The sudden outbreak of novel coronavirus has halted the automobile industry. The companies were forced to review their global operations, resulting in plant closures and job losses in this sector. But, the development of vaccines and changing scenarios is estimated to have a positive impact on the growth of this industry. The global automotive market is expected to have a double-digit growth rate in the existing year, which is likely to bridge the gap formed due to COVID-19.

This has also impacted the supply chain management of the industry. Besides, the process of globalization is also hampering routine supply chain management across the globe. Other factors such as the changing consumer demands, upgrading manufacturing procedures, and upcoming trends witnessed by the industry are also likely to impact the supply chain network of raw materials, parts, and finished goods; thereby influencing the overall market size during the forecast years.

Here is the list of challenges that will aid the disruptive supply chain network, propelling the market growth.

Challenge 1: Routing of parts

On average, a vehicle consists of 30,000 individual parts, which are either manufactured in-house or supplied from a third-party vendor. So, a delay in the delivery of any single component is capable of slowing down the vehicle manufacturing process.

Thus, the automobile sector has to make sure that the components are in transit, as per the production planning, ensuring the smooth manufacturing and distribution of the vehicles. This also intensifies the role of supply chain managers to work coordinately with the suppliers and third-party manufacturers to update the parts manufacture and distribution.

Challenge 2: Impact of external factors

The global automotive industry is also dependent on the economic, external politics, environment, and other such factors. Thus, the role of tariffs, trade policies, and political issues play a crucial part in altering the price to import and export of the parts and vehicles. Similarly, environmental disasters can negatively impact the supply chain of the entire industry. For instance, the unexpected outbreak of coronavirus was followed by the impact of Cyclone Tauktae and Cyclone Yaas in recent years, which imposed complete lockdown within countries. Moreover, the Suez Canal obstruction in March 2021 also affected the supply chain of the automobile sector.

Besides, the changing consumer demands are also likely to generate a new buying trend by increasing the demand for electric vehicles or by modifying them for better fuel efficiency. Thus, the automotive supply chain managers need to consider a plan to understand and diminish the risks linked with supply chain management.

Challenge 3: lack of visibility coupled with high fixed and variable costs

The third most important factor impacting the supply chain management of the automotive industry accounts for high fixed and variable costs. This cost is inclusive of the investment in machinery, automation, and production lines, high staff salaries owing to the technical skills, and retirement and pension provision for the employees.

 Furthermore, the capital investment for research and development activities along with the utility costs to run this machinery and maintain them for a healthy and safe environment is also a part of these costs. In addition, the commodities cost for the purchase of steel, rubber, and other raw materials with the third-party costs from manufacturers and logistic providers are also reported to impact the fixed and variables costs.

Challenge 4: Product recall issues

Majorly, the product recall issues are the result of a lack of oversight and auditing in the supply chain. This also leads to issues with the quality resulting in decreasing the performance of the vehicle. This reputation damage further affects the overall revenue and results in wastage and inefficiency. For instance, as per the Organization for Economic Co-operation and Development data, in June 2021, Hyundai’s passenger cars were recalled from the end-user; as the 12V socket may overheat when the compressor from the tire repair kit is being used that could increase the risk of fire.

Thus, the automobile companies should focus on real-time data modules, re-planning the production if required, and keenly monitor the cargo activities for decreasing such activities. Additionally, the companies should also focus on delivering an effective supply chain administration for minimizing the carbon footprints released from the automotive companies.

Other factors, such as the proper management of trading collaborations and real-time visibility are also expected to resolve the supply chain management of the automotive industry. Furthermore, the robust consumer demands, ongoing technical disturbances, and buyer’s demands for transparency and ethics are also likely to impact the global automotive supply chain.