How OEMs are adapting with intelligent supply chains

By Darren Coil, Global Manufacturing Service Line Lead

June 30, 2020

Categories
Manufacturing and mobility

In the past few months, Covid-19 has disrupted the automotive industry. Automotive original equipment manufacturers (OEMs) have paused production sending financial shockwaves through supply chains. Governments have required non-essential workers to stay at home. Around the world, people have deferred plans to buy new vehicles. Oil prices have dropped changing the profitability model for electric vehicles. How will automotive OEMs adapt and thrive with these new challenges?

One approach to navigating the post-COVID-19 world is adopting intelligent supply chains. The automotive industry supply chain is especially complex. Multiple companies work together to manufacture a vehicle that may have more than 2,000 assemblies and 30,000 total parts. The efficient and timely movement of vehicle parts between suppliers and OEMs is critical. A recent independent study conducted by the Center for Automotive Research (CAR) stated that vehicle parts need to arrive without damage, on time, and in a pre-planned sequential order.

person working in a manufacturing plant

Intelligent supply chains can enable automotive OEM business decision-makers to visualize data from processes, products, and people to gain new insights that inform decision making. The use of intelligent supply chains will differentiate automotive OEMs in the new competitive landscape created by COVID-19.

Let’s explore the benefits of intelligent supply chains and how they address the new challenges brought on by COVID-19.

Increased transparency into the supply chain.
Improved insight into customer demand.
Increased manufacturing agility.

Benefit 1: Increased transparency into the supply chain

A key benefit of intelligent supply chains is increased transparency into supplier status, inventory, and capabilities. Tracking inventory on spreadsheets or storing key business information in silos may have worked in the past. However, in today’s business environment, this approach is too slow and error-prone. OEMs need to quickly identify capacity issues or distressed suppliers. With increased transparency, OEMs gain several advantages in today’s environment.

When production commences, OEMs can quickly identify missing or at-risk parts.
As customer demand fluctuates, OEMs can fine-tune their responses.
As pressure builds to manage expenses, OEMs know the exact location of parts and components.

shipping containers in an outdoor industrial space

The right inventory, in the right place

To achieve supply chain transparency, automotive OEMs look to companies like Sugere, which offers container, mobile asset, and finished vehicle tracking solutions built with their patented technology and hosted on the Microsoft Azure platform. This type of solution can deliver OEMs a clear ROI in as little as six months.

Another example is BlueYonder’s (JDA) Luminate Control Tower. It offers a real-time view of every route in the supply chain, down to individual carriers, legs, and ports. With continuous monitoring of news, events, and social media signals, manufacturers can receive immediate alerts to potential impacts from external events and shipment delays.

Daimler is operational in three months

Automotive OEMs may hesitate to move to more connected and automated supply chain systems now. However, with the right motivation, projects can be done quickly. Daimler was operational in three months after replacing its companywide proprietary procurement system. Used to manage 400,000 global suppliers, Daimler selected a software as a service system running in Azure. The new system, which involves the SAP S/4HANA database, SAP Supplier Relationship Management on HANA, and the Icertis Contract Management platform cost 50 percent less than their proprietary solution.

Benefit 2: Improved insight into customer demand

The second benefit of intelligent supply chains is increased insight into customer demand. Missteps in forecasting impact OEMs significantly in a tight cash flow environment. The companies that can identify and respond to shifts in consumer behavior the quickest will be the most competitive. The advantages include the following.

Minimizing inventory and production expenses.
Shifting production based on geographic needs.
Updating new product development strategies.

Leveraging AI to deliver insight

To gain better insight into customer demand, OEMs can evaluate solutions like Prevedere Demand Forecasting for Manufacturing. Built on the Azure platform and leveraging Azure AI, this solution analyzes external data such as weather patterns, economic data, industry trends, and social trends alongside internal performance data to identify leading indicators. The result is dynamic, real-time demand forecasting. Automotive OEMs can respond to changing forecasts by adjusting production, resource allocation, and pricing as various external sources affect the market.

OEMs can also look at solutions like o9 Integrated Business Planning for Manufacturing. Also built on the Azure platform and leveraging Azure AI, the solution provides instant visibility into gaps between plans, actuals, and forecasts by product, channel, and region. Decision-makers can understand the stories and assumptions behind the numbers. They can view sales and marketing actions and initiatives to close the gap.

Toyota predicts customer behavior

Toyota Turkey wanted the ability to predict singular customer behavior. The company empowered its customer relationship management solution with Azure and Azure AI technologies. With the services provided by Azure, Toyota employees can easily integrate machine learning models into everyday marketing and sales operations for improved planning insight.

Benefit 3: Improved manufacturing agility

The third benefit of intelligent supply chains is increased manufacturing agility. But in a post-COVID-19 world, the definition of manufacturing agility needs to broaden. OEMs will need visibility into employee availability to work, production lines will be reconfigured for social distancing, and hygiene practices will be monitored. Connecting machines, factory sensors, and employees and applying analytics will give automotive OEMs advantages including those below.

Proactively identifying shortages of qualified workers.
Quickly starting up production after shutdowns.
Monitoring worker health and keeping them healthy.

Global automotive supplier transforms employee communications

American Axle & Manufacturing (AAM) needed to unify communication channels across its company after an acquisition. The company launched a new intranet site, “POWERhouse,” leveraging Microsoft 365, Microsoft SharePoint, Microsoft Power Apps, and Microsoft Stream. The resulting unified platform enables efficient communication across AAM’s global, mobile workforce which is now critical in a post-COVID-19 world. AAM associates access work updates as well as policies, procedures, and product documentation through their mobile phones. AAM keeps its workers in sync allowing it to be more agile as it competes in the new normal business environment.

Monitoring people, health, and hygiene

Winner Import Ukraine, a vehicle parts business, built their business processes on top of Microsoft Dynamics 365 and Microsoft 365. Their HR system enables them to track available workers and to proactively address gaps during the pandemic. Automotive OEMs can explore solutions like Ecolab’s Compliance Monitoring System to track compliance with handwashing rules. Brisa, the leader of the Turkish tire industry, has transferred its business processes to Microsoft Teams. The manufacturing can stay in contact with employees during production shutdowns.

Next steps

OEMs facing COVID-19 challenges will benefit from adopting or enhancing intelligent supply chains. They can be adopted or enhanced incrementally using three steps: