The predicted surge in electric vehicle demand carries the potential to exacerbate sourcing challenges for key battery minerals, potentially disrupting automotive manufacturing.

The global demand for battery raw materials is expected to explode, with increases of 20x for nickel, 19x for graphite and 14x for lithium by 2040. However, concerns regarding resource availability remain, as recent estimates found that 60% of lithium, 30% of cobalt and 10% of nickel were reserved solely for EV batteries in recent years. 

Now, with predicted shortages, automotive manufacturers face a potential pinch as EV incentives and popularity rise across the globe. To prepare, manufacturers will require proper strategies and technology capable of diversifying supply chains and navigating material shortages.

The expansion of domestic facilities and federal incentives for EV production and purchase will be obsolete if manufacturers fail to source sufficient materials. Suppliers of battery materials, such as lithium, nickel, cobalt, manganese and graphite, mined across Asia, Africa and South America, are increasingly susceptible to disruptions due to geopolitical tensions and the effects of climate change. Automotive manufacturers are bound to feel the impact. Navigating those disruptions will be critical not only to their success, but to greater economic and climate goals connected to EV production.

What can manufacturers do to prepare for forecasted material shortages? They must be able to predict supply and demand trends, diversify the procurement of battery materials and increase flexible production processes.

“Smart” manufacturing software provides benefits such as demand forecasting, scenario planning, alternative sourcing strategies and trackability and traceability functions, which can reduce dependence on single source materials and increase supply chain diversification. Technology tools include:

• The internet of things provides sensor-based data collection throughout the supply chain, allowing for active tracking of raw materials in real time. It monitors the flow of materials from mining operations to processing facilities and warehouses, enabling improved route optimization, reducing potential material losses and facilitating faster response to disruptions. 
• Enterprise resource planning integrates software with procurement and logistics systems, providing a holistic view of material availability, sourcing options and supplier performance. ERP applications employ forecasting tools to anticipate material availability, and utilize track and trace capabilities to trace materials throughout the supply chain.
• Supply chain planning utilizes multi-sourcing strategies to reduce dependency on single resources or suppliers. It monitors supplier activity to predict potential shortages and strategically stockpile resources as needed. And it allows for collaboration with partners to secure alternative routes for material deliveries as disruptions arise.
• A manufacturing execution system optimizes production execution and ensures quality production to reduce waste of valuable materials.
• Finite scheduling optimizes production schedules based on available resources to plan production schedules, and explores alternative sources if needed.

Implementing these platforms will support material sourcing and fortify EV battery manufacturing. In addition to these tools, the use of advanced analytics and data-driven insights can reinforce sourcing and manufacturing operations.

Advanced technology, such as machine learning and artificial intelligence, utilizes historical data, including production levels and material delivery delays, alongside real-time intelligence on demand fluctuations, material shortages and price changes. With advanced algorithms, manufacturers can also perform scenario planning, to better prepare for potential shortages or delays.

The use of a digital twin provides organizations with a digital copy of physical data or information. It allows manufacturers to create a virtual simulation of their supply chains, mimicking processing facilities and transportation networks. Organizations can also simulate scenarios of potential raw material shortages and identify potential bottlenecks before they happen in real time. This capability allows for improved resource allocation by analyzing production processes, then translating them into real operations.

The global demand for battery raw materials is expected to increase drastically in the next few decades. Subsequent shortages are bound to impact EV manufacturers, especially as geopolitical tensions, unanticipated disruptions and climate change interrupt global supply chains. As raw material shortages increase, manufacturers will be forced to employ greater resourcefulness and innovation. Success will require the adoption of predictive software and technology that can ensure resilient battery production in the automotive industry.

Ara Surenian is vice president of product management at Plex.