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Roadblocks in the Supply Chain of Automotive Industry: Top 5 Challenges

Feb 6, 2018

automotive industry

The supply chain in the automotive industry has several different aspects and is a very complex system, which makes it is essential for companies in the automotive space to keep constant tabs on their supply chain management systems. This sector has been showing an upward trend in recent times and is considered to be one of the most promising industries to watch out for in terms of technological growth and profit gains. But on the flip side, automotive companies are exposed to several challenges, some of them proving to be extremely difficult to handle especially for small and medium players in the industry. Most of these challenges are supply chain related in one way or the other. Hence, strategic supply chain management must top the priority list of companies in the automotiSE_Demo2ve industry. Mentioned below are the top supply chain challenges that are impacting automotive industry companies:

Overstocked Inventories

For every sector, it is vital to ensure that they are well-stocked and not over-stocked. Though the automotive industry has been witnessing steady growth in the past, this does not mean that companies operating in this space have to undertake extensive production. At the same time, they must also ensure that they are not understocked or face a shortage in the supply. Correctly estimating the demand and aligning the production capacity to meet the needs is indeed a challenging task for automotive players. These companies can also consider teaming up with third-party logistics partner to maintain a balance in the production and supply. Furthermore, it can help to gain full visibility of the demand and make better production decisions.

Rising Recalls

It is crucial for players in the automotive industry to understand that in the case of a recall, there are high costs associated with the process. Such failures in the supply chain services can be a long and complicated issue that can tarnish your name, disrupt the system, and affect your reputation in the market. More importantly, if your operations scale to a globally, then there is a higher risk of adverse consequences. In a sector like the automotive industry, the recalls in case of any defect to the product cannot be avoided as the customers’ safety is at stake. 

Just-in-time operations

Incorporating just-in-time strategies to the supply chain is essential for automotive companies to contain costs, especially when operating internationally. How can businesses achieve this, you wonder? They must have complete visibility of each element in their supply chain and also have access to the data necessary to create a plan for future growth. Automation of processes and full visibility at each stage are also facilitators for reducing costs and other losses.

Adaptability to change

Change is inevitable irrespective of the industry that you operate in. In a rapidly growing sector like the automotive industry, constant changes are happening round the clock. Companies in the automotive space must prepare themselves to be flexible in adapting to these changes. Automotive industry players must be able to predict high and low demand seasons accurately and adjust their supply chain accordingly to meet the demand.

Abiding by environmental ethics

The supply chain in the automotive industry is bound by a multitude of quality standards and regulations that are mandatory to follow. In the case of companies operating globally, they must be aware of the laws and ethics being practiced by the countries that they operate in. This would help them avoid getting into regulatory issues in the long run.


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