With many sources estimating that there are more than one billion cars in the world today, it is no secret that the automotive industry has come a long way since Ford’s Model T.
Automotive supply chains are some of the most complex in the world, as many vehicles contain more than 20,000 parts originating from thousands of different suppliers. The auto industry is changing fast, which means traditional supply chain tactics and relationships have had to adjust, too.
The automotive industry is vastly different from other sectors, because it is the only industry that makes a product of high complexity in very high volume. Other industries with global supply bases may be able to benefit from the current supply chain tactics that are present within the automotive industry, including:
Timeframes built around shipping
As stated before, many vehicles contain more than 20,000 parts from thousands of different suppliers, so it is important that production timelines are not slowed down because of bulk product shipment delays. This is done by creating timelines that are built around shipping schedules.
If it takes forty days for one specific part to get from point A to point B, a set amount of parts will be ordered that will provide enough for assembly before needing to order again. With a shipping schedule where something new is arriving every week, this means there will consistently be enough parts available to assemble a finished product.
Buying smaller quantities more often
By basing timelines around shipping schedules, this means those in the auto industry will purchase small quantities of parts more often, as opposed to bulk shipments every couple of months.
This allows for inventory levels to be more manageable and a lowered need for mass safety stock.
More stable cash flow
Most other industries are commodity-based, and will tend to buy high quantities of product that are meant to spread out over time.
When purchasing in high quantity and not ordering again for six to eight weeks, this means cash flow will have a lot of peaks and valleys, as opposed to being more stable, like it is in the auto industry.
Auto industry supply chains have transformed throughout the years with the evolution of new technology and shipping practices, and will continue to be a leading example for other industries.
Our team at TOC Logistics is committed to providing clients with solutions that will save both time and money. We consistently monitor patterns within the supply chain industry, across many sectors, in order to understand what works and what doesn’t.
If you are ready to optimize your supply chain and work with a team that always has your best interest in mind, please reach out to us today.