Supply chain management in the automotive industry: The benefits of digitization

Angelika Agapow
Angelika Agapow
Content Marketing Specialist
February 01
10 min
Table of Contents


The automotive industry is one of the most intricate and advanced supply chains in existence. With an interconnected web of third-party companies, thousands of components are woven masterfully together to create dependable vehicles with exceptional quality standards.

Automotive supply chain companies are staying ahead of the game by tapping into innovative tech solutions that give them access to thousands of inventories. By leveraging a global logistics network, they can ensure their goods simultaneously reach customers all around the globe.

Also the COVID-19 crisis has caused major disruptions to global supply chains, as unprecedented demand and reduced logistics capacity have resulted in product shortages and facility closures worldwide.


What causes supply chain problems?

The logistics industry is currently facing a complex and multifaceted dilemma, with both internal and external pressures. Driver shortages, capacity constraints at providers’ sites, inflationary costs associated with shipping delays impacted by global tariffs; all wreaking havoc on inventory stocks as demand peaks across industries threaten to worsen the situation even further. A comprehensive solution must be found swiftly in order for businesses to remain competitive within this ever-evolving market landscape.


Supply chain management in the automotive industry: challenges and solutions

Is your automotive supplier business suffering due to current constraints? Get the help you need and discover a new solution for overcoming these challenges.


Multiple ERPs

With multiple ERPs and legacy systems scattered across the globe, organizations are increasingly suffering from disconnected data which leads to an overall lack of visibility in their supply chain. Consequently, this results in delayed decisions being made and operational underperformance throughout the entire process.

Possible solution: Ensure data accuracy and confidence through a seamless, closed-loop process. Integrate all supply and demand information into a single point of record to create an undisputed version of the truth where everyone can observe any changes at anytime throughout the planning cycle that will ultimately drive confidence and success.

Check our case study about integrating machines on production line with ERP system.


Large-scale data requirements

The ability to model and deliver reliable global supply chain solutions is essential for any successful operation. But, with the enormous computing power comes a critical need to scale in order to maximize efficiency throughout integrated systems.

Possible solution: With the right technology, you can ensure scalability and performance levels that keep up with this highly data-driven industry. Investing in reliable solutions will guarantee your organization’s growth by meeting essential business needs.

You can learn more about data held in a consistent and proper format and with easy access for authorized persons here. Find better solutions with Common Data Model – an ideal approach for the automotive industry.

Hicron Software House digitizing Automotive supply chain


Global complexity

Automotive companies face the complex challenge of having to manage sourcing, production, and delivery across multiple countries and time zones. Keeping ahead in this highly competitive environment requires real-time visibility into supplier performance along the entire supply chain.

Possible solution: Grow smarter, faster and make a bigger profit with an end-to-end view of your supply chain. Gain valuable insight into demand patterns, inventory levels, capacity usage, and other constraints to ensure efficient product flow throughout the entire process.

Check out our article about the integration of online and offline channels in retail.


Complex products

Vehicles are complex and highly customizable creations, fitting customer-specific needs in marketplaces worldwide. With deep BOMs that contain multiple models, trims, options, and packages to choose from – along with intricate rules for order-based requirements – it’s no wonder why vehicles continue to drive the industry forward.

Possible solution: Leveraging a supply chain management solution with an in-memory planning engine yields the ability to quickly respond to demand and configuration changes. BOMs can be utilized for product structure maintenance, specifying production draw quantities, effectivity dates, and yield values – providing key information for accurate forecasting.

We can offer you fully customized solutions driven by modern technology for better and faster data processing and of course visualization for further product improvement – this one was made thanks to Angular technology. Check our case study about optimized quality control of post-sales servicing for the automotive giant.


Constrained and inelastic global supply

As businesses strive to keep up with rising demand, the challenge of accurate forecasting becomes more important. Ramping production leads to an influx of parts sourced from suppliers who are still careful following the 2008 recession. Companies must now be strategic in anticipating future needs and responding accordingly.

Possible solution: With the right system, you can prioritize orders against any criteria of your choosing – be it by channel, vehicle type, or geography. You’ll gain flexibility in terms of modeling units and timing-based constraints to ensure supply meets the demand when faced with imbalances – all while evaluating multiple scenarios for successful outcomes.

Get an Expert View on Industry 4.0 in Europe! 


Increased expediting and premium shipping charges

With the wrong parts in the wrong place at an untimely moment, businesses face significant increases in expediting and shipping fees. This is often accompanied by high inventory levels that lock up capital while simultaneously incurring costly charges for obsolete materials.

Possible solution: With the ability to seamlessly link data, processes, and people together, inventory planning is no longer a solitary process. Stay in control of your automotive inventory planning and management with our connected solutions. Our always-on analytics allows you to assess any potential changes or disruptions quickly, while alerts will notify planners if there are discrepancies between target thresholds and actual figures.

We helped one of the automotive giants build an allocation application. Learn more about it in our case study.


Navigate the complexities of the supply chain

1. Vendor delays

From the thousands of individual components that make up a vehicle, to its complex supply chain spanning across multiple vendors counted in dozens- it’s no wonder why delays can happen when constructing and distributing. However, with strategic planning and coordination between manufacturers, this process can be optimized.


Possible solutions:

  • With integrated manufacturers and suppliers, companies can gain more control over quality assurance while gaining visibility into any potential issues that could arise. A streamlined manufacturing process will help safeguard against delays or last-minute changes.
  • Staying on top of your supply chain can be made easier with accurate and automated tracking. Knowing expected timelines and being aware of potential delays helps you plan ahead and tackle any unexpected disruptions head-on.
  • To ensure success, companies must take proactive steps in supply chain distribution. While a quick fix may seem like the best solution right away, it doesn’t address underlying concerns and could lead to losses down the line. Long-term planning is an essential tool necessary to achieve long-lasting results.


2. External factors

Auto supply chains are subject to dynamic change as regulations become more intricate and require the adoption of specialized technical skills. Global automotive networks experience significant repercussions due to even slight alterations in environmental, economic, or political structures.

Possible solutions:

  • During the COVID-19 pandemic, emissions from automobiles decreased while interest in electric vehicles increased exponentially. To stay competitive and relevant to consumers’ changing needs and values, it is essential for the automotive industry to understand these shifts towards sustainable forms of transport – and make necessary adaptations accordingly.
  • In order to stay competitive, the automotive industry must be proactive in anticipating market conditions. Thorough research and swift analysis of external forces is essential for efficient supply chain planning that accommodates any potential disruptions or changes ahead.


3. Escalating costs

Let’s take the example of India. Businesses there need to be especially vigilant in managing costs due to the burden of logistics expenses. To maintain their profit margins and stay competitive with major automotive manufacturing centers like China, Indian industries must take proactive steps toward curbing operational expenditures.

Possible solution: To ensure success for both buyers and suppliers in the automotive industry, contracts must be freshly formed to account for newly adopted strategies. To redistribute risk, joint investments may arise while pricing is dynamically adjusted based on market demand. Additionally, transitioning away from a multi-vendor system towards “one part – one vendor” could prove beneficial moving forward.

Get an Expert View on Digital Transformation in the German automotive sector! 


Chief benefits of effective supply chain management

#1 Shipping optimization

As logistics costs soar, small businesses must become savvy to stay competitive. Supply chain leaders should take heed of this shift’s impact on profit margins and consider maximizing their efficiency by decreasing separate distribution channels while enlisting specialized logistical services, thereby optimizing shipping processes and safeguarding cash flow.

In other words, streamlining the delivery process for both small packages and bulk orders is a key factor in ensuring customer satisfaction. By strategically selecting shipping methods, companies can significantly improve order-to-delivery timeframes while reducing costs.


#2 Reduced overhead and inventory costs

To maintain a successful balance between saving costs and being prepared for the unexpected, businesses must identify their ideal inventory level. An efficient supply chain can reduce overhead expenses through reduced storage requirements while avoiding overstocking which puts pressure on distribution networks and reduces resilience to disruptions.


#3 Improved risk mitigation

Supply chain management is essential for businesses to prevent costly disruptions. With greater visibility and advanced analytics, companies can identify potential risks before they escalate and have a contingency plan in case something goes wrong.

Companies that proactively manage risks are well-positioned to dodge negative surprises and keep operations efficient. This can lead to cost savings, increased customer satisfaction, and improved sustainability in the long run.


#4 Streamlined cash flow

Operating an effective supply chain is key to any business’s success. Establishing strong supplier ties, and monitoring stock and prices vigilantly, while keeping quality control at its highest level will lead not only to better cash flow but improved liquidity as well.


#5 Better data analytics and visibility

Staying connected with suppliers and having real-time data at your fingertips are essential for business managers to successfully navigate the changing environment. Leveraging mobile phone applications, conferencing platforms, shared dashboards, and software tools gives you access to crucial insights on stock levels, distribution channels, and performance metrics which will aid in quick response times when planning for contingencies or capitalizing on opportunities.

Get a tailored solution with Hicron Software House

What other supply chain issues have you experienced? Let us know and we will talk about possible solutions for your case. As Hicron Software House, we have been working with the automotive industry for years and we provide solutions based on business needs. We can help you in creating an optimal tech stack, implement enterprise-size DevOps, and introduce automation as well as audits to drive automotive. What’s more, we know SAP very well and come up with custom solutions based on SAP standard.

Angelika Agapow
Angelika Agapow
Content Marketing Specialist
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What our partners say about us

After carefully evaluating suppliers, we decided to try a new approach and start working with a near-shore software house. Cooperation with Hicron Software House was something different, and it turned out to be a great success that brought added value to our company.

With HICRON’s creative ideas and fresh perspective, we reached a new level of our core platform and achieved our business goals.

Many thanks for what you did so far; we are looking forward to more in future!

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Jan-Henrik Schulze
Head of Industrial Lines Development at HDI Group

Hicron is a partner who has provided excellent software development services. Their talented software engineers have a strong focus on collaboration and quality. They have helped us in achieving our goals across our cloud platforms at a good pace, without compromising on the quality of our services. Our partnership is professional and solution-focused!

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Phil Scott
Director of Software Delivery at NBS

The IT system supporting the work of retail outlets is the foundation of our business. The ability to optimize and adapt it to the needs of all entities in the PSA Group is of strategic importance and we consider it a step into the future. This project is a huge challenge: not only for us in terms of organization, but also for our partners – including Hicron – in terms of adapting the system to the needs and business models of PSA. Cooperation with Hicron consultants, taking into account their competences in the field of programming and processes specific to the automotive sector, gave us many reasons to be satisfied.


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Peter Windhöfel
IT Director At PSA Group Germany

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