Supply chain management in the automotive industry: benefits, risks, and practices

Auto Supply Chain

Supply Chain Management in the Auto Industry

The benefits of effective supply chain management are manifold. The ability to project sales, production, demand and inventory in correlation to one another is essential to ensuring that an automaker maintains critical demand schedules.

Benefits and Risks:

Remarkably, the benefits and risks of supply chain management in the automotive industry are closely intertwined today. On one end of the spectrum, auto makers are finding that there is a sudden surge in demand for both automobiles and associated parts. According to the text by Miziolek (2011), maintaining a rapid and responsive supply chain strategy has helped many automakers to stay on pace with this rising demand. However, there is a considerable risk that many face today. As Miziolek notes, the sudden rise in an industry that was struggling to stay afloat half a decade ago means that demand for shipping needs has suddenly outstripped supply.

By Miziolek's reporting, "boom times' of a sort are back for the automotive industry, with 93% of respondents saying they've experienced an increase in demand for their vehicles, parts and services in the past year. Yet despite such optimism, more than a third of the executives polled by Dykema (39%) believe that raw material costs will pose the greatest challenge to their company's supply chains in the coming year." (p. 1) There is a real risk in take on more order volume that a given auto company's contracted fleet can handle. And during a fragile recovery period for the wounded industry, few companies could afford any type of delay in meeting the demand of customers with a great many options on the market.

This is why articles such as that provided by IBM (2012) are especially compelling. Here, IBM offers the summation that there is a direct connection between Supply Chain Management and Risk Management. According to IBM, for companies "to effectively address these challenges, we believe automotive companies will need not simply a more efficient supply chain but rather a smarter supply chain that embodies three key characteristics: instrumented…interconnected…[and] intelligent." (IBM, p. 1) Certainly, finding ways of making Information Technology systems more intuitive and responsive to changes in market conditions is critical to mitigating the risk that can come with unexpected shipping shortfalls. By remaining in tune to shipping capabilities as they relate to market demand and order intake, companies can spare customers the frustration and deterrence of waiting in uncertainty.

Warehouse Management: