Automotive puts money in “smart supply chains”
According to Sean Young, Deputy General Manager of Shenzhen Shentou Supply Chain Management.Co, cloud-based computing, faster communication networks and live-stream applications are the cornerstones of the aftermarket’s future cross-border supply chain
Over the last few years, Asian automotive markets experienced a remarkable increase acting as a gauge of the health status of the industry worldwide. What impact has the Covid-19 pandemic had on all this?
“The Chinese automotive market is quickly regaining lost ground, both as OEM and aftermarket products. At the end of April, we launched a survey on 52 aftermarket production facilities currently manufacturing 19 groups of products, and the results highlighted how in terms of production, assembly line personnel, suppliers and local transport, almost all of them have confirmed that it’s business as usual. As far as production capacity available, all factories surveyed admitted having tight margins, below 30%, while 30% of them confirmed that the available capacity is less than 10%: this may be due to local business overload after the recovery and growth of international orders. In addition, lead-times are longer than they were before the pandemic; however, most companies still work on 60 days or less. Now, during this recovery period, we are observing something rather surprising”.
What is it about?
“We noticed a remarkable change in the automotive industry since the Covid-19 pandemic, especially in the ways global aftermarket communities are coordinating their work, including supply chain management. We likewise noticed a widespread adoption of new business practices, in this case more remarkable in international trading, which were made possible by new advanced technologies such as cloud-based computing, improved devices and communication networks and innovative live-streaming applications. The profound impact of the coronavirus has changed the traditional cross-border supply chain management into an upgraded business model that could be defined as Post Covid-19 supply chain management or more simply Scm C19”.
To whom is this model addressed?
"I believe it addresses all the challenges faced by international aftermarket communities that are depended on cross-border supplies. It is likely that for some time, most international buyers will not be able to travel or will suffer travel restrictions. Therefore, how will it be possible to identify and choose the correct supplies? How do you inspect or audit the factories? How will pre-shipment and inspection procedures be handled? This is where Scm C19 might come in handy. This model could provide international aftermarket communities with a system that addresses these new Covid-19 standards. Scm C19 will make sure that European buyers can continue to order supplies from China, and the entire procurement process can be strengthened by the available technologies and a variety of on-site services, both in Europe and China, so that cross-border purchasing can be processed smoothly and safely overseas, without the need of meeting in person and without international buyers having to travel to China”.
Basically, the use of hi-tech instruments guarantees that no interruption takes place in the supply chain and business can be done as usual.
"Exactly! Technology will simplify procurement procedures and this will allow international buyers to manage their work from a distance and in real time. Think for example of on-site inspections or audits that could be performed by local service providers in China while international buyers can participate and monitor the process via live streaming. The same goes for quality control. Here, too, local inspectors can be present on site, while international buyers can participate via live-streaming to verify critical elements of the inspection”.
Another important issue revolves around minimum order quantities. In this case, how should things be handled?
“Several international buyers complain about the high MOQs required, which represent a high risk for their business. In this case, I think it may be wise to look at solutions such as group purchasing, which can be organized to help reduce MOQ problems. In my opinion we will see a transformation on how oversees shipments will be handled, where multiple Lcl (Less than container load) orders from different buyers will make up a complete shipment to Europe, for example. I believe that traditional cross-border supply management systems will have to change throughout the global aftermarket community in order to survive in the new post-Covid 19 economy”.