The global supply chain is an ever-evolving system that impacts businesses and industries worldwide, including the automotive sector. As parts and components must be regularly and reliably sourced, the supply chain has become increasingly important. From mass production and assembly lines to smaller body shops and car repair facilities, the supply chain has a significant role in how automobiles, trucks and other vehicles are manufactured, maintained and repaired.
There are many suppliers that provide various vehicle parts and components, often from multiple countries. These parts are then shipped to the assembly line or body shop, where they are assembled and installed into the vehicles. This process is complex, requiring coordination between various suppliers, shippers and transportation companies.
With the rise of electric and self-driving cars, suppliers must be able to efficiently source and deliver the parts required to build and maintain the new vehicles. This requires them to stay current on the latest trends and technologies, as well as have access to the necessary resources and capital. Given the recent and continued supply chain turmoil experienced in the auto industry, both OEMs and suppliers are forced to choose between deepening an existing relationship or looking to expand to new partners. Deepening existing relationships includes sharing more detailed forecasts and committing to higher levels of inventory than previously to ensure delivery metrics are met. Further, OEMs are developing more strategic relationships with tier two and three suppliers that previously have not been a priority to avoid unexpected disruptions and limit exposure as much as possible. They will need to ensure the products they manufacture are reliable, safe and cost-effective.
As with most industries, if you are not evolving you are falling behind, and the automotive sector continues to be no exception to that. The continued transition and push from internal combustion engines (ICE) to electric vehicles (EV) in the industry opens up various opportunities for new and existing suppliers with manufacturers to reevaluate their delivery model. As competition continues to heat up, the ability to lock in strategic relationships with suppliers to support the ever-changing technological advances in the sector will provide windows of opportunity to capture market share quickly for both suppliers and OEMs alike. Creating that relationship structure offers a framework to think strategically about supplier relationships and drive the reliability, cost-effectiveness and level of service that is expected in the industry.
Having a better understanding of the supply chain process – from the sourcing of raw materials to the delivery of the finished products – is crucial. Your supply chain is integral to the integrity, profitability and efficiency of your business.
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For more information on this topic, please contact a member of Withum’s Automotive Manufacturing Services Team.
