With raw materials from all over the world, complex industry processes, and a continual demand that’s lasted for decades, the automotive supply chain is one of the most intricate logistical challenges of modern industry.
Boasting annual industry revenue of over $2.5 trillion, the constant demand for automotive vehicles places a great strain on the sector. With client orders pouring in from all over the world every day, businesses in this industry have to guarantee the reliability of their suppliers to keep operations on schedule.
In order to get visibility into suppliers, manage innumerable logistical operations, and mitigate potential risks, the automotive supply chain has to continually conduct risk assessments. In reaction to the growing complexity of this field, solutions like Prewave have begun to offer real-time risk intelligence management.
By leveraging artificial intelligence (AI) and machine learning (ML) technologies, Prewave offers the comprehensive insight that the automotive supply chain needs to thrive.
Source: Global automotive industry revenue between 2019 and 2023.
Importance of Supplier Reliability in the Automotive Industry
Without suppliers that can deliver shipments, products, and components on time, your business is unable to manufacture the deliverables that your customers and clients demand.
Even small delays of only a day can lead to a chain reaction of missed deadlines, additional fees, logistical challenges, and client dissatisfaction. Here’s why supplier reliability is vital in the automotive industry:
- Reputation Damages – When you fail to deliver on your promises, your clients and customers will begin to lose faith in your business. Your brand reputation can take years to create and only a few minor instances to completely destroy.
- Schedule Delays – Beyond just disappointing your customers, delays in your logistics processes could cause you to have to restructure delivery processes, incurring fees with last-mile delivery or upsetting pre-approved transit schedules.
- Cost – Every delay to the automotive supply chain causes businesses to lose out on capital. Delayed deliveries lead to customers who want refunds, cancelled orders, and unpaid invoices.
Reliable suppliers are the foundational pillar upon which the entire automotive supply chain rests. By partnering with a reliable supplier and doing due diligence to check for potential risks, you’re avoiding the above problems while contributing to a stable, secure, and robust supply chain.
Common Vulnerabilities in the Automotive Supply Chain
Demand for automotive products isn’t going away anytime soon. With a consistent demand that’s slowly rising each year, businesses in this sector need to understand potential vulnerabilities and prepare to overcome them.
Some vulnerabilities are impossible to avoid, like the sudden outbreak of war or natural disasters. However, predictive strategies can help to determine the risk of potential suppliers before you partner with them, helping to minimise the possibility of these events impacting your company.
Typically, the leading vulnerabilities that businesses can control in the automotive supply chain stem from:
- Poor Visibility – 81% of automotive partners claim that they don’t have full visibility over their own supply chain. Without insight into the state of partners, businesses are unable to plan mitigative strategies to overcome potential risks.
- Cost Containment Issues – Without full context as to how your partners operate, businesses in the automotive supply chain regularly struggle with cost containment strategies. Businesses need to constantly monitor the costs of transportation, materials, warehousing, and more to build up a nexus of information on how their business could be exposed to cost risks.
- Poor Risk Mitigation – Risk mitigation is the single most impactful method of managing the growing complexity of the automotive supply chain. When businesses fail to assess supplier reliability and potential disruptive risks, their production and shipment pathways can become fractured and weakened over time.
Source: Top operational concerns in the supply chain.
Businesses need to understand that every supplier can experience reliability issues. However, the important thing is to conduct effective risk assessments ahead of time and gain full visibility over your partners to be able to combat those risks.
In circumstances where risk is too great to overcome, businesses can switch to a different supplier before encountering any major hurdles.
The Role of AI and Machine Learning in Mitigating Risks
Artificial intelligence and machine learning are two of the most impactful technologies that have emerged over the last two decades. Much of effective risk assessment and mitigation in supply chain planning comes from data analysis. AI and ML are able to perform data collection, processing, and analytics at speeds that would be unachievable with previous technologies.
Currently, 46% of supply chain executives anticipate that AI technologies will become their greatest area of investment over the next three years. The motivation behind this change in investment strategy is linked to the powerful abilities of AI and ML tools. When improving supply chain risk assessment, AI can:
- Analyse Data – AI can analyse more data than previous tools at much faster rates. When processing data for 1000s of potential suppliers, this provides a comprehensive level of visibility over potential risks.
- Predictive Algorithms – ML tools can learn over time, allowing them to hone their predictive algorithms to high rates of fidelity. The automotive supply chain can use AI and ML to forecast risk and implement strategies to mitigate it.
- Real-Time Monitoring – Artificial intelligence tools can monitor the supply chain in real-time, understanding how changes in economic, social, or political contexts will impact individual suppliers and their production capabilities.
Prewave is at the forefront of AI and ML in risk intelligence, offering numerous products that allow businesses to more effectively determine risk overhead in their partners and identify potential reliability issues.
How to Address Supplier Reliability Issues
Fixing supplier reliability issues after identifying them won’t be an overnight change. However, the automotive industry is so widely developed that there are numerous options that a business can turn to when it wants to address these problems.
Here are four leading strategies to address supplier reliability issues in the automotive supply chain:
- Diversify the Supplier Base – When businesses concede a large percentage of their supplier production to one or two companies, they create potential points of weakness in their supply chain. If a supplier manages 50% of a company’s raw materials and is suddenly unable to produce, their operations will rapidly grind to a halt. By diversifying the base of suppliers an organisation works with, they are able to create a network of alternatives, with no one supplier having too much power over production.
- Implement Advanced Forecasting Models – With the growing precision of artificial intelligence and ML technologies, forecasting is rapidly becoming a primary tool in supply chain risk assessment and mitigation. Advanced forecasting models will be able to manage the complexity of the supply chain and bring a high level of accuracy to future predictions. Adapting to these predictions ahead of time can help to mitigate supplier reliability problems.
- Collaborative Risk Management with Suppliers – Working together with suppliers can help to defeat data silos, leading to more accuracy when identifying risks. By using supplier data, you’re able to collaborate on risk mitigation strategies that help both parties succeed. This strategy will also help build stronger relationships with your supply chain suppliers.
- Continuous Monitoring and Adaptability – The supply chain can rapidly change as new global scenarios arise. Constant monitoring and a willingness to adapt to new processes will help ensure your business stays agile enough to tackle any problem that may emerge.
While the automotive supply chain is vastly complicated, the existing prediction and mitigation strategies you can put in place help to bring a much-needed level of clarity. With full visibility over your partners, you can create better processes and eradicate supplier reliability issues.
Regulatory and Compliance Considerations
Another important factor to take into account is the potential impact of changing regulations. One single action by a government can radically change how your business has to operate in its territories. With that in mind, it’s vital for your business to stay ahead of potential regulatory changes and adapt as soon as possible.
Compliance monitoring and abiding by regulations is critical for organisations. Where possible, use internal resources to trace potential legal changes that governments in your areas of operation are planning on approving a bill. Understanding the impacts ahead of time will give you the additional runway needed to build out preventive or protective strategies.
Prewave’s Solutions for Supplier Reliability Management
As a global supply chain risk intelligence platform that’s trusted by industry experts, Prewave has developed several solutions to streamline supplier reliability management. Using cutting-edge technologies, like AI, ML, and cloud integration, we trace risk across the globe and deliver tailored insights to your business.
Here are a few of the solutions that Prewave offers to enhance supplier reliability management and keep your supply chain running smoothly.
Sub-Tier Visibility
As companies expand, adding more suppliers and linking to new areas, the underlying complexity of their supply chain increases. This is especially the case for businesses working in the automotive industry, which involves an extensive network of raw materials and suppliers.
In order to enhance visibility over the automotive supply chain, Prewave offers Tier-N Monitoring. With Tier-N Transparency, a business is able to map its entire supply chain, incorporating data from public, private, shared, and supplier-side sources. Prewave can map over 500,000 Tier-N suppliers across 300+ commodities, giving you a 360-degree view of supplier risk.
As a free service for your suppliers, they can sign up to your network, bringing you full visibility over their business and the connective links that they have forged with other suppliers.
Effective visibility over the automotive supply chain is one of the most effective ways of decreasing reliability issues and removing redundancies in your network of operations.
Prewave’s Supplier Score and Risk Matrix
Prewave offers supplier scoring, allowing you a 360-degree view of the potential risks that could impact a supplier. Each supplier’s risk profile pulls from live Prewave data, external information, historical data, and more to deliver a quantifiable risk rating in real-time.
By examining the political, financial, workplace, and other risk factors, Prewave provides an overall risk score. Depending on where a supplier falls on the Prewave Risk Matrix, you’ll be able to trace how high the potential risk of working with a supplier is and where they could impact your business.
With comprehensive insight into predictive risk, Prewave gives your organisation the confidence it needs to select the best suppliers for your business.
The Prewave Action Platform
An integral part of risk management is regularly auditing your suppliers, identifying potential problems, and putting in place actions to mitigate them. The Prewave Action Platform offers extensive oversight into risk, using a risk identification funnel methodology to understand potential risks and suggest actions to remedy them.
Interacting with suppliers, analyzing data, and utilizing peer scoring provide a comprehensive risk overview. Prewave offers action consulting, on-site auditing, and full awareness training to enhance supplier performance and bolster supply chain resilience.
As a full-score service, Prewave will help identify, isolate, and eliminate major risks in your automotive supply chain, building a more robust service for your business.
Final Thoughts: Identify, Address, and Overcome Supplier Reliability Issues
The automotive supply chain is made up of thousands of interconnected networks of suppliers. As businesses enter into this market and expand, they have to create connections with these suppliers to facilitate the timely production and delivery of raw materials and products. Yet, each partnership poses an inherent risk – if a supplier cannot deliver, your business has to pay the price of those delays.
Understanding the risk that underlies supplier relations and taking preventative steps to overcome them will allow your automotive organisation to excel. With Prewave’s range of cutting-edge supplier reliability and risk management solutions, you’ll be able to stay one step ahead of potential disruptions.
Book a demo with Prewave or reach out to the team today to start building a more reliable supply chain!
