Strongly influenced by the accelerated rise of new technologies, emerging markets, and changing consumer preferences, today’s economies are changing at a fast pace. New business models, an increase in automation, and digitization have transformed most industries around the world, including the auto industry. As the number of electronics fitted into vehicles continues to rise, it’s becoming more and more common to hear cars referred to as computers on wheels. It’s, therefore, safe to assume that innovation in the industry finds itself predominantly at the intersection between microelectronics and automotive parts. Innovation, in this regard, refers to the synergies found in the joint initiatives of both fields.
It’s important to keep in mind that the automotive industry and its supply chain, composed of vehicle manufacturers and component suppliers, have been evolving steadily around vehicle sales for many decades now. Their customer groups used to be fairly well-established. On the one hand, there were the individual customers, while on the other, there were commercial entities that predominantly ordered entire fleets of vehicles. However, the auto industry has since grown to vertically envelop and integrate design, product development, car manufacturing, automotive sales, accessories, service, etc. into its supply chain. More recently, the established players in the global automotive industry have also ventured into mobility solutions and services.
This trend indicates a transition towards creating businesses and functionalities that gravitate towards the sales of miles. The automotive industry will also shift towards increasing the experience, rather than simply focusing its efforts on the vehicle or just transportation from A to B. The disruptive trends giving rise to these developments in the automotive sector are autonomous driving, connectivity, electrification, and shared mobility solutions.
The ACES of the Automotive Supply Chain
Collectively known as ACES, or CASE, the main trends currently disrupting the global auto industry are autonomy, connectivity, electrification, and sharing.
- Autonomy – Computers are set to take over the act of actually driving the vehicle. This process started with advanced driver assistance systems (ADAS), but the end goal is to have a completely self-driving car. At the moment, the technology finds itself at SAE Level 2. This means that the vehicle can, under certain circumstances, such as on the highway, drive itself, but it needs constant driver supervision. Experts in the field believe that through increased levels of artificial intelligence and computing power, higher levels of fully autonomous driving can be achieved.
- Connectivity – An increasing number of vehicle models and connected cars are exchanging data with a central hub or with one another through satellite, WiFi, cellular, and more. Even though at the moment, this is done mostly for entertainment and convenience purposes, there are also safety and maintenance functionalities that begin to emerge. The major differentiating factor between these connected car solutions is whether they are embedded (built-in), are “brought-in,” such as phone apps that are independent of the vehicle or its dashboard navigation system, or are “tethered,” meaning that your smartphone is used as a communication gateway.
- Electrification – Electrical components are steadily replacing their traditional mechanical and fossil fuel-powered counterparts. Among these electric cars, we can include hybrid electric vehicles (HEV), plug-in HEV (PHEV), battery-powered electric vehicles (EV), and hydrogen fuel-cell vehicles (FCV). The initial transition from the traditional fossil fuel to an electrified driveline will require an increasingly diversified array of electronics. These will include more sensors, control systems, and high-voltage systems. However, the transition will require fewer systems overall, such as ignition, injection, and a multitude of other systems that will be replaced by high-voltage electronics.
- Sharing – An increasing number of consumers are looking for convenience when it comes to their mobility from “point A to point B.” Many are also increasingly looking at vehicle ownership and the personal vehicle as more of a burden than a benefit. Some alternatives to vehicle ownership include services such as car-sharing, ride-sharing, ride-hailing, micro-transit, and micro-mobility. Instant access, easy payment methods, flexible working opportunities, and other mobile computing services also allow for much of this mobility convenience. Therefore, it’s easy to assume that connectivity, electronics, and computing all play an important role in the shared mobility solutions trend.
How Can the Automotive Supply Chain Prepare for These Mobility Trends?
Given these many new vehicle technologies and disruptive trends, auto manufactures and other automotive suppliers will need to look at reevaluating their product portfolios. Diversification is one possibility, and another is creating spin-off businesses that can focus on these particular specializations. It’s also a good idea to base these new products and services on emerging technologies. This also provides a huge opportunity for hardware suppliers to expand into related software services that could be used in EVs.
Traditional electronics suppliers should also consider partnering up with new entrants in the mobility ecosystem and integrate them into their value chain as a means of closing their own competency gaps. It will also help better leverage this new competitive landscape and facilitate more innovation. There are already many such partnerships that have been established with the aim of developing smart health and safety systems and AI algorithms for autonomous applications.
The aforementioned ACES trends and other related changes in automotive supply chains have pushed many automobile manufacturers and other automotive companies to develop new and better ways of handling increasing market volumes. This requires developments in the strategic, operational, and financial level as a means of avoiding any bottlenecks across the supply chain.
To quickly and effectively respond and adapt to these disruptive trends is to achieve the following:
- Shift in the Product Portfolio – Matching products and services with demand in growing component clusters.
- Scaling and Consolidation – Looking for economies of scale by consolidating product volumes.
- Increased Collaboration – Accelerating developments, speed to market, and risk mitigation through more partnerships.
- Reevaluating Your Location Strategy – Consider reorganizing your production and warehousing locations in accordance with future market trends and customer demand.
- Future Business Demand Talent – Creating a forward-thinking talent model that takes into consideration today’s changing requirements.
- Digitization – Looking to establish an integrated and digital supply chain that will help with cost optimization.
To have a chance in today’s highly competitive business environment, automotive companies need to look into the best ways to optimize their supply chains. If you need help with your optimization, Redbird Logistic Services is a group of experienced professionals that are here to help!! Contact us today and work with a professional 3PL logistics provider to gain a significant competitive advantage!