It’s Been 40 Years Since Automotive Logistics Saw This Much Change
The automotive logistics sector is undergoing fundamental change as manufacturers and suppliers adjust to new technology.
A new report from analyst firm Ti, Automotive Supply Chain and Logistics 2018, investigates current and future automotive sector trends and found that logistics in the automotive sector is undergoing more change than at any time in the past 40 years.
“There are two major drivers of this change," says Thomas Cullen, report co-author and senior analyst with Ti. "One is the growth of new markets, especially in China but in other regions as well. However, the greatest change is being wrought by new technology. The internal combustion engine is gradually being replaced by electrical power and electronic control systems. The implications for the automotive supply chain and the nature of vehicle production are huge and will be reflected in the changing nature of logistics. Not only will the sources of components be different but the nature of those components and the way they are moved about within any assembly plant will be profoundly unlike what has gone before.”
According to John Manners-Bell, Ti’s CEO, “The automotive sector may become unrecognizable in time, driven by trends often referred to as Industry 4.0. These trends include the likely widespread adoption of electric vehicles, with all the attendant disruption this will have on engine production and spare parts logistics, to name just two key areas. In 5-10 years’ time, automotive supply chains are likely to look very different, although with the billions of dollars already invested in existing plants and production processes, change may be slower than many believe.”
There are numerous concrete examples of how supply chains will be forced to adjust. For example, all-electric propulsion will see the requirement for an engine plant disappear, with logistics focus shifting to the management of battery production and the movement of batteries to assembly plants. Changing materials use will change the nature of the ‘frame shop’, the feeding of steel coil will reduce or disappear and carbon fiber fabrication facilities will be created feeding assemblies into the primary plant.
New digital guidance technology could see a significant part of assembly operations become similar to that of IT hardware such as PCs or mobile phones. Overall, there will be a dramatic fall in the level of assembly activity needed inside vehicle manufacturing plants, and this will have an enormous impact on logistics and supply chain management.
As Cullen sees it, many logistics service providers face the need to rethink their business models. "Not only will they have to deal with issues such as the changed pattern of globalization, they will have to adapt to new operational activity by vehicle manufacturers and component suppliers. For example, the traditional freight ‘milk run’ is increasingly old-fashioned and the road freight providers who specialize in it will already be under pressure." It might be suggested that large carriers and 3PLs who specialize in transportation management services will be able to adapt in such an environment. However, Cullen says, "this is also questionable as the attraction of new web-based freight exchanges is only likely to increase especially if there is greater use of intercontinental air and sea freight.”
