There are over 254.7 million vehicles on the road in the Unites States1 and every one of those vehicles are made up of thousands parts. There are many moving parts that surround the production and distribution of automobiles which has made it one of the most intricate supply chains to exist today. Auto sales have been on the rise in 2015 with annual sales estimated to reach nearly $17 million2. With such a demand and so many moving parts, supply chain management is vital for auto manufacturers to drive their business.
Being Strategic with Suppliers
With thousands of parts and 1,500 suppliers, manufacturing a vehicle is extremely complex. There are over 30 vehicle derivatives and each of those deviates are built from thousands of parts and auto manufacturers rely on original equipment manufacturers (OEMs) for those parts. Before a vehicle can even be produced, the logistics for all the parts needs to be determined. Once those parts are distributed to manufacturers and the vehicles are built, there are then separate logistics in place for the distribution of the complete vehicles. All of these components can make for a costly supply chain as many use all modes of transportation in some way to present customers with a final product. Some manufacturers have investigated ways to improve their supply chain costs. For instance, Mercedes-Benz began to expand their production locations so that they can source products and reduce the amount of transportation needed for parts. They have also invested in distribution centers where they consolidate parts that are going to the same manufacturing plant to continue to cut down on the amount of transportation3.
Revving up for Change
The auto industry is always evolving. Variables like customer demand, regulations, fuel economy, and data are changing how and where vehicles are made and sold. So far, 2015 has been a profitable year for the auto industry. Consumers are more confident in their purchase decisions as the economy improves and there is more accessible information for consumer s to do their own research on the vehicles. Today’s automobiles are the safest and most tech savvy to date. As competition and demand drive vehicle design and production, manufacturers are also looking to expand to new markets geographically. Targeting new geographic markets can bring opportunities to enhance the supply chain to distribute their vehicles and also improve their current models for transporting and distributing parts.
Planning for Recall Management
Vehicle and part recalls are one of the biggest challenges that the auto industry faces. There was a record of 100 million automobiles recalled in 20144. Recall Management can be a huge challenge for OEM’s and manufacturers, and 42.3% of auto executives expect to see more industry recalls in 2015 and 20165. As technology advances and automobiles continue to change, manufacturers try to be proactive in recognizing possible malfunctions earlier, however recalls can still occur. Although recalls can be burdensome to all parties involved, having a reverse logistics plan in place can help make the process smoother. Collaboration between all parties can help improve future models and improve overall processes to prevent and address recalls.
From the tiniest screw to the largest tire, each piece of an automobile will need a transportation and distribution solution. Having a supply chain strategy for all processes can help auto manufacturers improve relationships with their OEMs and customers. As the industry continues to evolve, logistics will continue to be a vital aspect to success.