Authors: Rich Schmidt & Satyendra Pal
How automotive companies can improve customer experience through supply chain reinvention and optimization.
Today’s automotive supply chains are inherently complex and already a profitability challenge for many. Automotive companies are trying to keep pace with rising demands by optimizing their supply chain operations. At the same time, automakers are fundamentally transforming what they make, how they make it, and how they operate. These transformations, along with sociopolitical changes and technological innovations, are driving multiple challenges:
Lack of visibility into the automotive supply chain prohibits optimization and is a roadblock to execution, as there is a complex bill of materials needed to build a vehicle and after-market parts are hard to access for repairs.
Supply chain disruptions and geopolitical situations make it difficult to access OEM-supplied and aftermarket parts. This problem has intensified as people hold on to their cars longer and need more parts to keep their vehicles running.
EVs have disrupted the market as they require fewer parts, and they are changing customer experiences as software updates open the opportunity for digital product and service add-ons. EV brands are also influencing the sales process as they test direct-to-consumer models.
The automotive industry is more focused on an environmental agenda, and this means OEMs must work harder to meet requirements and new goals.
Globally distributed partnerships lead to productivity challenges due to inefficient communications and a lack of transparency.
Recent labor unrest, lack of leadership, and inadequate employee training and development inside factories continue to impact the manufacturing sector.
On average, a vehicle consists of roughly 30,000 components that are designed to bring automotive supply chains together for consistent production. Overlooking any part of the manufacturing process can be detrimental to the procurement process, resulting in issues like inventory shortages and significant delays. Expanding focus on all aspects of communication, part tracking at every stage, streamlined processes, and predictive analytics will eliminate the lack of insight for all parties in the supply chain.
With the right framework, automotive companies can address these challenges through the following areas:
When faced with visibility challenges, such as lack of insight into when a supplier will address a critical part shortage or shipment delays due to a port strike, supply chain managers should be asking: What actionable insights can I leverage to help me address these challenges? How did we deal with similar challenges in the past? Who did we speak to? What did we do? Can we repeat the same actions again? Which suppliers provide similar stock and how quickly can we switch?
But what if an organization is unable to connect data across their entire supply chain ecosystem? Visibility into the supply chain—across vendors, transport providers, manufacturers, distribution, stores, and dealers—is the first key to unlocking actionable insights. The second key is predictability. Do I know exactly when each shipment is going to arrive? If there is a delay, what is the knock-on effect likely to be? How can I mitigate the impact? Can another supplier step in? Visibility and predictability are key. So how do you ensure you have both?
A supply chain control tower provides end-to-end visibility and capabilities to use data to make decisions and self-correct supply chain issues. It can help both B2B and B2C to improve the operation of the overall automotive supply chain so that organizations can meet consumer expectations and increase customer satisfaction.
Customers have high expectations, whether they shop online, in the dealer showroom, or talk with a sales executive. They expect product information, including availability and associated services required, to be detailed and accurate. Supply chain managers need to ensure inventory and associated information are readily available at the click of a button. This visibility shouldn’t be limited to just the manufacturer’s employees but should also support end customer sales, whether through a dealer salesperson or via an end customer online commerce experience. For example, an end customer should be able to see accurate inventory available for immediate purchase or where items are in transit for a specific make, model, and features in near-real time with an accurate promise of when such inventory will reach them.
Case Study:
Publicis Sapient worked with a Latin American retailer to use a supply chain control tower that led to $145M in estimated savings in reverse logistics, including markdown and logistics costs. The solution also unlocked an immediate $2M by item-level transportation cost calculation, enabling the optimization of routes.
Key Considerations for Inventory and Promising Solutions:
Allocation Optimization Factors:
Inventory Accuracy and Service:
Capacity Tracking:
Placing and optimizing inventory across the distribution network to ensure effective reach to customers not only supports effective customer service but also reduces overall inventory and cost. However, it is easier said than done. The key to successful inventory projection/placement is a highly accurate demand forecasting process that uses past sales history, future growth, and other internal and external factors.
The output of a good forecast enables optimal inventory distribution across the network. This requires multiple considerations; for instance, product relationships and product assortments must be considered when placing products at a given fulfillment location. It is ideal to have the products from the same assortment be co-located at a given location. For brands that offer value-added services, it is important to place products eligible for these services at a location that can perform these services. For example, vehicle accessories, which are likely to be sold and installed at the time of a new vehicle purchase, should be located with vehicle inventory at the dealership.
Inventory Optimization Goals:
Businesses are focusing on digital transformation to improve stakeholder (external and internal) experiences as well as the overall efficiency of conducting business. One area that needs improvement is the procure-to-pay process across direct and indirect procurement. This function is critical for auto companies striving to make and deliver the right products at the right time.
The procure-to-pay process spans organizations and therefore needs transformation across both the buyer and seller sides. Automotive companies can modernize their approach to support both centralized and decentralized internal customers across a wide range of procurement needs while managing suppliers of various sizes and with a range of technical sophistication.
Best Practices for Business and Digital Transformation in Procure to Pay:
Business Transformation:
Digital Transformation:
Businesses have traditionally taken a team approach to supply chain optimization. One team may be focused on delivering the best possible B2C customer experience while another focuses on the needs of B2B fleet customers. Other teams may be responsible for planning order fulfillment or handling the shipping plan and last-mile delivery.
This siloed approach to the supply chain is anything but optimal. Instead, it can lead to delayed shipping, stockouts, and higher-than-expected shipping costs. When businesses have limited visibility into the supply chain process, so do their customers, which can result in negative experiences and lost revenue. B2B and B2C customers want to have confidence that a promise made is a promise kept. If a customer doesn’t receive their promised purchase on time, then they will likely take their future business to someone else.
For businesses to meet customer expectations, they need to start with end-to-end visibility across their entire supply chain, from initial order to the last mile of delivery.
Promise to Delivery Process Overview:
If your business wants to transform its supply chain to optimize operations and better serve customers, visit our site to explore more. For the latest insights regarding Transportation and Mobility, click here.
Rich Schmidt
Senior Director Strategy and Consulting
Satyendra Pal
Group Vice President, Global Omni Fulfillment Practice Lead
Publicis Sapient is a digital business transformation company. We partner with global organizations to help them create and sustain competitive advantage in a world that is increasingly digital. We operate through our expert SPEED capabilities: Strategy and Consulting, Product, Experience, Engineering, and Data, which combined with our culture of curiosity and deep industry knowledge, enables us to deliver meaningful impact to our clients’ businesses through reimagining the products and experiences their customers truly value. Our agile, data-driven approach equips our clients’ businesses for change, making digital the core of how they think and what they do. Publicis Sapient is the digital business transformation hub of Publicis Groupe with 20,000 people and over 50 offices worldwide. For more information, visit publicissapient.com.
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