How TMS Technology is Helping to Steer Change in the Auto Industry
The flexibility to adapt to an ever-changing logistics landscape on a global scale is a key characteristic of today’s transportation management system (TMS) technology. And there is no better example of this flexibility than applications in the automotive vertical.
A number of major changes are reshaping the auto industry. One of the main changes is a shift toward a localized production model in emerging markets. In an effort to mitigate risk related to currency fluctuations and to locate operations closer to customers—particularly in emerging economies—auto companies are expanding their manufacturing presence in countries such as China and Mexico.
Reconfiguring production networks in this way also brings certain types of risk. For example, a stronger local presence across the globe can make companies vulnerable to localized disruptions, such as political upheavals, regulatory changes, quality issues, supplier failures, and fluctuations in currency exchange rates. Inherent in these risks is the increased complexity involved in managing the expanding supply chains.
At the same time, automobiles are becoming more technically sophisticated. Today’s buyers demand a wider range of product features, including customized options. The “connected car” is gaining ground in many markets. Innovations like these increase supply chain complexity, especially in just in time operations that are finely tuned to the precise flow of components and sub-assemblies. Also, the speed at which components become outdated is increasing. In order to keep pace with higher rates of obsolescence, supporting supply chains need to be more agile.
How are these changes impacting TMS solutions?
Global control towers that are attuned to local market nuances, as well as the rigors of managing international supply chains, are gaining in importance. And the business intelligence and analytical tools that sit on top of these solutions provide decision-makers with vital data on supply chain performance and costs.
A global control tower operated by regional TMS experts—called power users—delivers significant competitive advantages by helping companies deal with the local complexities mentioned above. Control towers also improve a shipper’s understanding of local business practices and variations in operating hours, and they support the use of local languages. These capabilities promote supply chain agility.
Excellent supply chain visibility is critical in such a dynamic industry. TMS solutions provide real-time or near real-time information on the status of shipments worldwide. And the technology helps break down the regional silos that often exist within supply chains to help create “one version of the truth.” End-to-end visibility with supporting metrics makes it easier to truly identify root cause issues. Additionally, shippers can allocate costs down to the parts level with the benefit of TMS technology, which supports more effective decision making.
Risk management is another important TMS offering. Companies need to be forewarned of problems, such as parts defects and shipment delays, so they can mitigate the downstream impact on auto supply chains. A Global Control Tower® is essential in not only identifying the impact of part defects within in-transit inventory, but also in executing recovery plans to help minimize cost and impact.
Of course, shippers need to think carefully about which TMS configuration works best for their global freight network (for more on this see the Connect post Blueprint for Truly Global TMS). Selecting the right system is becoming easier as the technology continues to evolve.