Automakers need to adopt integrated digital supply chain solutions to meet product complexity and market dynamics: CII-EY report

Auto parts makers eye gains in the aftermarket

New Delhi, August 01, 2019: The Indian automotive industry is facing a paradigm shift with multiple triggers pushing firms to adopt digital solutions and build an intelligent supply chain that can respond to changing consumer dynamics. To be ready for the impact of ‘Future of Mobility’ levers, it is important for organizations to make the shift from merely doing digital projects to actually being digitally operated organizations, states a report titled Automotive supply chain- Emerging trends for building intelligent supply chain launched by EY and CII.

Megatrends, like connected cars, autonomous cars, electrified cars and shared mobility (CASE), are anticipated to lead to monumental change in demand in the automotive sector. In addition, emerging technologies, pace of digitalization and changing consumer demand makes it imperative for automakers to develop early potential risk insights and optimize visibility across the supply chain. According to EY research, 80% of global CEOs perceived technology innovation as a top disruptive factor over the next five years, while 57% of global institutional investors share similar sentiments. About 67% of global institutional investment executives want companies to undertake potentially disruptive innovation projects even if they are risky and may not deliver short-term returns. It was also found that 61% of auto executives plan to actively pursue M&A activity in the next twelve months, with 75% executives expecting technological innovation as a key factor influencing deal strategy. Furthermore, 25% of auto executives are pursuing M&A for acquiring technology, talent, new production capabilities or innovative start-ups; while 18% attribute securing supply chain amid regulatory changes as main strategic driver for M&A.

Vinay Raghunath, Partner, Auto Sector Performance Improvement, EY India, says:

“Adopting a disruptive approach towards building an intelligent supply chain ecosystem is a clear opportunity for automakers in India to stay on par with the mega-trends emanating from the ‘future of mobility’. Automotive organizations must ensure that they invest appropriately to manage the ‘business of today’ while being prepared for the ‘business of tomorrow’. They must build a more agile, integrated, efficient and collaborative supply chain which leverages the diversity of emerging technologies and solutions. Focusing on deploying integrated digital solutions while building a ‘digital DNA’ across the value chain, will help automotive organizations be better positioned to respond to increasing product complexity and market dynamics”

With the advent of a new mobility ecosystem and entry of technology players in the market, automakers and OEMs alike are witnessing a shift in vehicle value pool and transformation of businesses, from internal processes over product capabilities to unexploited revenue streams. The changing value web has given rise to numerous alliances and partnerships for obtaining a competitive edge.

Supply chain is no longer linear and increasingly managing the interaction between emerging technologies and functional excellence is becoming critical to success. The key components of a responsive and digitally driven supply chain will be integrating multiple modules which existed as islands of excellence in the past:

  • Procurement 4.0 to help move away from repetitive tasks towards becoming a strategic tool enabling stronger quality and cost controls.
  • Logistics 4.0 to ensure negligible paper and process driven bottlenecks, leading to greater stocking and warehousing flexibility, accurate storage standards, delivery rerouting, among others.
  • Manufacturing 4.0 to realize greater data-based efficiency and failure prevention, leading to production flexibility and real-time capacity management.
  • Control Tower 4.0 will impact the three foundational pillars of planning, data warehousing and intelligence to enable seamless communication in driving strong strategic and operational controls.

By orchestrating a complex ecosystem connecting OEMs, suppliers, technology providers and customers, organizations can look to create a digital and responsive supply chain that challenges existing business models and innovates to meet the changing demands of a digitally savvy consumer,” added Vinay Raghunath.