The global automotive logistics industry is experiencing an unprecedented shift in 2020, as companies grapple with advanced technology and shifting consumer patterns. And like all business sectors, the industry has been hard by the onslaught of COVID-19.
With customer demand intensifying, and competitive threats becoming more unpredictable, the automotive logistics industry is on the cusp of a revolution. The market is projected to surpass $170 billion by 2025.
The industry has turned to a number of initiatives to put the brakes on in-transit damage, bolster the flow of parts and vehicles, and improve information visibility. A major goal is elimination of shipment delays, which can create a domino effect throughout the supply chain that ultimately strains customer relations.
Citing the latest data on worldwide car production from the Organization of Motor Vehicle Manufacturers (OICA), Worldometer reports that the production of cars in 2020 has already surpassed 20 million. Spearheading the trend is China, which produced more than 21 million passenger cars and 4 million commercial vehicles in 2019. In the U.S., by contrast, commercial vehicle production outnumbered passenger vehicles in the same year, at 8 million and 2 million, respectively.
Auto companies are rethinking their supply-chain strategies to cash in on new market opportunities, maintain competitive advantages, and reduce costs as they look to weather the storm of COVID-19.
In a bid to ensure timely delivery of automotive parts, advances in just-in-time and build-to-order systems have resulted in more responsive supply chains, and a more flexible production environment.
Original equipment manufacturers (OEMs) are also experiencing a number of challenges in the aftersales market, including anti-competitive legislation, non-franchise workshops, and low-cost imports. In keeping with increases in vehicle production, demand for vehicle servicing and replacement parts has surged in the recent past.
The inbound logistics side is working to streamline the warehousing of automotive parts and raw materials. Given the need to enable the smooth flow of production parts, this sector is likely to see a continued rise in activity. A seamless inbound logistics ecosystem is needed to create higher-quality products, boost sales and cost savings, and reduce overhead and waste materials.
Inbound logistics is the first stage in the supply chain. Yet the COVID-19 pandemic has derailed the influx of raw materials and auto parts to manufacturing facilities. Outbound logistics, it’s worth noting, faces similar disruptions as a result of the virus.
In the warehouse, logistics companies such as DHL are using smart glasses equipped with augmented reality to bolster operations. The devices allow for hands-free picking, enabling workers to quickly locate and sort product.
Leading companies are striving to keep the supply and production of spare parts going. They’re investing in a variety of innovative technologies to gain real-time visibility, eliminate paperwork, reduce fraud, and rein in supply-chain costs. Skoda, for example, has been using drones and artificial intelligence-based 3-D mapping technology to identify and track empty containers outside the factory from the air. Koopman has embraced blockchain to gain end-to-end visibility into the supply chain. The automotive logistics company conducted a blockchain trial in the Netherlands in April, 2018, to track each unit in real time and automate administrative transactions.
With the help of state-of-the-art inventory management systems, the automotive logistics industry is looking to remove unnecessary waste and non-value added activities from the supply chain. The goal: no detours, no backflow, no waiting, and reduced logistics costs.
Recent years have also seen an increase in the use of third-party logistics (3PL) providers to support the automotive logistics supply chain. Automotive companies are looking to 3PLs as a means of streamlining logistics. For their part, 3PLs are are collating data in real time and joining with auto manufacturers to bolster customer relations.
The coronavirus pandemic has compelled companies throughout the supply chain to make tough decisions, including derailing or halting production, and reevaluating cost-cutting measures. Further disruption in the supply chain is likely to be seen in the coming years.
The pandemic has brought about significant changes in the automotive industry in China. Preliminary data from the China Passenger Car Association (CPCA) finds that passenger car sales there dipped 80% in February of 2020. That said, COVID-19 is not invincible. Production is resuming in China; albeit slowly due to logistics problems.
In both China and globally, digitization efforts are accelerating in the automotive logistics sector. There’s a heightened sense of urgency to create transparency and secure sufficient capacity to bolster resilience against future shocks. In a bid to become a $170 billion market by 2025, stakeholders in automotive logistics are embracing collaboration, boosting the efficiency of inbound logistics, and seeking deeper relationships with outsourced service providers.
Sunil Kumar Jha is research content developer at Global Market Insights.
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