Earlier this year, logistics giant DHL released a white paper, “Quiet Revolution: Convergence and the Future of Automotive Supply Chain,” outlining the convergence of the auto sector and high-tech industries. The growing importance of technology vendors has altered the automotive supply chain and introduced new risks.
How is the increase of technology suppliers affecting the supply chain for auto manufacturers?
Technology now represents 50 percent to 60 percent of the value of the car. Those systems are coming from technology campuses, which are in the Far East and based where those technology centers are producing. The main effect we are seeing is it has elongated the supply chain. These suppliers are not based where car manufacturers are producing cars. By making the supply chain longer, you start adding more risk.
The automotive industry is competing for these components with other companies that don’t build cars. How has that affected the supply chain?
From my experience, the key to managing risk is in inventory. You basically have to improve inventory management and visibility.
We’re not necessarily seeing an issue where companies are competing for limited stock. Companies need to see where stock is and what the lead times are to get it to their factories, and utilizing more sophisticated forecasting tools.
Technology development cycles are much faster than auto development cycles. How is that affecting the industry?
We can see those lifecycles beginning to decrease, because the technology within the car has a much shorter lifecycle. That may be reflected in mid-term upgrades or refurbishments.
I think you could see with some technologies that cars could be more modular in the future. In terms of the aftermarket opportunity, OEMs might create more demand by allowing the technology components in the vehicles to be upgraded via aftermarket channels.
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