Navigating the New Auto Industry Supply Chain
Since the early 1900s when Henry Ford pioneered the original assembly line, the evolution of the supply chain has been tightly linked to the auto industry — and ever since it has been held up by manufacturers as a shining beacon representing what a supply chain is capable of.
Compared to most modern manufacturers, auto industry OEMs are somewhat unique in that they produce highly complex products in extremely high quantities. According to Strategic Sourceror, the vehicle contains over 20,000 parts, approximately 1,000 of which are critical components. To meet their consumers’ unrelenting demand for innovation and increased safety, automakers have developed a remarkably intricate supply chain that can only be described as global; in fact, today only 50-60 percent of an “American made” automobile is actually assembled in the U.S., with other sections and components sourced from manufacturers all over the world. It’s a marvel to behold.
Driven by Technology
But times continue to change, and as the automotive industry increasingly looks toward the future with electric-powered vehicles and autonomous driving technologies on the horizon, suppliers and OEMs alike are being forced to find new ways to keep pace with the scope of their ambitions. The tried-and-true strategies that have long maintained business continuity from a vehicle’s conception to end of life no longer apply.
On the surface, it may seem like some of the traditional issues relating to manufacturing such a complex product would be easier with newer, more efficient technologies. Battery powertrains, for example, while originally consisting of nearly 2,000 components, now only consist of around 60. But with such a reduced bill of material against ever-increasing demand, competition to supply these components has greatly increased.
In response, many OCMs have adapted by narrowing their specialties to a few select components, trusting that increased investment into a niche will provide greater returns than competing in highly commoditized markets (ball bearings, air filters, brake rotors, etc.) on a mass scale. Where a jack-of-all-trades mentality focused on quantity used to be a viable strategy, committing to such a business model has since become a race to the bottom defined by razor-thin profit margins.
In an interview with Supply Chain Drive, Visteon CEO James Fisher discussed his company’s transition away from commodity-type components. “We’ve become laser-focused on what we do best and we’re a very different company than we were even a few years ago,” he said. “We’ve changed and adapted to serve the automakers, and many consumers are being driven by cockpit electronics.”
The Faster It Goes, The Tighter It Handles
Such a movement has profound consequences for equipment manufacturers. Although OEMs may require fewer standard components at the time of assembly, the highly specialized nature of the critical electronic components that remain leave them with few alternative options should a supply chain disruption inevitably occur as a result of component obsolescence. Redesigns, discontinuations, and delays are costly for even the most innocuous of products – but in a market as large and visible as the auto industry, resorting to such drastic measures has the potential to erode decades-worth of consumer goodwill in an instant.
To eliminate the need for such measures, auto OEMs must have a solid obsolescence management strategy in place — starting with a BOM Monitoring Solution.
The goal of Partstat’s BOM Monitoring Solution has always been to offer OEMs and EMS providers a way to seamlessly implement a proactive supply chain infrastructure that can not only accurately predict obsolescence, but do so in a streamlined, user-friendly, and cost-efficient manner. To accomplish this, we have been collecting data on electronic components and semiconductors. In fact, our open-source big data platform Partstat consists of over 50 billion data points on over 25 million unique electronic components and semiconductors. From there, this data collected from over 2,000 participating global suppliers is combined with our own advanced algorithms which allow customers to easily monitor for obsolescence, predict allocation, and confirm the life cycle status of virtually any electronic component, semiconductor, or peripheral product in a real-time model.
Monitoring obsolescence through Partstat has proven time and again to be the best way to ensure long-standing OEM and OCM relationships remain positive and prosperous, regardless of industry. Especially in the auto industry, these two sides of the supply chain depend on one another for support, and when the road from the factory to the car lot is smooth, they are both still capable of giving us a product that captures the imagination every bit as strongly as the original horseless carriage did centuries ago.