7 January 2013

Automotive supply chain: abyss or precarious balance?

The news about the automotive sector alternate from pole to pole. On one hand we have the usual and bubbly descriptions of the new incoming models, with an acceleration of rhythms and an unprecedented growth in segments within a kaleidoscope of innovation from which very little seem to escape (…Fiat maybe?).

On the other hand there are heavy notes regarding the continuous drop in sales, looking backward to find out at which time the market has returned.

The automotive supply chain is often referred to “the ragged edge”; however, we should say it is hanging in the balance. “Long waves” of change of the last two decades (among which the offer excess and the transition to the customer market), combined with “short waves” of the recent years, and particularly heavy in Italy, (economic crisis, fiscal pressure, political paralysis and social uncertainty) make the operators re-evaluate their choices of today and tomorrow.

The main issue consists in combining the delays in the interventions for the re-organisation (many of them requested since long time) together with the new urgencies.

However, the automotive distribution sector is reinventing itself, it hasn’t reached the end of the line. It is not mature, perhaps some timeworn strategies are mature, those that aim at standards and brand experience without settling a bill, those that want to chase the demand with no measured coverage in the area (on a physical and virtual basis), those that focus on very short term issues, leaving out fundamental medium-long term aspects. Some milestone in the middle of the crisis dust cloud should be highlighted.

The manufacturers are asked to stay grounded for what concerns the distribution and be innovative, and then the dealers need to create and build synergies (subsidiaries and brands) in order to cover the area. There should be a combined offer, mix between the new and the second-hand market, encompassing the new technologies.

The supply chain operators should focus on efficiency and effectiveness, through an innovative approach, so that the strong uncertainty could be cleared.

In addition, the manufacturers cannot play by themselves; they need partners in the area. There should be synergy between them. It s not convenient for the manufacturer to eliminate the dealer because of excessive stocks and neither, obviously, the dealers want to be cancelled out for inertia.

The dealer role doesn’t die out; it changes.

As particularly highlighted by Dan Peterson and Roberto Bonzio in the last Automotive Dealer Day, for every company, besides the good and correct strategy, the willingness of all the people belonging to it really makes the difference.