Study: Potential savings in the automotive industry
Author: Mario Schmidtgen
Cost optimization through hidden cost drivers
According to the new study “Supply chain management in industrial companies” by the consulting firm Emporias, the automotive industry offers enormous savings potential. Although the industry is spending a lot on the digitization of the supply chain compared to other industries, the exact costs are unclear to most companies.
The most common reasons are problems with data quality and processing. Furthermore, the automotive industry is characterized by large, widely ramified supplier networks. In addition, it has a wide range of product variants at its disposal, which pushes up transport costs, which are already rising.
According to the majority of participants, these costs could be saved by optimizing the supply chain. One in ten estimates the savings potential as very high and 35 percent as high. However, there are several factors that prevent companies from realizing this potential.
Missing calculation models
“The digitalization of the supply chain is no guarantee that logistics costs will be better controlled. Our study shows that data processing is often a problem, especially in the automotive sector. There is a lack of calculation models that really make the total costs of complex supplier and transport systems, including their interdependencies, visible and billable,” says Oliver Ohlen, managing director of Emporias.
Nine out of ten people surveyed in the automotive sector stated that they did not have complete and up-to-date logistical master data. Another three-quarter responded that digitally captured data is not being properly processed and used for optimization. This applies in particular to external data from suppliers or service providers.
In addition, the majority of participants consider the systems used in controlling to map the supply chain to be unsuitable. “The data processing models used in the automotive industry are not worse than in other industries. However, the logistics decision-makers in this industry are more aware of the shortcomings because they also feel the effects to a particularly large extent,” explains Ohlen.
Eight out of ten managers in the automotive industry cannot adapt their cost structure of the supply chain quickly enough to market changes. However, the flexibility of the cost structure is particularly important in this industry – and the most important criterion for optimizing the supply chain.
Due to complex supplier and transport systems, the true cost drivers often remain hidden. In addition, the interrelationships between costs often remain unnoticed. As a result, despite savings at one point in the supply chain, costs are recurring at another point as additional expense. According to Ohlen, the reason for this is that automotive companies do not allocate costs to the cost center where they arise.
Holistic cost models
At this point, a holistic cost model is indispensable: “State-of-the-art systems and tools for controlling the supply chain do not help if they are not based on a valid cost model. Then simulation and forecasting functions will not produce meaningful results,” explains Ohlen.
According to the study, only 30 percent of companies can project the impact of sales and production plans on future supply chain costs. The number of participants using holistic cost models to manage the supply chain is below the industry average.
To counteract this, Emporias has “developed new tools and instruments to implement the total cost philosophy”. These were tested together with customers in practice and expanded in cooperation with the TU Munich and a group of logistics experts.