Automotive supply chain challenges and software solutions

1.1 Automotive supply chain challenges

Since 2020, the automotive industry has experienced a seemingly relentless series of unprecedented supply chain challenges which have all driven VUCA – volatility, uncertainty, complexity, and ambiguity. In the post-Covid recovery, inflationary pressures and price volatility have further compounded the challenges around managing supply chains. Furthermore, simultaneously, OEMs face an existential challenge not only in the transition to electrification and alternative powertrains to overcome internal combustion engine (ICE) bans, but now also in the efforts to meet wider carbon net-zero targets across the entire value chain, including production and manufacturing, which will require transformative reinvention of the supply chain with all the new challenges that brings.

1.2 Supply chain disruption and shortages

The pandemic, chip shortages, and the Ukraine/Russia conflict have caused a succession of challenges that have made supply chain disruption the ‘new normal’ as many OEMs have described it. This VUCA plays havoc with supply chains and exposes a fundamental weakness in highly developed automotive lean manufacturing principles and just-in-time (JIT) just-in-sequence (JIS) processes, as it ultimately leads to potentially very costly production line stoppages. In that context, there has been a slight change in strategy whereby in some cases the long term ‘just in time’ supply chain is being supplemented and complemented by a near-shored ‘just in case’ supplier for the short-term supply shocks. Similarly, some particularly critical components, such as semiconductors, are often over-ordered to try and achieve ‘safety stocks’ – buffer inventory levels to mitigate against potential disruption.