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Building Agility in Lean Global Value Chains
India remains a strategic market of the future for many global OEMs. With exports of more than USD14.5 Bn in 2019-20, the auto component industry is also intrinsically linked to the global industry.
Global automotive supply chains are undergoing a transformation, accelerated by the pandemic. Traditionally the auto industry has been at the forefront of mass manufacturing, volume and scale economics and Lean Supply Chains have been the traditional mantra. Yet, the market is increasingly moving towards lower volumes, more frequent launches, customizations – all of which make lean manufacturing implementation difficult and call for more agile systems.
The pandemic has further underlined the need for agility – with supply shocks being followed by demand shocks and resulting in inventory pile up at various points in the system. The major challenge for industry is how to make their supply chains more agile without completely jettisoning the decades of gains and efficiencies built through lean adoption. As leaders of the value chain, OEMs are spearheading collaboration efforts to help make the supply chain more agile and therefore deliver the competitive advantage.
Digitization
Digital disruption has the potential to create value across the chain starting right from designing a new product, supply chain, retail as well as the after-market. It is important for companies to adopt a digital mindset and leverage strong analytics to appreciate changing customer behaviour in order to drive growth.
A. Product Design: Digital technologies like e-auction and decision-making tools allow companies to determine what features customers value and what they are willing to pay for. It also helps in savings in material costs. As development timelines get crunched and technologies like rapid prototyping become common, does this require a different skillset in logistics as well?
B. Supply Chain: Advanced analytics-based forecasting models can improve forecast accuracy anywhere between 20%-30%. Coupled with greater inventory visibility in real time across the chain, it results not only in lower inventory holding costs but also 2-3 percent growth in sales because companies are able to minimise stockouts at the point of sale.
C. Retail sales: The coronavirus pandemic has accelerated the manner in which consumers purchase vehicles. Even before the pandemic, more than 70% of consumers compare products online before entering the showroom. This percentage is only going to increase with consumers wanting minimal human interaction and maximum digital support. In the absence of retail footfall, the logistics of enabling customer experience of the product will become more complex.
D. After-market: Many OEMs are trying to change the after-market dealership experience by using AR and VR enabled services to drive customer satisfaction. For example, in 2017, Ashok Leyland launched Service mandi – a platform which connects customers to Leyland-trained mechanics to get live mobile updates on their vehicle repair. As predictive preventive maintenance and on road dynamic support takes root, they can pose new challenges in logistics – real time failure data integration, dynamic demand mapping and agile fulfilment.
The future of Mobility
Mobility itself is undergoing a transformation globally. In India the discussion is focused on 2 pillars – electric vehicles and shared mobility. A 2018 NITI Aayog report said that India can save 64% road-based mobility-related energy demand and 37% of carbon emissions in 2030 by pursuing a shared electric mobility strategy.But beyond powertrain and sharing, connectivity, use of AI, demand for entertainment and use of streaming, agile financial services all are leaving their footprints on the evolution of mobility. These changes demand a radical change in current business and provides for opportunities to develop new business models. What kind of supply chain challenges could such new business models throw up?
Some examples of such supply chain challenges and opportunities could be:
? In case of battery swapping, real time battery inventory management across various swapping stations
? In case of shared mobility using personal cars, chauffeur / valet service to make vehicles available on location on time
? On road charging and quick repair service, etc.