Top 5 Supply Chain Challenges in the Automotive Industry

The automotive supply chain is one of the most complex in the world. This industry relies heavily on third-party companies working together to supply thousands of parts needed to complete manufacturing processes and deliver high-quality products.

Automotive supply chain companies are constantly implementing new technology, allowing them access to thousands of inventories, and with the help of a global logistics network, goods can be shipped anywhere in the world.

In this post, NewStream explores the top 5 supply chain challenges the automotive industry is facing in 2021:

5 Supply Chain Challenges in the Automotive Industry

1. Lack of Visibility

One of the top challenges for automotive supply chains, like other industries, is visibility. The automotive industry has an 81 percent concern rate, compared to 70 percent for all other businesses.

On average, a vehicle consists of roughly 30,000 components that are designed to bring supply chains together for consistent production. Overlooking any part of the manufacturing process can be detrimental to the procurement process, such as inventory shortages and significant delays.

Expanding focus on all aspects of communication, part tracking at any stage, streamlined processes, and predictive analytics will eliminate the lack of insight for all parties in the supply chain.

 Source: Jay Malaviya

2. Overstocked Inventories

In the automotive manufacturing industry, well-managed inventory is crucial, as overstocked, unoptimized raw materials can leave potential profit sitting on shelves.

To overcome the issue of overstocked inventory, automobile companies might use third-party logistics (3PL) providers that use software to track data and inform them of product demand.

Just-in-time production also helps companies eliminate overstock and make better decisions about what should be on hand each day.

3. Sustainability

Since 2015, the automotive industry has become more focused on an environmental agenda. It is not only expected but also required that both manufacturers and third-party partners construct vehicles in an environmentally responsible manner.

Unfortunately, with globalization enabling the shipment of goods from around the world, each location’s stance on sustainability varies, creating supply chain issues for the United States.

4. Quality Control Issues

In automotive manufacturing, it is critical to prevent errors during assembly. A lack of control and auditing can lead to quality issues, resulting in recalls, revenue loss, material waste, and tarnishing the company’s reputation.

5. COVID-19 Impact

During the COVID-19 pandemic, around 51.7% of automotive industry respondents said supply chain disruptions were “very significant,” the highest percentage among the six industries.

Due to parts shortages, particularly microchip shortages, many automotive manufacturers cannot complete vehicle assembly. As a result, automotive OEM supply chains must put long-term plans aside and focus on the immediate future.

COVID-19’s supply chain issue can be addressed by monitoring real-time supply issues, communicating with parts suppliers, and simplifying access to supply data. Additionally, using a third-party logistics provider can help automotive companies resolve this supply chain issue.

Being aware of current supply chain issues does not eliminate the challenges ahead. Determining which automotive supply chain issues exist within your warehouse is the first step toward ensuring your company runs smoothly with no errors.

Materials management will be one of the biggest challenges in the automotive industry in the near future.

It requires excellent communication across the supply chain to ensure that warehouses receive the proper amount of inventory, control what inventory they do have, and find the most suitable solution to downsize current inventory.

Eliminate Your Automotive Supply Chain Issues

Finding the perfect solution to supply chain issues is a crucial aspect for any manufacturer, especially in the automotive industry.

If you’re not loving your supply chain, life in the warehouse can become stressful, leading to mistakes. Our expert team at NewStream Enterprises, LLC, provides a wide range of supply chain management solutions to relieve your team of this challenging task.

Inventory planning and procurement, vendor management, and kitting and packaging are just a few of the supply chain solutions we provide.

Allowing professional SCM providers like NewStream to manage your inventory will help your company lower friction and costs, reduce stress, and help you love all elements of your supply chain.

Are we the supply chain management company that will help you love your supply chain? For all of your supply chain management needs, contact us today!