How to Overcome Complex Supply Chain Challenges within the Car Manufacturing Business

The imagination of how a motor car gets right from the factory to your driveway is really long and complicated, containing many steps and players along the way.

This is called the “supply chain.” And as vital as the supply chain is to the automotive industry, when it breaks down, automakers and customers alike can stand to be in quite a bit of trouble.

So just what are some of the supply chain challenges facing the automotive industry, and why should that matter? Before proceeding to discuss the challenges, let us understand what a supply chain is.

Also Read: Going Green and Profiting: How Businesses Can Apply Sustainable Practices

A supply chain represents a network of people, companies, and activities that work together in creating a product or service and delivering it to the consumer.

The supply chain, in this context, can be defined to include all the stages—from the raw materials for car parts, to the stage of assembly of the vehicle, to the transportation of the finished car to dealers.

Major Players in the Auto Supply Chain

Suppliers

These firms provide the raw materials and parts that go into making a car. They range from steel, rubber, and glass to electronic components.

Manufacturers

Companies that put the car together with the parts and raw materials. Suppliers provide all of that.

Logistics Providers

Companies responsible for moving materials and finished cars from one place to another.

Dealers

Concerns that sell the finished cars to consumers.

Automotive Supply Chain Challenges

Now that you have a general idea of what a supply chain is, let’s explore some of the key challenges that the automotive industry faces.

1. Globalization and Complexity

The automotive industry is truly global. A car might be assembled in one country, with parts sourced from suppliers in several others.

The tires may come from an Asian factory, the parts of the engine may come from Europe, and the electronics can be from North America. That in itself presents a supply chain that becomes very complicated indeed.

But it is not just about the complexity of the geographical scope; it is also about the number of parts.

Do you know that the average car comes with a total of 30,000 parts? Synchronizing the delivery of all these parts to the assembly line at the right time is a huge challenge. A single disruption in even one part can hold up the entire production process.

2. Supply Chain Disruptions

There can be many reasons for disruptions in the supply chain. Natural disasters, political instability, or even a pandemic can cause delays in the delivery of parts.

And what happens when something goes awry at any given part of the world will have a ripple effect through the whole supply chain.

For instance, the COVID-19 pandemic has caused great disruption in the automotive supply chain: factories needed to be closed down, transport was delayed, and suddenly many parts were hard or impossible to get. This has resulted in delayed car production and shortages of certain models.

3. Just-In-Time Manufacturing

The automotive industry relies heavily on a system called “Just-In-Time” (JIT) manufacturing. Parts are delivered to the assembly lines at just the right time instead of being warehoused until they are needed.

JIT decreases costs and waste but results in more vulnerability within the supply chain. If one part does not show up on time, then entire production lines can shut down.

4. Quality Control

With so many different parts coming from different suppliers, quality control can be ensured only consistently. A defect in even a single part may lead to recalls and thus may affect the reputation of the car manufacturer.

That is why quality control becomes so crucial in the automotive supply chain. Each component has to be strictly checked for specific standards before being installed in the process.

5. Environmental and Regulatory Compliance

Automotive companies face a number of challenges as far as environmental and regulatory compliance go. Various countries have varied rules about emissions, safety standards, and waste handling.

The manufacturers have to ensure that their supply chain complies with these regulations, which may be complex and costly.

6. Technological Changes

The automotive industry keeps on evolving with new technologies in electric vehicles (EVs), autonomous driving, and connected cars. These changes require new components, materials, and manufacturing processes, adding another layer of supply chain complexity.

As an example, electric vehicle manufacturing requires access to supplies of batteries—which are themselves manufactured from raw commodities like lithium and cobalt. These are already rare, and many of them come from politically unpredictable regions.

This makes the structure of the supply chain even more vulnerable to various kinds of disturbances.

7. Sustainability

Sustainability is increasingly becoming a vital issue in the automotive industry. Governments and consumers have started to push for more ‘green’ automobiles and more environmentally friendly production methods.

These factors drive manufacturers to think of ways to lessen the environmental footprint of their supply chain. However, this can be challenging as often it involves huge investments in newer technologies and processes.

Overcoming the Challenges

So, how does the automotive industry overcome these challenges? A few strategies are:

• Diversifying Suppliers: Sourcing parts from a number of different suppliers across different regions helps reduce a manufacturer’s risk of disruptions.
• Invest in Technology: Advanced technologies like AI and Blockchain help in giving better visibility and efficiency to the supply chain area.
• Building Relationships: Good rapport with suppliers and efficient logistics can build a common positive outlook on challenge pressures.
• Focus on Sustainability: The focus on sustainability will allow manufacturers to meet customer demand while reducing their environmental impact.

Conclusion

The automotive supply chain forms the backbone of the industry; it is also one of its major challenges.

From globalization and complexity to disruptions and technological advancement, there are many factors that have their effect on the supply chain.

However, once the challenges are understood and strategies to overcome those are implemented, the automotive industry will continue to thrive in an increasingly complex world.

The next time a car is spotted on the road, one will remember the rather circuitous journey to its placement there. The automotive supply chain is an amazing feat of coordination and collaboration, nonetheless.

Overcoming these challenges will remain the only thing capable of keeping the wheels churning for the industry.