How auto makers benefit from the connected supply chain

There are three mega trends driving the digital transformation of the automotive sector; Connected, autonomous and electric vehicles. Some time ago, I wrote a blog about the growing partnerships between auto makers and technology companies to apply digital technology for connected cars. Since then, the market has exploded. This time, I’d like to look at applying disruptive digital technologies to the supply chain and ask what value the intelligent and connected supply chain can deliver to the automotive company.

The dream of the autonomous vehicle may still be some way off, but the connected car is already with us—and it’s quickly moving from peripheral to pervasive. In 2015, 35% of new cars sold were connected to the Internet and that’s predicted to rise to 98% by 2020. The connected car market was estimated to be $ 72.89 Billion in 2017 and projected to reach $219.21 billion by 2025, at a compound annual growth rate (CAGR) of 14.8%.

The result is a whole range of potential new revenue streams in areas such as infotainment, car safety and security systems, insurance services and fleet management. However, the largest and fastest growing revenue stream is within the connected services segment. In the future, it’s easy to see that most of the value to the automotive company won’t come from vehicle sales but from the added value packages that they can tailor for customers.

Focus on the intelligent and connected supply chain

In my opinion, auto manufacturers have to focus on connecting their supply chain if they are to maximize the opportunities of connected cars. A quick look at the business imperatives for the industry should explain my thinking:

  • Increase collaboration within the growing ecosystem of trading partners in the supply chain to drive innovation and business agility
  • Respond to customer demand for greater personalization by enabling customization to happen later in the production process—and closer to the customer
  • Speed up and increase the efficiency of the entire production and logistics processes
  • Maximize the use of resources and materials from design to recycling
  • Exploit data to enable new data-driven digital products and services
  • Ensure outstanding and consistent customer experience across multiple channels and touch points

It has been many years since the supply chain has simply been a way to produce and deliver a product. It’s probably the primary source of competitive advantage within the automotive industry. The intelligent and connected supply chain builds upon B2B connectivity to integrate the latest disruptive digital technologies in a way that can transform every element of your business.

The key technologies are the Internet of Things (IoT), advanced analytics, Identity and Access Management and Artificial Intelligence (AI)—conceivably, you could add block chain to that list as a means to heighten supply chain visibility. Taken together, you create a high performance, scalable and secure digital platform that helps streamline supply chain operations, enables business agility and innovation, and drive increasingly smart and automated business processes.

The automotive sector has always been an early adopter of new technologies and this is true for the likes of IoT and AI. But we are still at the beginning of the implementation curve. New disruptive technologies are still more likely to be deployed to improve the efficiency of a specific business function rather than on an enterprise basis to redefine and develop new business strategies.

There are 928 million connected IoT devices in the global automotive sector in 2018 producing an incredible amount of valuable data that could be used to improve operational performance and decision-making. Too often, that data remains untapped in many vertical storage systems and applications. AI and advanced analytics give the potential for the IoT data to be released and blended with structured and unstructured data from other sources—such as enterprise systems, file shares and social media channels—to gain real insight and enhance competitive advantage.

Four keys features of an intelligent and connected supply chain

In effect, the intelligent and connected supply chain is a ‘digital ecosystem’—of which IoT, AI and analytics are key components—that connects and integrates a highly complex global network environment including your customers and trading partners. It has four key features:

 

A diagram showing the connected nature of the connected supply chain Enable growth through an extended digital ecosystem that unites employees, trading partners systems and things.
A diagram showing the intelligent nature of the connected supply chain Boost your competitive edge with machine learning-based advanced analytics to predict outcomes, optimize and automate business operations, and take informed decisions.
A diagram showing the collaborative nature of the connected supply chain Promote rich and secure collaboration with the flexibility to work when, where and how people, systems and things work.
A diagram showing the secure nature of the connected supply chain Ensure only the right people, systems and things have access to the right data at the right time – and only for as long as they need it.

The intelligent and connected supply chain: Three key use cases

By creating a digital ecosystem within your supply chain, you gain the ability to transform almost every element of your business. Here are three use cases for the automotive sector:

Predictive maintenance
Being able to predict when a part of sub-system of a serviceable product is likely to fail is a key investment area for the supply chain. Whether that part is within the production process, within the warehousing environment or part of a connected vehicle, an intelligent and connected supply chain can automatically monitor and analyze performance to boost operating capacity and lifespan. This system can intelligently decide whether the part needs to be replaced or repaired and can automatically trigger the correct process.

Proactive replenishment
Reducing inventory levels while improving customer experience requires the ability to automate much of the replenishment process to continuously monitoring stock levels and re-stock as levels drop or demand grows. The intelligent and connected supply chain provides real-time inventory visibility. As well as stock levels, it can indicate the condition of each item – such as the temperature it is stored at – to ensure the quality of items. Automotive companies can automate the replenishment of parts from the supplier before they are needed in the production process.

Supply chain visibility
Knowing where exactly an item is, what condition it is in and when it is going to be delivered is of vital importance to all supply chain operations. While the previous generation of tags and sensors could provide some information on location and condition, it was very limited. The intelligent and connected supply chain provides improved end-to-end visibility of shipments ‘from floor to store’. It enables the continuous and pervasive flow of data from highly connected supply chain ‘assets’ at every stage of the process. This includes tracking and monitoring of multi-modal 3PL providers, optimization of warehouse operations and improvements in ‘last mile’ delivery.

Connected cars may grab all the headlines and, let’s face it, the supply chain has never really been seen as the rock star of the business. Yet, the intelligent and connected supply chain can drive real value for an automotive business.

Learn more about the intelligent and connected supply chain

To find out more about the intelligent and connected supply chain, read our white paper, How IoT enables the intelligent and connected supply chain.

This will also be a major topic at our Automotive Customer Day in Detroit on Wednesday October 24. If you’d like to attend, please email me here.

Look out for my forthcoming blog when I look at whether a completely autonomous digital supply chain is possible today.

Tom Leeson

Tom is Industry Marketing Strategist for the Manufacturing Sector globally. An Engineer by Trade, and Mathematician by Education, Tom’s entire career has been spent in Engineering, Manufacturing and IT helping customers digitally transform their business and their manufacturing sector. With Industry 4.0 and the Industrial Internet of Things, Manufacturing lives in exciting times, so there is much to talk about.

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