3 tips for strengthening automotive supply chains

• Automotive
• Article

The last few years have been full of disruptions that have exposed the hidden weaknesses of international supply chains. These developments urgently remind us that we will all need to focus on improving our resilience from here forward. What specific steps can automotive industry suppliers take to protect themselves against production stoppages, delivery interruptions and cost overruns? 

The main weakness of the automotive industry supply chain lies in the differing levels of digitalisation among its individual players. These cause extreme variation among the tools, systems and interfaces that are used. The deeper you look into the supply chain, the more static systems you usaully find. The heterogeneity of the systems used between one data silo and the next reduces the transparency of the entire supply chain, increasing the risk of errors and delays. These are problems that companies cannot afford, especially in our times of supply chain volatility.

The primary way to ensure that companies within the automotive industry supply chain can “bounce back” from disruptions, and “bounce forward” to prevent them in the future, is complete digitalisation with standardised processes and interfaces – and thus uninterrupted data flows. But what does the road towards this look like?

1. Create a consistent data foundation

The key to success within the automotive supply chain is complete, current and precise data, and this applies in two respects: reliable data is a prerequisite for both smoothly functioning processes and problem-free communication. Suppliers need it in order to use advanced technologies such as artificial intelligence and machine learning, which enable for example the automation of decision-making processes.

One classic area for taking advantage of machine learning and artificial intelligence is data mining, which makes it possible to automate the extraction of data from a wide variety of documents in all kinds of formats, from PDFs to Excel spreadsheets to emails and other sources. In the next step, algorithms convert the data into a unified format that can be utilised by all the various systems throughout the supply chain.

While making the effort to ensure unified data throughout your ecosystem, you need to account for suppliers’ fears and needs from the perspective of data administration. This is far tougher than it seems. Each supplier might use a different standard for sending messages, or completely different channels of communication. The process of unifying and adapting standards demands extensive internal know-how or an external partner that is capable of acquiring and leveraging the necessary knowledge.

Regarding communication channels the situation is even more complicated, especially for on-premise solutions. That’s because new communication channels sometimes require additional licences for the given solution. In some cases new software may not even work on old locally-bound solutions at all.

2. Implementing EDI is just the start; the system must be constantly optimised

EDI is the gold standard for communication in the automotive industry supply chain. But implementing EDI is never the end of it all. After the implementation, a company must constantly verify its EDI infrastructure and if needed adapt it to their current situation and the supply chain as a whole. This can even mean contemplating whether on-premise solutions satisfy their current demands, or whether a transition to a cloud EDI infrastructure instead might bring fundamental benefits in terms of scalability and flexibility.

If a company decides for any reason not to migrate its EDI to the cloud, it will have to accept certain limitations. Besides the fact that the end-of-sale and end-of-support dates for its existing solutions will eventually arrive, there is always the risk of security holes. It may happen that important security updates cannot be installed on outdated and unmaintained systems. Additionally, within complex EDI scenarios, situations can arise wherein it will be necessary to maintain more than one system at once. In such situations a security flaw may appear in one of these systems. Later they might find themselves needing a new version of one of the applications due to new functionality. And another system might for example require patching to qualify for maintenance from its supplier. Ensuring the functioning of different versions of individual applications only further increases the complexity of maintenance and the demands on the functioning of the EDI system.

3. United for standards

Every OEM and every supplier works a little differently from the standpoint of EDI messages, labels, delivery notes etc., which hinders communication and processing. Large differences exist among the individual advance shipping notices (ASNs), call-offs and JIT and JIS processes. Additionally, every OEM in Europe is governed by its own set of processes. And the call-off process of Korean manufacturers for example differs from those in Europe. In the USA the situation is different yet again. Meanwhile, unified standards in this area can save companies a great deal of work. Standards do exist, but they are constantly evolving, and individual OEMs sometimes adjust them so heavily that one cannot even truly call them standards.

Standardisation is not a one-way affair. All the participants in the automotive ecosystem have to agree on common working procedures and consistently observe them. In order to achieve this, it is necessary for every stakeholder to become aware of the advantages this brings to their company. This goal is only achievable if companies work together as equals and discuss and reflect important issues – for example in data administration – with mutual respect. Excessive hierarchical differences between the interests of an OEM and its suppliers must be prevented. Catena-X is attempting to offer a platform for partner dialogue of this kind.

Openness is needed not only among individual firms in the supply chain, but also in their cooperation with any potential partners.

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