Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Supply Chain Metrics That Matter – A Focus on Automotive Companies 2017

1,483 views

Published on

Executive Overview
Electric vehicles. Autonomous cars. Shared car ownership through Uber and Lyft. While the automotive industry emerged from the recession with the best balance sheet performance of any manufacturing industry, the future poses new challenges. Today’s questions are: “Can the industry reinvent itself? Is Google the new General Motors?” Traditional automakers fear the “Google effect” in the same way that retailers fought the “Amazon impact” a decade ago. All know that it is coming. The question is “Can the traditional automotive industry adapt?” The jury is out. The processes are old and stodgy, and supplier relationships are combative. This is not the industry of enlightened supplier development or inter-enterprise process automation. The industry responds in traditional, rote processes. A recent example is the failure to recognize the shift from four-door sedans to family-centered SUVs in 2017. The processes are consistently out of step with the market.
To better understand the industry in the context of supply chain management, let’s start by looking back. As shown in Table 1, the impact of the recession, with a decrease in consumer spending, surprisingly drove growth in the automotive industry at a faster pace than any other manufacturing industry. In the automotive value chain, the auto manufacturer fared much better than component suppliers or the other supporting manufacturing industries. The industry has consistently pushed cost and waste back in the supply chain, lengthening payables and enforcing tougher procurement policies. Investment in traditional work processes, and factory automation, improved operating margin and inventory turns.
To understand the table, let’s walk through some of the details. Most automotive manufacturers would like to forget the end of the recession. 2010 was a tough year. This industry, hit hard by the recession, was regrouping in 2010. Balance sheets and income statements were just starting to recover from the blow of the economic downturn. As a result, when we compare 2016 to 2010, the results of 2016, with a post-recessionary recovery, show a marked improvement to the weak performance of 2010.
In the period of 2010-2016, the automotive industry averaged 5% annual growth. When the period of 2016 is compared to 2010, growth is down 45%. The green arrows in Table 1 indicate improvement while the red arrows show a decline in performance when 2016 is compared to 2010. Across all metrics except growth, inventory turns, and Sales & General Administrative Expense (SG&A), the position of the automotive manufacturer in 2016 is dramatically better than 2010.

Published in: Business
  • Be the first to comment

×