{"id":9654,"date":"2021-08-04T17:17:07","date_gmt":"2021-08-05T00:17:07","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=9654"},"modified":"2022-02-23T15:16:30","modified_gmt":"2022-02-23T23:16:30","slug":"strategy-for-supply-chain-transformation-in-the-age-of-scarcity","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2021\/08\/strategy-for-supply-chain-transformation-in-the-age-of-scarcity","title":{"rendered":"Strategy for Supply Chain Transformation in the Age of Scarcity"},"content":{"rendered":"

[vc_row][vc_column][vc_single_image image=”9657″ img_size=”full”][vc_column_text]When was the last time you had a package or food delivered to your doorstep? If you\u2019re like most Americans, it was probably within the past week. Maybe you\u2019re even expecting a package today\u2026<\/span><\/p>\n

While having your groceries, takeout, and new electronics delivered to your doorstep may provide an added convenience for you, what you don\u2019t see is how that small, yet significant change, is sending a ripple of disruption in supply chains across all industries. <\/span>\u00a0<\/span><\/p>\n

The increased demand for last-mile delivery has created scarcity for an already diminishing supply of trucks and drivers, making it difficult for companies of all types, not just B2C, to send and receive the items they need to do business. Now, even auto is feeling those impacts and suffering from scarcity.\u00a0<\/span><\/p>\n

Cause of Supply Chain Scarcity and How It\u2019s Impacting Auto<\/span><\/h2>\n

Amazon, a B2C powerhouse, has been at the head of this growing trend, making it easier and easier for consumers to purchase and receive daily items right from their home. And when the pandemic hit and going to the store was no longer an option, the world of eCommerce and at-home deliveries skyrocketed.\u00a0<\/span><\/p>\n

Now, consumers are more comfortable than ever ordering items online and having them delivered to their doorstep\u2014and <\/span>B2C companies are suddenly competing<\/span><\/a> amongst themselves and with the B2B sector for delivery resources to provide a consumer convenience that wasn\u2019t needed 2-3 years ago. This scarcity issue is only amplified when we review the <\/span>aging workforce<\/span><\/a> in the delivery industry and the lack of interest from younger generations to jump in a semi-truck for short- and long-haul transports.<\/span><\/p>\n

Ultimately, this drive in delivery demand has decreased the available supply of trucks and drivers for the automotive industry, delaying important deliveries of parts and materials and stalling production processes. Of course, this is all happening at the same time the <\/span>industry is electrifying<\/span><\/a>.\u00a0<\/span><\/p>\n

The Semiconductor Shortage<\/span><\/h2>\n

If completely redesigning your vehicle architecture, transforming your business, and dealing with delivery resource issues wasn\u2019t enough, auto (and tech) companies also face a major <\/span>shortage of semiconductors<\/span><\/a>.\u00a0<\/span><\/p>\n

These silicon chips might be small in size, but they play a big role in electronics, from your rice cooker and smart phone to your washing machine and electric, autonomous vehicle. The scarcity of semiconductors has been a growing concern as the need for them has continuously increased over the years, especially with the automotive industry dramatically moving toward EV and AV vehicle designs. However, when the pandemic hit, once again, it shook up the supply chain. Demand for vehicles dropped significantly and production lines were stopped. At the same time, the need for personal computers and electronics rose significantly. This created an imbalance in market supply, with more chips going toward personal connectivity technologies and less to automakers.\u00a0<\/span><\/p>\n

So, when automakers were ready to resume assembly lines, semiconductor manufacturers had already shifted their production capacity to other technology industries, creating a significant shortage in automotive semiconductors and dramatically delaying production. Some automakers have already announced significant rollbacks and expect to lose billions of dollars in revenue this year as a result of the <\/span>semiconductor shortage<\/span><\/a>.\u00a0<\/span><\/p>\n

Scarcity of semiconductors and delivery resources will continue to grow as technology developments and delivery demands continue to surpass industry capacity trends. Automotive companies must take action now to transform their supply chain in order to survive (and even thrive) in a scarce market environment.\u00a0<\/span><\/p>\n

Here are five strategies your automotive company should consider moving forward:\u00a0<\/span><\/p>\n

Become Supply Chain Focused<\/span><\/h3>\n

Automotive manufacturers must refocus their operations from manufacturing-centric to supply chain-focused in order to maintain continuity in the face of relentless disruptions. The need to address and remedy the key systemic root causes of poor supply chain delivery performance is an urgent priority for the automotive industry, especially in light of the $110 billion revenue lost to the industry due to the semiconductor issue. The good news is that it\u2019s not too late. The bad news is the clock\u2019s running, and the next disruption isn\u2019t far off. OEMs, suppliers and industry groups must take action now. QAD and Quistem developed a <\/span>five step action plan<\/span><\/a> which includes 24 essential supply chain processes for building sustainable supply chain performance.\u00a0\u00a0<\/span><\/p>\n

Solid Forecasting<\/span>\u00a0<\/span><\/h3>\n

Forecasting at this stage is really critical. Your estimates have to maintain a consistent 90- to 95-percent accuracy to ensure you aren\u2019t left with too much or too little materials. To do this, you must be able to leverage <\/span>advanced analytics<\/span><\/a> and then use that information to formulate both long- and short-term strategic plans.\u00a0\u00a0<\/span><\/p>\n

A <\/span>good supply chain<\/span><\/a> will be able to pick up a 5- to 10-percent slack, but anything more and your businesses\u2019 supply chain will face major disruptions. Ultimately, you need to be able to sell what you\u2019ve bought, and you certainly don\u2019t want to be left without the materials critical to your product design.\u00a0<\/span><\/p>\n

Supply Chain Cleansing<\/span>\u00a0<\/span><\/h3>\n

In times of scarcity, your purchasing team needs to be able to leverage <\/span>strategic sourcing<\/span><\/a> principles. More than ever, your purchasing team should be reviewing their supply base and determining which suppliers are most likely to maintain and grow and which aren\u2019t. Hanging onto suppliers who don\u2019t have the financial means or staying power to survive scarcity and other industry disruptions could leave you with a sudden and significant gap in supply.\u00a0<\/span><\/p>\n

Instead, your company should begin to separate the \u201cwinners\u201d from the \u201closers\u201d and start to weed out and replace the losing supply base. Winning suppliers should be locked in with long-term contracts to avoid losing product to an expired deal or competition. Continuously improving your supply chain by filling gaps and weeding out weak links will help prevent your business from suffering the impacts of scarcity.\u00a0<\/span><\/p>\n

Focus on Scalability<\/span>\u00a0<\/span><\/h3>\n

As the automotive industry electrifies, custom solutions will not work and will only lead to further scarcity challenges. Instead, automakers and suppliers should focus on the scalability of their designs. By leveraging common architectures in components, you eliminate the problems of scarcity because you\u2019ll have required scale. You will also open yourself to a larger supply base, and one that is able to quickly scale as your needs grow. The tech industry is all about scale and uses this as a strategy to safeguard against scarcity.<\/span><\/p>\n

Dedicated Trucks and Drivers<\/span>\u00a0<\/span><\/h3>\n

As we discussed earlier, the growing demand for delivery has created shortages for businesses across a large number of B2C and B2B industries, which has naturally led to a higher demand of third-party delivery businesses.\u00a0<\/span><\/p>\n

By bringing delivery resources in-house, you won\u2019t have to depend on third parties and <\/span>risk them not having the availability or capacity<\/span><\/a> to meet your delivery needs. Instead, you will have a captive capacity that you can actively manage and have visibility so you can foresee and control the supply and demand.<\/span><\/p>\n

Navigating the seemingly endless disruptions of electrification, automation, and now scarcity can be challenging and overwhelming for automotive companies of all sizes. Solid planning is one way to help your business develop and implement a <\/span>successful strategy plan<\/span><\/a> and turn challenges into opportunities to gain a competitive edge.<\/span>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"

[vc_row][vc_column][vc_single_image image=”9657″ img_size=”full”][vc_column_text]When was the last time you had a package or food delivered to your doorstep? If you\u2019re like most Americans, it was probably within the past week. Maybe you\u2019re even expecting a package today\u2026 While having your groceries, takeout, and new electronics delivered to your doorstep may provide an added convenience for you, […]<\/p>\n","protected":false},"author":60,"featured_media":9657,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[182,2045],"tags":[7,46,237,697,620,495,544,1388,1677,251,92,1763,118],"class_list":["post-9654","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-supply-chain-trends","tag-automotive","tag-automotive-manufacturing","tag-autonomous-vehicles","tag-disruption","tag-electric-vehicles","tag-electrification","tag-forecasting","tag-scalability","tag-semiconductor-shortage","tag-skills-gap","tag-supply-chain","tag-supply-chain-delivery-performance","tag-supply-chain-management"],"yoast_head":"\nStrategy for Supply Chain Transformation in the Age of Scarcity | 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