26 Mar 2021


Rethinking Global Automotive Production Networks

Michael W. Rüger, Rolf Janssen, Thomas Fang and Wilfried Aulbur
Roland Berger


Current trends and conflicts call for a transformation of automotive production networks

Rising logistics costs, trade conflicts and the pandemic have left the global automobile manufacturing model exposed. In this special report, Roland Berger examines the best road forward for international automotive players.

 

Management Summary

To serve global markets, vehicle manufacturers pooled production volumes to achieve economies of scale but lost sight of regional dependencies and even neglected transregional transportation services. The coronavirus pandemic has mercilessly exposed the vulnerability of global production and sourcing structures in the automotive industry. Inadequate supply capabilities in weakening regions led to severe disruption in the economies of dependent regions.

The short-term consequences of the pandemic – namely a collapse in demand and the negative effect of temporary border closures on international supply flows – have put automobile makers under significant financial pressure. But the pandemic doesn't shoulder all the blame. Rising logistics costs, increased carbon taxes and intensified trade conflicts are also challenging existing production and procurement structures.

Demand structures for vehicles are shifting enormously in some cases, presenting manufacturers with major challenges. For example, Full-size SUV production is mainly located in North America and Europe, while demand for this segment has risen sharply in Asia in particular. The only way for vehicle manufacturers to cope with this lately has been through higher transportation costs and challenging supply adjustments.

In our view, manufacturers need to reorganize their production and sourcing in a way that production and sourcing structures better match regional demand to achieve a holistic cost optimum. Increasing production flexibility, regionalized manufacturing and risk management are appropriate levers to deal with the uncertainty arising from trade conflicts, rising transportation costs and border closures.

Thus, automotive manufacturers can emerge stronger from recent conflicts and in better financial health with new risk profiles and novel supply strategies. By simplifying, shortening and regionalizing their value chains with more agile, digital and innovative technology, adaptive manufacturers will secure their futures.

 

 

Continue to read...

 








 

Supply chain E-learning



Explore available supply chain e-learning modules by language and academy



News & Trends
 

Last update 3 Aug 2021
Manufacturing business conditions continue to improve rapidly in July
   Source: NEVI Netherlands Manufacturing PMI ®  -  IHS Markit
Netherlands 


Retail

The retail sector is always on the move. Whether this involves shopping centres, shops in inner city locations or at airports – trends change very quickly and the goods change just as rapidly too. To keep up with these developments, highly complex and process driven supply chains are needed. With our...

Deloitte’s 10th Annual Global Chief Procurement Officer Survey 2021: CPOs Harness Agility to Deliver and Protect Value Despite Uncertainty in the Wake of COVID-19

Key takeaways The chief procurement officer (CPO) is playing an increasingly complex, integrated and strategic role in the C-suite in light of the coronavirus pandemic and corresponding supply chain disruptions. CPOs ...


Education
 

Local & Regional Agenda
 


Resources
 
Missed orders reduced by 30% at Dijkgraaf-Reinders

Based in Apeldoorn, The Netherlands, Dijkgraaf-Reinders supplies a complete range of food and non-food items to restaurants, cafes, schools and healthcare organisations. Through implementing Slim4, the catering dist...

The New Language of Procurement

The language of procurement speaks to an agenda driven by delivering value. Leading procurement organizations are well-versed in areas that resonate with financial officers and the performance narrative. They lead with h...