens
8Benefits of EDI