Global Auto Industry: Raring to go

The need to reinforce supply chains for resiliency.

With 2020 and 2021 recorded in history as the years the pandemic brought the world to a screeching halt, might very well go down as the year of recovery. Industries around the world are preparing to bounce back in force, even as they battle subsequent lockdowns, unexpected natural disasters and severe supply chain issues.

For the global automotive sector, however, the problem is compounded by the fact that the industry itself is going through an overhaul. Drivetrains are changing to electric; automobiles are being built with software at their core, and consumer behaviour towards purchasing automobiles is changing drastically.

The just-in-time and just-in-sequence industry has been dealt a body blow over the last year and a half as shortages in components forced assembly lines to move at a snail's pace. For the automobile industry, the need to reign in scattered component production capabilities and shift the epicentre of innovation back to home ground is paramount.

As technology changes from chips to the anticipated systems on chips (SoCs) and automobiles are built from the ground up with software, OEM, tier-one suppliers and semiconductor suppliers need to work together to help align the goals of all parties. This could mean paying more for chips when capacities are lower in order to expedite their production. It could also mean replacing back-ordered components with chips that have more memory or that can deliver more features.

The cybersecurity factor

A by-product of a connected, always-on, and smart driving experience is the growing concern regarding how accessible this data is. Automobiles are now set up for over-the-air updates, vehicle-to-vehicle communication and vehicle-to-infrastructure (V2I) communication, and OEMs must ensure this accessibility is limited to themselves and their customers. The cost factor is huge, and initially, we can expect to see cybersecurity protocols being integrated into commercial vehicles. But it will be a few years before we see this level of protection in consumer vehicles.

As the infrastructure for both personal and mass-transport electric vehicles improves, the need for highly efficient supply chains and logistics networks also grows.

Roadblocks on the recovery path

The industry's recovery is also being hampered by logistics constraints all over the world. Supply chains usually can shake off unusual or unexpected events like the 6-day Suez Canal crisis of March 2021 or the shutdown of the Yantian Port in South China. However, the pandemic has rendered the entire industry very vulnerable to these hits, and the effects are being felt across the line. As the world emerges from the economic paralysis of Covid-19, ports, customs and warehouses are struggling to handle the surge in deliveries for automakers rushing to replenish stocks. A lack of visibility into transit times has left both suppliers and customers guessing about transport schedules for components.

Going digital with planning, paperwork, and monitoring and managing logistics is the only way forward to drive efficiencies, cut costs and get greater visibility into supply chains.

The global auto industry has put a very difficult year behind them, and it is now time to transform themselves into leaner, meaner, resilient businesses that can survive and thrive.