Supply chains: preventing a weak link

Bill Bacon, managing director for automotive at DHL Supply Chain, explains why it’s more important than ever for both manufactures and suppliers to have greater resilience in their supply chains so not to fracture the growth in British auto manufacturing.

Increasing volatility and uncertainty in global supply chains can cause traditional supply chain management models to break down. Natural disasters, socio-political unrest, economic uncertainty, market volatility – these and more can threaten catastrophic disruption without warning.

In 2011, when the unthinkable happened – the Fukushima tsunami and nuclear disaster in Japan – the global automotive industry was already busy recovering from the U.S. financial crisis, dealing with a European market damaged by the Eurozone debt crisis, and scrambling to meet demand in markets, growing exponentially, like China and India.

Manufacturing was affected by the compound disaster in Japan. But some of its suppliers were devastated. The automotive industry woke up to the fact that while its just-in-time (JIT) business model and super lean, highly inter-dependent supply chains were wildly efficient, they also were brittle – susceptible to disruption on a potentially massive scale.

It is important to remember that almost all businesses face some degree of some risk, which will be outside immediate control, especially in a global marketplace. A business’s supply chain is often at the forefront of facing risk and is one of the most exposed areas to external factors.

More and more original equipment manufacturers (OEMs) are also obtaining parts from multiple suppliers and not just the authorised tier one suppliers, adding even more complexity to the automotive supply chain, and consequently greater risk.

Acting on this knowledge, the industry and its supply chain partners have embarked on efforts to craft a revised operating model: supply chains that are simultaneously lean and resilient. Even the government is taking part, recently allocating £24 million to aid UK suppliers to the automotive industry.

It makes sense then that we’re seeing more and more OEMs currently looking at getting better visibility and traceability of car parts so that they can see where any issues might arise. Whilst issues such as natural disasters can’t be foreseen or avoided, there are plenty of other issues that can, and therefore ultimately keep the industry running smoothly.

The automotive industry’s journey toward creating supply chains that are simultaneously lean and resilient is still in its early stages but at DHL Supply Chain resilience has been a priority for the last couple of years.

Car output in the UK is expected to reach all-time record volumes by 2017, and so naturally, the supply chain will need to keep up with the demand. A competitive supply chain is a vital ingredient in a successful automotive industry. The evolution towards this resilient supply chain model is ongoing. Automotive companies are re-balancing their supply chains to build in carefully managed tolerances for volatility.

The goal is to build a supply chain that can tackle conditions of systemic volatility – good and bad – ranging from the ordinary to the unthinkable. And do so while preserving or enhancing profitability, contributing to a stronger and more successful industry.