According to a recent study, the long-term viability of the supply chain in the automobile industry has plateaued over the past three years. Environmental concerns are being put on the back burner as suppliers seek more money for material management and inventory tracking systems.
Global supply networks have seen an unprecedented period of instability since the pandemic. To secure future accessibility, an increasing number of businesses are transferring suppliers for essential services and commodities from offshore sites.
According to a recent report by the Capgemini Research Institute, the amount of procurement from outsourcing locales fell by 22% over the previous two years and is predicted to fall by another 19% over the following two.
Because of this, automotive organizations are now more confident in their ability to handle supply chain disruptions in the future, but the significant shift was not free. Automakers have spent a lot of time and money rethinking, restructuring, and refinancing the management of their supply chains in order to achieve this near-shoring.
In many businesses, the implementation of sustainable supply chain methods has been put on hold. Only 66% of automotive companies told Capgemini they had a thorough sustainability plan for their procurement function, despite the fact that Scope 3 emissions, which relate to supply chain pollution, are coming under increasing scrutiny.
This percentage increased from 62% in 2020 to 65% in 2022, showing an unsettling stagnation in environmental sustainability efforts in the industry. In the supply chain for automobiles, several components of the quest to net zero appear to be going backwards. In the past year, fewer companies—from 69% to 58%—have provided information on the sources and content of their products. Just 59% of businesses have begun to track the carbon footprint of their supply chain’s raw materials, energy, logistics, and delivery, a further 11 points of reduction.
The speed at which the sector’s sustainability drive will resume its original course is likewise unknown in the future. Only 37% of respondents, according to a study by Capgemini, thought that factors like environmental risk and managing carbon footprints affected their supply chain decisions. This trend is reflected in investment across the industry. While suppliers’ yearly spending drastically decreased by 17%, OEMs (original equipment manufacturers) saw their overall investment in supply chain sustainability reach the same levels as previous year.OEMs and suppliers, however, appear to have their objectives well established elsewhere.
60% of suppliers said their top objective had been to build additional surveillance remedies to comprehend risks and constraints, whereas 48 percent of original equipment manufacturers said they were implementing purchasing approaches including open markets and new suppliers as the industry continues to target improvements in short-term in the crisis-management and resilience.
Additionally, it appears that they favor three new crisis management strategies, the implementation of which will necessitate large infusions of operating cash. These include requiring and overseeing supplier inventory, allocating financial resources to ensure improved inventory management, and increasing stocks for essential components. It seems unlikely that suppliers and OEMs would soon put sustainability back at the top of their list of objectives given that they are already searching for investments on these new fronts.
“Over the past few years, organizations have been compelled to reorganize and reorganize their supply chains on the fly as they attempt to cope with multiple disruptions from all sides,” said Alexandre Audoin, global head of the automotive industry at Capgemini. Despite being in a better position now, automakers must consider implementing a long-term, clever, and data-driven approach that will increase resiliency and competitive advantage. Circularity must be included as a key element in this process in order to help organizations manage regulatory changes, integrate new participants into the supply chain ecosystem, and meet ambitious climate targets.