Commentary | 3PL Line

The Importance of Contingency Planning in Automotive Supply Chains

Tags: Risk Management, Automotive Logistics

Brad Brennan is Managing Director, Evolution Time Critical, + 44 (0)1332 814 914

Emergency logistics specialists have been championing the benefits of focused supply chain management for a long time, and the adoption of such policies by vehicle manufacturers is enabling the introduction of new, dynamic, and higher-risk logistics strategies. Supply chain contingency can not only safeguard current operations, but provide support for the increasingly fleet-footed manufacturing footprint that is being displayed by major original equipment manufacturers.

Vehicle manufacturers operate in often volatile markets, under increasing pressure to deliver products offering higher levels of technology, refinement, performance, and efficiency without passing costs on to the customer. Heightened expectations have driven the need for globalized production, and companies of all sizes are placing activities under constant review, ready to move swiftly and decisively in the search for reduced costs. Effective supply chain management develops strategic focus and contingency planning, and this increased awareness provides a safety net for manufacturers seeking dynamic location moves without jeopardizing supply chain robustness.

Vehicle manufacturers’ concerns over moving live production when shifting manufacturing location is reduced by effective contingency planning, and ultra-fast logistics is an important enabler as this trend continues to grow. Companies are able to deploy much higher risk strategies than in the past, where operating less dynamic methods could provide the only supply chain dependability required – now, cross-continent shift of live-production is an achievable reality, and one that we have recently helped facilitate. Confidence between suppliers is able to build greater freedom of activity, which can lead to a progressively evolving path to end-user satisfaction and a reputation for reliability.

Of course, the increasing acceptance of the crucial role played by supply chain management in optimizing production has been influenced by the realization at senior management levels, of the damage that can be done by supply chain failure. American reports this year suggested that operational crises can have the largest long-term negative impact on company share prices, and a survey of risk professionals showed that 73 percent of North American companies say their supply chain risk has risen since 2005. Furthermore, 71 percent state that the financial impact of this risk has also risen.

It is not just the financial penalty of operational crises that supply chain contingency can protect against, but long-term reputational damage. This is true at all stages of the supply chain, be it between Tier I and II suppliers, Tier I suppliers and vehicle manufacturers, or even vehicle manufacturers and their customers – where the ultimate deadline is faced.

Supply chain management is no longer simply a case of making sure shipments are not late, but is an opportunity to ensure that robustness, fluidity and transparency of operations can combine for truly optimized manufacturing. As companies realize the benefits of simply avoiding breaks in their supply chain, the potential gains of utilizing effective contingency becomes more apparent and drives the adoption of evolving, dynamic strategies for delivery of carefully analyzed processes.

Emergency logistics are often thought of as the last line of defense for when things go wrong, but when utilized proactively, they can provide solutions to potential problem areas, not just a reactive contingency or just-in-time delivery to bridge supply chain failure. By evaluating companies’ processes and activities, it is possible to identify potentially fractious areas and develop methods to best address them.

A dependable, tailored supply chain contingency can help provide optimization as a tool for business growth, expansion, and a strengthening of the widening, worldwide production footprint enabled by increasing agility.