Supply chain management is a crucial function for any business. As we all know, trade and commerce are dominating the business market. So it is necessary for the supply chain system to be efficient in this fast-paced and dynamic market. The automotive sector encompasses supply, manufacturing, and dealership networks. Different distributors get involved in the network to supply the requirements of each discrete unit.
Some of the organizational challenges of the automotive sector are new additions in assembly, requests from buyers, changes in distribution networks and many more. And another major external crisis is the shortage of semiconductors due to the ongoing war which is disrupting the shipments. Issues like these have a major impact on the supply chain network which causes severe delays in delivering the goods. It impacts the entire nexus.
The solution to combat these challenges is an efficient system in which various stakeholders can access all data and take part in various transactions in real time. The most business-friendly technology is enterprise resource planning software. Let’s discuss some of the must-haves for optimizing the supply chain system.
Supply chain management in the Automotive parts industry
The supply chain in auto parts is a complete cycle, beginning from the procurement of raw materials from suppliers to the delivery of finished products to the customers. And vehicle manufacturing plants need on-time delivery of goods.
For example, a car is built up of many parts, it is about 25,000 separate parts. Plus, most of these products are made of different components. Many of these components have to be manufactured and sourced, but these manufacturers rely on suppliers, fabricators, and raw materials suppliers.
So, in the automotive manufacturing sector, numerous companies are involved to make one finished good.
Complexities of the supply chain system in the auto parts industry
Issues highlighting supply chain frailty
Fabrication of semiconductors is an intricate process. The semiconductor shortage is a major crisis which began in the year 2021. During the pandemic, the demand for electronic gadgets surged, so it was directed towards the consumer’s use. And the auto parts industry was a virtual newcomer to the market, so the suppliers had to decide who should be prioritized first.
Tiers of Suppliers
The suppliers are segregated into three tiers. The third tier of suppliers deals with raw materials such as minerals, metals and plastics. The two-tier suppliers supply the necessary parts needed for the production of a vehicle. Semiconductor suppliers come under this category. And the third-tier supplier delivers finished components to the car makers. Panel suppliers, battery gigafactories etc come under this bracket. So, the timely delivery of each material from the three levels of suppliers is complex.
ERP for the auto parts industry to the rescue
The auto parts industry is a competitive landscape. so, efficiency in supply chain operation is crucial to have a competitive edge. ERP system is the best business management software which enables auto part manufacturers and distributors to streamline operations, enhance visibility and increase efficiency. Let’s learn more about how it optimizes the supply chain of the auto parts industry.
1. More coordinated data
Data is power for any business. ERP for the automotive industry has a centralized database that integrates all the operations of the business. So, consolidating from procurement, inventory, production, sales and production can be easily done. With this single source, ERP enables real-time time visibility of inventory levels, demand forecasts, order status and customer preferences.
This data integration ensures accurate and updated information simultaneously minimizing errors and increasing efficiency in the auto parts supply chain.
2. Demand forecasting and insightful planning
To attain efficiency in the supply chain, there should be accuracy in demand forecasting and planning. ERP for auto ancillary possesses advanced analytics and reporting capabilities to analyze historical data, customer expectations, and market trends to generate accurate reports. Further, it aligns production schedules, and inventory levels with the expected demand patterns acquired from the accurate reports.
3. Integrating supplier and manufacturing data
The auto parts industry is a competitive sector as mentioned earlier. Likewise, even the original equipment manufacturers and OEMs are also highly competitive in the business. So timely delivery of goods is vital from the suppliers. As learned before, there are about three tiers of suppliers. ERP solutions provide data regarding all the supplier networks. In addition, it provides real-time visibility into supplier information such as purchase history, quality and the best rates.
4. Traceability and quality control
Ensuring the highest quality of the auto components is essential in this industry. It just contributes to safety and better customer satisfaction. ERP software for auto ancillary provides end-to-end traceability into tracing raw materials data, manufacturing processes and quality inspections. All these features enable the automotive business to address quality issues and reduce room for rework and recalls.
5. Understanding of consumer needs and market trends
OEMs need data regarding customer preferences and changing trends. ERP is efficient to track and collect massive amounts of data to understand changing customer behaviors and patterns. Both the OEMs and the supplier need access to the altering trends. A smart system like ERP enables data sharing and increases the connectivity of both OEM and supplier which help in gaining insights about customer demands and trends.
6. Optimizing the supply chain system
Integration and analytics of the ERP can help to optimize supply and distribution networks. And it can change a failed network to a proactive supply chain nexus. The SCM will be more prepared for unexpected uncertainties and glitches with a robust auto parts ERP.
7. Monitoring performance and analytics
ERPs provide powerful reporting and analytical capabilities by permitting the business to facilitate KPIs and give actionable insights into the supply chain operations. It has features such as real-time dashboards and customized reports that enable stakeholders to identify and mitigate risks, measure supplier performance, optimize transportation routes, and make insightful business decisions.
Conclusion
In the auto parts industry, optimizing the supply chain system is crucial as it impacts the growth of the business. It is pivotal for the supply chain operation to upgrade to smart systems like ERP to stay proactive and competitive in the market.