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The Future of the Automotive Supply Chain Survey: Americas & Europe — An industry in transition

Tad Simons  Technology Journalist/Thomson Reuters Institute

Tad Simons  Technology Journalist/Thomson Reuters Institute

Despite morphing trade policies, disruptive tariffs, political instability, and economic uncertainty, automotive supply-chain professionals must find ways to ensure a consistent supply of auto parts no matter what circumstances they face.

The job itself is made no easier by the fact that the automobile’s role in modern society is also changing. Concerns about energy sustainability are driving a slow but seemingly inevitable transition toward mainstream adoption of electric vehicles. Autonomous vehicles (and the technology that enables them) are also evolving rapidly, forcing manufacturers to invest huge sums in research & development for a market that has yet to mature. And in the supply chain itself, as older workers retire, new hires who are comfortable with data and technology are in increasingly high demand.

Americas/Europe: A global market

All of these trends and more are discussed in a new report, The Future of the Automotive Supply Chain Survey: Americas & Europe, published by Thomson Reuters in partnership with the Automotive Industry Action Group (AIAG). For the survey, 97 upper-level supply-chain executives in the United States, Canada, Mexico, South America, and Europe were asked to evaluate the factors most likely to impact their supply-chain operations within the next five to seven years. Their answers illuminate the many challenges facing automobile manufacturers today, and serve as a poignant reminder of how geo-political and socio-cultural forces in different countries can dramatically impact market dynamics in a global economy.

Last year, Thomson Reuters and AIAG partnered for a similar supply-chain report in the Asia-Pacific region. But the Americas & Europe report is particularly important because the United States and Europe combined comprise the largest automobile market in the world. Mexico and Canada are also integral to the U.S. market, as both countries supply parts and operate assembly plants for numerous manufacturers, including Ford, General Motors, and Toyota. Automobile manufacturers in Europe use different supply chains, but face similar basic business challenges.

For example, the report examines the current and future implications of the U.S.’s ongoing trade war with China, a country that exports car parts to almost every manufacturer in the world. It also addresses the potential changes in trade policy resulting from the recently re-negotiated U.S.-Canada-Mexico Agreement (USCMA) — which will, when adopted, replace the North American Free Trade Agreement. (NAFTA). The policy details in these agreements are critical to the supply chain for automobiles manufactured in the U.S., Mexico, and Canada, because they determine how parts are sourced in each country.

Job skills & technology

The report also explores the pressing issue of job skills and knowledge transfer in an industry that is becoming ever more reliant on data analytics and other advanced technologies to manage risk, anticipate possible supply disruptions, and create more efficient processes.

Younger, more technically adept personnel are generally needed to operate these newer supply-chain systems; but the business relationships and accrued institutional knowledge of older workers are still extremely valuable. For manufacturers, the challenge is how to replace older workers without sacrificing the crucial network of relationships and communication that made the traditional — but still quite relevant — supply-chain system work.

Electric & autonomous vehicles

The twin trends of electrification and automation are also discussed at length. Though most industry executives and analysts agree that electric vehicles (EVs) will eventually displace combustion engines over time, how quickly that transition will happen is very much in dispute. Numerous factors — such as charging infrastructure, price competitiveness, evolving battery technologies, vehicle performance, and social attitudes — will affect the mainstream market adoption of EVs in the United States. Europe is much farther along the EV path in terms of infrastructure and adoption rates, but EVs still represent only 2% of the market in the European Union.

Other topics addressed in the report include cybersecurity, environmental regulations, shipping modalities, and changing generational attitudes toward transportation in general. Indeed, as the report demonstrates, automobile manufacturing and auto supply chain management involves some of the most complex business logistics in modern industry, so how these companies manage the inherent risks and uncertainties of their business is instructive to leaders in other industries as well.

Download the full The Future of the Automotive Supply Chain Survey: Americas & Europe here.