Connected Supply Chain: Focus on the automotive industry 

Global supply chains

Focus on supply security

Global supply chains are the key to success in many industries - but they can also be a sticking point, as we have seen clearly in the recent disruptions. The automotive industry is a case in point, acutely impacted by supply problems in the semiconductor industry’s current chip crisis and forced to drastically cut back production even to the point of shutting down. There have also been supply chain disruptions caused by the rapid ramp-up of production as we emerge out of lockdown. 

The fundamental challenge facing companies in supply chain management and inbound logistics is to orchestrate numerous partners and activities in an increasingly complex, dynamic and volatile supply chain network spanning the globe. That challenge becomes even more difficult when we look at suppliers below the Tier 1 level. These suppliers – particularly in the automotive industry – urgently need new solutions. OEMs are paying closer attention to supplier risk management today, as evidenced in the current Deloitte study on supplier risk management in the German automotive industry. 

To ensure efficiency, flexibility and quality under such complex conditions, suppliers need to monitor and optimize their supply chain processes on an ongoing basis and to ensure shipping logistics operate smoothly to guarantee future security and resilience of the supply chain. Deloitte's innovative Connected Supply Chain solution meets these high requirements, increasing transparency, quality and consistency of the supply chain, focusing more on managing partners from suppliers to shipping logistics service providers and using analytics and artificial intelligence (AI) tools to generate automated insights and drive continuous improvement. 

The experts at Deloitte have also developed a comprehensive set of proprietary tools to help optimize supply chain management further, such as the monitoring tool known as Supply Chain Control Tower. Before we describe our approach in more detail, however, let’s first take stock of the status quo: What makes this issue so urgent today?

Looking for a new approach

Efficient supply chains can make or break our modern industrial production. In the automotive sector in particular, supply chains are closely timed or coordinated (i.e., JIT, JIS) and the challenge today is how to take supply chain efficiency to the next level. Moving from linear models to a multidimensional, agile dynamic supply network is a key factor as we transition to Industry 4.0.

This will allow manufacturers to better absorb unplanned disruptions like the current chip crisis and the massive increase in global supply chain volatility that comes with it. Here, it is crucial that we offer maximum transparency - also with regard to supply chain sustainability, the issue that requires the most urgent action today. New regulations such as the Supply Chain Sourcing Obligations Act (LkSG), which was recently passed by the German Parliament, oblige companies to establish transparency across the entire value chain, with fines of up to 2 percent of average annual sales for violations. This issue  has supply chain management teams under serious time pressure, as few companies are sufficiently prepared for the rollout of the LkSG as early as January 1, 2023. According to a Deloitte study conducted in July 2020, only 13 to 17 percent of the companies surveyed met the requirements of the regulation. 

Deloitte also offers a range of specialized services in this area relating to supply chain management, up to and including comprehensive, full-service solutions. 

What can our forward-looking solution do for you?

To meet the current challenges in supply chain management, there is an entire range of digital tools available today - from mobile connectivity and Industry 4.0 to AI and analytics. 
Deloitte's innovative Connected Supply Chain solution bundles these tools to ensure transparency across all flows of goods and information – the first step in any optimization initiative. Manufacturers can monitor all processes proactively and significantly improve shipping logistics management, as the solution gives them global control of the supply chain and standardizes the diverse inputs from different regional providers and service portfolios. By integrating a wide range of local inputs into the solution, you automatically create more transparency (see also Deloitte's Transportation Management System (TMS) Compass study on the topic of transportation management). 
The Connected Supply Chain solution allows manufacturers to automate processes and workflows in real time between supply chain actors and process events across company boundaries, while our ServiceNow Continuous Improvement Management tool makes the planning, management and monitoring of events more efficient. Both are key for facilitating continuous improvement of the supply chain, along with the platform's performance analytics capabilities (Analytics Hub) used to identify the available optimization options. 

Other benefits of the platform include the ability to improve reporting and to build knowledge databases. We offer the Connected Supply Chain offering as an in-house solution but also in a managed service format with support from Deloitte. For OEMs in the premium segment, for example, Deloitte experts will manage the entire inbound supply chain as your partner. Your company can increase transparency through continuous monitoring of your supply chain, plus you will be able to easily identify potential for improvement. And throughout implementation, we manage the relationship with various service providers and meet regularly with them to discuss quality issues.

In a typical case, the OEM arranges for a delivery from the supplier by posting it in the notification portal. The shipping service provider receives the notification and picks up the goods. If the process is altered in any way, i.e., a change in the delivery quantity or a different delivery date, this is displayed as an event in the system and can be managed accordingly, using features such as real-time alerts.

Events like these are also included in automatic evaluations that are shared with suppliers, for example to track particular actions. In addition, a large knowledge database is set up for this OEM, where employees can find out the details of the processes, but also access contact details or the option to create a support ticket. Through regular exchanges with the logistics providers - in this case on a weekly basis – the parties can discuss data and trends on specific KPIs as well as potential countermeasures. This entire process can also be applied to Tier-1-N . 

One particularly important KPI is the Estimated Time of Arrival (ETA), which is matched against GPS-based tracking data. This approach can also be extended to other partners in the ecosystem and Tier 2, Tier 3, etc. suppliers, increasing the benefits for all stakeholders accordingly – more transparency translates into more benefits for every participant in the supply chain. To improve efficiency even further, the OEM can use the blockchain-based solution TrustChain developed by Deloitte to track all deliveries reliably.

The potential of the Connected Supply Chain becomes especially clear in the ecosystem when there is transparency across the Tier 1 to Tier 2,  Tier 3 level.

Tobias Exler Director, Supply Chain & Network Operations 

A transparent platform for the delivery network

Deloitte's Connected Supply Chain solution is based on the ServiceNow digital platform that provides end-to-end capabilities with tools from service desks and portals to continuous improvement and analytics. Our experts at Deloitte have "customized" these tools to the specific needs of supply chain management in order to optimize inbound logistics processes between suppliers, shipping service providers and production.

Supply chain managers can monitor all inquiries and flows of goods with this solution, enabling them to respond to bottlenecks at an early stage, to achieve the right balance between the given shipping capacities and to manage unforeseen events more easily.

The solution also allows for better partner management through quality meetings with suppliers and shipping service providers as well as continuous performance tracking. This systematic approach also helps new partners by integrating them quickly and smoothly into existing processes.

The ServiceNow Service Desk makes all support requests and error messages accessible as a central point of contact to further increase transparency in the supply chain. The complementary analytics capabilities (i.e., Continuous Improvement) can be used to identify potential improvement areas and to develop as well as implement optimization initiatives. A key benefit of the solution is real-time digital data processing, which allows all stakeholders - even partners in the ecosystem - to immediately respond to process data and events. Using this data, they can coordinate all planning and logistics operations throughout the process, from shipping orders to fleet management and customs declarations to warehouse and equipment management.

Success through partnership: Supply chain expertise from Deloitte

The Connected Supply Chain solution based on the ServiceNow platform offers automotive manufacturers, suppliers and the broader manufacturing industry services tailored to their specific needs. As a global partner of ServiceNow, Deloitte has adapted and expanded this established software solution with a precise focus on the automotive industry’s supply chain management issues.

The business expertise and in-depth industry knowledge of Deloitte's experts ensure successful implementation. We also provide direct assistance with the client operations, providing support through managed services in the areas of connected supply chain, supply network optimization and "supply chain control tower".

The Deloitte Supply Chain Excellence Center in Leipzig was created specifically for this purpose, providing services that establish end-to-end transparency across all levels of the supply chain, that support performance management and supply chain monitoring, and that offer dynamic route optimization and continuous action tracking. Our service range also includes tactical optimization apps as well as operational apps with a specialized automotive focus. Services for supply chain management in production are also part of the package, and those who are interested can visit the Deloitte Smart Factory in Düsseldorf for a demonstration and/or trial run of the available managed store floor solutions. To deploy of Deloitte’s Connected Supply Chain solution successfully, you must have a clear division of roles between platform experts, operational teams and consultants, and to ensure optimal transparency, you must digitalize as many of the processes as possible. Once these elements are in place, you can expect a significant improvement in your supply chain:

In our work with a premium OEM like the one mentioned above, data quality increased by 43 percent and delivery performance by 13 percent with this solution. The client also reduced lead times by two to six weeks, cut warehousing costs by five to ten percent and lowered logistics costs by ten percent. This particular solution is currently available for inbound logistics with a focus on the automotive industry, but we plan to gradually extend it to other segments and also cover the outbound sector in a future development stage. Deloitte serves more than 80 percent of the Fortune Global 500 automotive and manufacturing companies worldwide, with more than 12,000 automotive professionals available across the global Deloitte network.