A new IT landscape to future-proof the automotive supply chain

This article makes the case for orchestration and collaboration, explains the enabling role of IT, and outlines a proven approach to implementing the right IT landscape.

Today’s business challenges call for unprecedented cooperation

Today, automotive OEMs and their suppliers face business challenges that are difficult for a single company to tackle on its own. These automotive industry supply chain challenges include verticalization, localization and diversification, and digitalization within shorter product lifecycles.

Verticalization

OEMs have become much more engaged with the E2E value chain than in the past. They now get involved in direct sourcing of raw materials (e.g. battery raw materials like lithium or cobalt). They also interact directly with subcomponent manufacturers (e.g. semiconductor companies) to secure long-term supply. In addition, OEMs need to recycle and then (re-)provision secondary materials to support their circularity and sustainability strategies.

This verticalization brings complex requirements for OEMs in terms of the need to deal with hardware, software, raw materials, and so on – and to interact with the suppliers of all these resources.

Localization and diversification

Automotive sourcing strategies are becoming much more “local-for-local.” This reshoring is intended to reduce dependencies and strengthen adaptability in case of disruptions. It does so by shortening transportation routes and delivery times and providing alternative supply sources in case of unexpected supplier outages. Reshoring can also help companies meet social responsibility and automotive sustainability goals.

At the same time, OEMs are diversifying their approach to procurement. They’re optimizing timing of their procurement – for example, when a resource is very limited, an OEM may decide to buy the entire supply for the next five years. They are also creating supply chain redundancies, perhaps working with multiple suppliers rather than a single gigafactory to reduce their risk. And they’re diversifying logistics – the same goods might be transported from the same supplier by both train and ship, for instance. While beneficial, changes like these further complicate supplier interactions.

Digitalization within shorter product lifecycles

Auto manufacturers are incorporating new digital technologies into their products. For example, they’re adding AI assistants and ADAS systems to vehicles, and moving toward software-defined vehicles. Manufacturing and other processes are undergoing a similar transformation, with machines rapidly gaining intelligence. These changes require the integration and synchronization of very different software and hardware value chains.

These requirements arise at a time when product lifecycles are shortening. This change is linked to digitalization in that companies need to offer customers frequent software updates – but it is also a general business trend associated with competitive pressure for a shorter time to market.

The solution: multi-tier orchestration and real-time collaboration

Because they require specialist knowledge and assets, challenges like these necessitate an increasingly diverse set of players. Tackling the challenges also leads to more intricate relationships with suppliers of different types and on different tiers of the supply chain, which adds to the complexity of interactions.

Collaboration with many of these suppliers also needs to take place in real time – for example, risk management requires sharing of the latest data. To facilitate this real-time collaboration and increase supply chain resilience, auto companies need to be able to orchestrate complex webs of suppliers.

The need for collaboration and orchestration also applies to internal functions and departments. Companies must start planning their sourcing from the earliest stages of product development, and that can only happen if the whole organization shares the same strategic view. In addition, different suppliers will be interacting with different parts of your company throughout the product lifecycle – another reason why a unified view is needed.

Orchestration and collaboration need a new IT landscape

Today, however, most auto companies tell us that their current IT gets in the way of doing all this. So what new IT capabilities are needed?

First, the new IT landscape must incorporate industry standards within a consistent supply chain framework and operations reference model across departments and partner companies.

Second, it must be able to integrate data from various internal and external data sources (e.g. ERP core systems including OMS, MES, TMS, and PLM), third-party data providers (for example, of risk data or customs data), and industry data ecosystems such as Catena-X.

Third, the IT landscape must offer truly integrated business planning and business optimization, together with intelligent decision-making support based on reliable, real-time information. The information should be fully up to date so that the company can instantly adjust plans when circumstances change. If there’s a problem with one supplier, for instance, being the first OEM to contact an alternative supplier confers a competitive advantage.

How to migrate to your new IT landscape

Implementing a landscape like this is arguably the single most important step companies can take to future-proof their supply chain. But planning the move, and choosing the right technologies and providers, is a significant undertaking.

It can be a lot easier if you start with the right “canvas”: an automotive-specific framework and toolset that helps you create a vision of your desired supply chain, and then analyze that vision from a process perspective, looking at everything from raw materials to customer.

You can then assess how far your vision of the future supply chain can be realized with the current state of the company’s process and system landscape. After gaps between vision and reality have been identified, the canvas guides the process of developing a roadmap for building the new IT landscape, complete with all the tools you need for business operations transformation – and for effective collaboration and orchestration.

Future-proof your supply chain now

As the first element of Capgemini’s Automotive Supply Chain Resiliency offer, we have developed a canvas or framework of the kind just described. We’ve already used it successfully to help a major automotive client launch their journey to the competitive automotive supply chain of the future.

We follow a “building block” approach that enables rapid identification and implementation of the best technology solutions. These solutions are integrated seamlessly into your existing IT landscape, ensuring a close match for your individual business model and strategy.

While drawing on our own deep specialist knowledge of the industry and its processes – including development, sourcing, production, and sales – we also partner with a comprehensive range of technology providers. These include vendors of applications for integrated planning, third-party data, and underlying technology stacks that support the custom development of automotive supply chain solutions. Our partnerships with carefully chosen startups give you low-risk access to the latest innovations in areas such as AI.

Get in touch to start your supply chain transformation journey right now.