Despite the economic downturn, the U.S. automotive supply chain has seen significant growth. Sales volume increased from 10 million to 15.6 million units between 2009 and 2013. These unit increases can be associated not only to improvements in economy, but solid efforts to implement industry best practices to solve supply chain challenges. Some of the top challenges faced by the automotive supply chain include inability to adapt to fluctuations in demand due to capacity constraints, financial constraints due to lack of liquidity, supply chain complexity increases with the globalization of the supply chain, qualified labor shortages and lack of information visibility with legacy technologies. Outdated supplier technology is present most often in tier 2 suppliers such as metal stampers and die casters. Lack of production management systems causes significant delays for OEMs and downstream supply chain partners. According to the Global Supply Chain Survey 2013 automotive industry leaders plan to focus on both continuous improvement efforts relating to production efficiency and inventory management. Focusing on improving these areas can help to reduce costs and increase supplier collaboration. The top four areas of focus identified in this study were cost minimization, delivery performance, volume flexibility and complexity management. This is where industry best practices come into play. To address these issues automotive supply chain operators are implementing EDI/ASN to more effectively manage inbound shipment schedules and facility staffing. The information gleaned from this change allows these businesses to be proactive rather than reactive. Supply chain managers are also implementing documentation management protocols in order to comply with regulations and improve recall execution. In response to omni-channel retailing the automotive supply chain is also now aggregating orders into once centralized location such as a warehouse management system (WMS). This provides fulfillment centers with a more holistic view of inventory data. With this more accurate view of data, supply chain operations can also reduce on-hand inventory and focus on a just-in-time (JIT) replenishment strategy. This helps to reduce costs creating savings that can be passed on to customers. Transportation routing and other analytics are also being used to make data more accessible to all key supply chain players, including customers. To access more valuable automotive supply chain resources contact Datex experts today at www.datexcorp.com or marketing@datexcorp.com or call 800.933.2839 ext 243.

1. SUPPLY CHAIN &
LOGISTICS
BASICS:
THE
AUTOMOTIVE
SUPPLY CHAIN
BY: ANGELA CARVER

2. State of the Automotive Industry
• Despite the economic downturn, the U.S. automotive industry has
seen significant volume increases according to reports by LMC
Automotive. Sale volume increased from 10 million units in 2009 to
nearly 15.6 million units in 2013.

3. Auto SCM Challenges Caused by the
Economic Downturn
• Adjusting to fluctuations in demand
– As demand has continued to increase, many equipment manufacturers are
struggling to meet demands for increased capacity, resulting in significant supply
shortages.
– During the downturn, many suppliers eliminated excess equipment and shut down
plants to remain in operation. Adding capacity back has been significantly more
difficult.
• Financial constraints
– Keith Updike of BBK reported that many OEMs are facing liquidity issues. While
there is no shortage of lenders, many automotive manufacturers are hesitant to
become more indebted. This creates a lack of available resources, compounding
many other challenges.

4. Auto SCM Challenges Caused by the
Economic Downturn
• Supply chain complexity
– As OEM suppliers are shifting towards a globalized strategy, the supply chain is
becoming more complex, creating more risk factors to address. Operating across
multiple geographies, using suppliers with different technologies, language
barriers, etc make operating in the automotive industry more difficult.
• Labor shortage
– The supply chain industry has experienced significant labor shortages due to lack
of an experienced labor pool. The study of supply chain and logistics, especially in
the automotive manufacturing sector, has continued to decline in popularity. This
makes replacing the experienced people who have retired or relocated during the
downturn very difficult.
• Lack of information visibility
– Outdated legacy systems are preventing modern-day supply chain operations
from seeing their true potential. Many are looking to invest in new technologies.

5. Outdated Supplier Technology
• It has been found that many Tier 2 suppliers are lacking the
technology needed to focus on continuous improvement efforts. This
is indicative of a widespread issue throughout the industry.
• Many of these suppliers, such as metal stampers and die casters,
have no production management systems and struggle to turn over
production lines. This can cause significant delays for the OEMs and
all downstream supply chain players.
• Working with outdated technology and processes makes it difficult
for automotive manufacturers to complete new product launches
and meet the increasing sales demand.

6. Leading Automotive Supply Chain Focus’
• According to the Global Supply Chain Survey 2013 automotive
industry leaders focus on continuous improvement efforts in both
production efficiency and inventory management categories. This
helps to reduce costs and improve collaboration with key supply
chain partners. The top 4 practices include:
Minimized Costs
10
Key Focus
90
Not a Focus
Delivery Performance
13
Key Focus
87
Not a Focus
83
Key Focus Not a Focus
67
33
Volume Flexibility Complexity Mgmt
17
Key Focus Not a Focus

7. Automotive SCM Best Practices
• EDI/ASN utilization
– Transmitting critical documentation for your automotive supply chain via
electronic data interchange can help to optimize operations, improve
communication efforts and reduce labor hours spent on clerical tasks.
– Using EDI to receive advance shipment notices (ASNs) from suppliers can also
help your business to more effectively create and manage your inbound shipment
schedules and staffing plans.
– With the information gleaned from ASNs your team can be proactive rather than
reactive.
Sender EDI Vendor Recipient

8. Automotive SCM Best Practices
• Documentation management
– As recall instances continue to plague the industry, properly managing key
inventory documents is critical at the inbound and outbound level.
– Having records of certain documents make enacting targeted product recalls
more efficient. These document types include:
• Bill of Lading (BOL)
• Packing slips
• NAFTA certificates (if applicable)
• HAZMAT certificates (if applicable)
• Customer invoices
– If these documents are being transmitted or received from suppliers on the
inbound side it is important to strictly enforce specific data sets being present on
these documents as regulatory bodies require very specific data to be saved.

9. Automotive SCM Best Practices
• Order aggregation
– With omni-channel retailing more prevalent in the automotive industry, especially
in OEM replacement parts, supply chain operators must be able to effectively
manage orders from a variety of sales channels. This is where order aggregation
comes into play.
– Collecting orders and aggregating them into a central location such as a
warehouse management system (WMS) can assist in forecasting and
replenishment activities.
– Without all of this information in one database it is difficult to get an accurate and
holistic view of inventory data.

10. Automotive SCM Best Practices
• JIT/Lean replenishment
– Implementing a just-in-time inventory management/replenishment strategy can
help your automotive supply chain operation to meet key performance indicators
such as cost savings and on-time delivery
– Implementing this strategy across your supply chain can also help your suppliers
upstream to meet performance goals, further reducing costs. These savings can
be passed onto your customers, making your automotive operation more
competitive.

11. Automotive SCM Best Practices
• Transportation routing
– Last mile logistics accounts for a significant portion of total supply chain costs.
As more automotive parts are being delivered directly to consumers (D2C) supply
chain operators are focusing more on reducing these expenses.
– The automotive supply chain is reducing transportation related costs by
implementing transportation routing technology. These solutions automate the
identification, planning and tracking of the most efficient delivery routes available.
– Optimizing delivery routes helps to reduce miles driven, eliminate excess stops,
avoid high traffic areas – all of which can help to reduce the overall cost of
delivery automotive goods to consumers.

12. Automotive SCM Best Practices
• Analytics utilization
– Industry leading automotive supply chains have implemented warehouse
management technology, manufacturing execution systems, automated data
collection technologies and more. All of these tools make inventory data much
more accessible.
– This data can provide useful analytics for a variety of purposes including:
• Vendor/Supplier Management
• Transportation Partner Management
• Recall Management
• General Inventory Management
• Inventory Optimization
• And more…

13. Conclusion
• Despite the challenges faced by automotive manufacturers during
the economic downturn, many have turned business around by
implementing a variety of technology solutions and industry best
practices.
• Operating these global supply chains can be complex, but identifying
and focusing on individual challenges on an ongoing basis is the key
to success for these operations.

14. For access to valuable resources for your automotive
supply chain contact Datex experts today. Don’t miss out on
your free Technology Assessment.
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