Optimizing your automotive supply chain through technology solutions

April 19, 2021
By Taulia
By Taulia

The coronavirus pandemic has caused economic and societal disruption worldwide. The automotive industry has been particularly affected, with global passenger car sales down by 15.3% to only 63.4 million in 2020. McKinsey predicts it may take up to four years to recover and reach pre-COVID-19 sales levels. 

Supply chain disruptions, factory closures, a renewed focus on the environmental impact, and limitations on travel have contributed further to the industry’s struggle. While the approval of COVID-19 vaccines is fueling optimism for a better future, how can automotive companies prepare for a post-COVID world? What does this future look like? Now is the time for companies to transform themselves and change for the better.

Optimizing your automotive supply chain through technology solutions

The automotive industry has had to adapt and act quickly in response to changing market conditions caused by the pandemic. Looking to the future, we have highlighted some of the key themes that will enable automotive businesses to become more agile and competitive, through supply chain finance programs.

  • Resilient supply chains – Missed revenue caused by disrupted production and business closures has shown automotive leaders that having access to consistent working capital is essential. To ensure operational continuity, automotive leaders need to implement data-driven solutions to manage the risk of disrupted supply, identify opportunities for cost optimization, and manage complex supply chains. By having real-time access to information, they are able to spot problems before they occur and mitigate them. Having a birds’ eye view across the supply chain helps identify where supplier support is needed, manage compliance globally, and improve cash forecasting. That’s where using technology like Taulia can improve the visibility of invoice status and payment across the supply chain, which creates more predictability around payments for both the automotive company and suppliers. Resilient supply chains, powered by supply chain finance programs, can help avoid costly disruptions and help support the financial help of small businesses and reach your global ESG  goals. 
  • Strategic planning for the unexpected – The pandemic has generated a lot of uncertainty for many businesses, particularly the automotive industry, with 73% of finance leaders in the United States and Mexico saying the financial impact of COVID-19 is their biggest concern. These leaders are worried about their liquidity, negative impact on operations, and the future economic climate. With these worries in mind, it is crucial that automotive leaders think strategically about their future business operations and how to adapt to the new normal.  With more consumers working from home permanently, KPMG estimates that U.S. car ownership could fall from 1.97 to 1.87 per household, which would significantly decrease consumer demand for cars. Automotive leaders need to think deeply about what the post-COVID 19 world looks like and adapt accordingly. 
  • Renewed focus on the environment As a result of travel and lockdown restrictions, consumers are spending more time online, at home, and are not as mobile as they were pre-pandemic. The pandemic has shifted consumer behavior towards protecting society and the environment, with the UK government setting out a target for reducing emissions by 68% by 2030. As a result of this, consumers are looking for electric vehicles, which are less harmful to the environment. If consumers switched to electric vehicles, the shift would cut the overall lifetime greenhouse footprint by about 37% for passenger cars.  Restructuring operations to capitalize on new technologies requires the ability to quickly access the cash required to fund these innovations. 

Although the automotive industry has been negatively impacted this year, the international roll-out of a vaccine promises a return to a stable and profitable future. To ensure automotive companies can thrive during the post-COVID-19 world, they should develop working capital strategies that will enable them to respond to any circumstance. Supply chain finance programs will enable automotive companies to be agile, forward-thinking, and resilient in times of certainty and uncertainty.