Driving resilience in automotive supply chains

Impact on original equipment manufacturers

Increasing technological disruption, in combination with greater regulatory scrutiny, is driving the creation of new business models and new competitive forces that are impacting the supply chain. Original equipment manufacturers (OEMs) and major suppliers are evolving from a (relatively) fixed capital production, first-transaction, product-sale business to an end-to-end mobility services provider. In some cases, OEMs are seeking new suppliers outside the traditional model.

To meet this profound change, automotive companies are reconfiguring supply chains, increasing reliance on technology suppliers, and retooling production operating systems to be even more lean, flexible, and nimble—so they are increasingly able to meet “smart customization” requirements.

Suppliers, now competing with technology companies, must defend their competitive position in the automotive value chain. Accordingly, many suppliers are becoming more like software companies, causing OEMs to reconsider their long-term relationships.

These “new frontier” disruptions in the industry are driving OEMs and their multi-tier suppliers to seek help in understanding and interpreting the potential risks that could impact them at every point in the supply chain. Without adequate insight into inherent risks, organizations face the possibility of production disruption, increased product recalls, potential damage to brand image, dips in customer satisfaction, and remediation. Longer term effects on financial performance and the failure to keep pace with competitors are considerations as well. As a result, OEMs should be vigilant in monitoring and executing plans to mitigate supply chain vulnerabilities.

The regulatory roundup

• Regulatory agencies are increasing automotive supply chain investigations and inquiries with an emphasis on advanced and predictive analytics that use more aggregated data sources, including social media.
• Greater emphasis is now on OEM and supplier audits to improve quality control and compliance programs, as well as more regulatory “hands-on” recall remedies and testing—before manufacturers and suppliers implement them.
• Control over recall execution, timing, and completion rates by regulatory agencies is demanding enhanced governance and transparency across different levels of management. These agencies are pursuing more enforcement actions and fines in support of deferred prosecution agreements and consent orders.

How we can help reduce risk exposure

To help mitigate stress on automotive supply chains, Deloitte Advisory has developed a comprehensive framework to assist automotive executives with illuminating, transforming, and monitoring quality and safety risk within their organizations. This framework is designed to help companies drive accurate business reporting, improve performance, and enable growth and innovation.

Our framework is based on three phases:

1. Illuminate: By identifying the current operational profile, we capture, prioritize, and quantify risks. Illuminating these risks leads to the development of an end-to-end risk profile and risk management plan with prioritized recommendations.

2. Transform: Leveraging the prioritized recommendations, we execute the implementation roadmap and develop the associated risk mitigation plan.

3. Monitor: Pursuing the outlined direction from the risk mitigation plan, we implement tools and processes designed to help you further mitigate and monitor current and emerging risks.

In today’s environment, in which risks emerge at a rapid pace, managing supply chain risk is a strategic choice for automotive companies. But to have an impact on the business, it’s a strategic choice that must be made quickly. A comprehensive evaluation of threats to the supply chain can help companies mitigate risks and also be the first to capitalize on new opportunities and cutting-edge developments.

Is your supply chain prepared for the future?