Supply Chain in the Automotive Industry. After the seasonal break in the Automotive Industry at the end of July and the first half of August, the trend on the market is showing a recovery. This is a green light for the automotive business after the crisis due to the war in Ukraine and the lack of microchips from Asia. The prediction of a positive trend is till the end of the year and new seasonal brakes during the winter for both car manufacturers and suppliers. The high sales will bring a positive impact on the financial results of companies in the Automotive business and significantly improve the losses in the first and second quartal of the year.
The orders from car manufacturers (customers) are so high that overcome installed
production capacities at supplier companies. It makes it difficult for Tier 1 and Tier 2 suppliers how to increase their production capacity and fulfill customer demand. It is the word to mention that one of the most
important KPIs for suppliers is “Delivery on time”. Delivery on time is an indicator that measures the quality of service to customers and ranks suppliers on the reliability list. One of the actions for suppliers to increase capacity is overtime work with 6 or even 7 days during the week with existing manpower. It generates high overtime for manpower and increases the cost for companies. A part of the cost for overtime is compensated with additional sales. The increased salary is a good opportunity for employees to earn more money but over a longer period, the overtime schedule could be counterproductive making people tired and reducing productivity.
Logistics in uncertain automotive supply. This phenomenon could affect the lost quality of products. Employing new manpower is more expensive than previous action, but more sustainable for a longer period. The high demands in the period September – December in 2022 could be fulfilled with overtime, but in case of the same trend in the first quarter of 2023, the suppliers must think of new employment and organize additional shifts of production. For some projects where three or four shift patterns already exist the capacity increase will be possible only with new equipment and machines implementation. An investment in new equipment is always a very expensive strategy and only in the long term can be profitable. That is why the analysis must be very robust and reliable before the decision on a new investment.
Logistics as a key driver in the supply chain must be very reactive in the daily analysis of customer demands not only for the short term but for a longer period (more than three months). Every pick with a higher or lower order than usual should be investigated and communicated with the customer. Customer demands are pretty unstable with significant fluctuation and the main task for Logistics is to recognize and react to customers on time. It is important to understand the behavior of customers’ demands to organize their production and order enough materials from their suppliers. Every delay from Tier 2 or Tier 3 suppliers will reflect to delay of production for Tier 1 suppliers and to the final customer, the car manufacturer.
