It’s no secret that the automotive supply chain deals with a lot of challenges. However, a surprise solution can come in the form of an auto transport broker — so long as you find the right one. Here’s everything you need to know about developing the right approach to conquer these challenges:
What Is the Automotive Supply Chain?
The automotive supply chain consists of a few different components, including dealerships, manufacturers, and suppliers. Let’s explore each one in further detail to gain a better understanding of this unique and vital supply chain.
Dealerships
Dealerships sell vehicles to consumers. Contrary to popular belief, most dealerships are independent of manufacturers. At the same time, one company can own a number of different dealerships.
For example, you might find that a single dealership offers three different makes of cars. Most of the time, the name of the dealer comes in front of the make they sell in order to set it apart from the rest of the field.
Manufacturers
Manufacturers produce the vehicles that are provided to dealerships. The odds are that the brands you associate with dealerships are actually manufacturers — brands like Toyota, Ford, Nissan, Chevrolet, etc.
Sometimes these brands are referred to as original equipment manufacturers or OEMs. However, these brands focus on designing models, marketing vehicles, ordering parts, and assembling the final product.
Suppliers
Suppliers provide auto parts or systems to manufacturers for assembly on production lines. Within the supplierrealm, there are three different tiers.
- Tier 1 suppliers provide quality parts or systems directly to manufacturers. Most of the time, these parts and systems are specifically manufactured for vehicles.
- Tier 2 suppliers provide automotive parts or systems that end up in cars but do not sell directly to manufacturers. Most of the time, these parts and systems can be used in other industries rather than just auto manufacturers. A great example of this is computer chips produced by Intel.
- Tier 3 suppliers provide raw materials like metal or plastic that are involved in manufacturing vehicles. Since all levels need raw materials, Tier 3 suppliers end up providing materials to manufacturers, Tier 1 suppliers, and Tier 2 suppliers.
How Does the Automotive Supply Chain Work?
Let’s put all of these components together to illustrate how the automotive supply chain works.
- Consumers go to dealerships to purchase cars.
- Dealerships order specific types and quantities of cars from car manufacturers based on the demand from their customers.
- Automakers use this order data to meet the demand from the dealerships. They also identify trends to design new cars. Finally, they source the components they need to build these cars from Tier 1 suppliers.
- Tier 1 suppliers source components from Tier 2 suppliers and transform them into automotive-grade products that can be used in vehicles.
- Tier 2 suppliers source components from Tier 3 suppliers. While they work with the automotive industry, they are also involved in other industries.
- Tier 3 suppliers sell the raw materials needed to produce systems, parts, and components to the other levels in the supply chain as needed.
Challenges in the Automotive Industry
The automotive supply chain is a complex system with several components. If a single player experiences supply-chain disruptions, this issue easily impacts the other players. All players need to work together for a seamless system that’s able to meet consumer demands. Obviously, this is easier said than done.
Here are some other automotive production challenges faced by the automotive market:
External Factors
Perhaps one of the biggest challenges faced by the automotive industry relates to external factors. The automotive industry can be easily impacted by everything from environmental disruptions like hurricanes, snowstorms, and wildfires to global health crises, lack of raw resources and even sustainability issues.
We have all seen the impact that COVID-19 has had on the automotive industry that’s struggling to source vital parts like computer chips. With factories all over the world constantly shutting down due to outbreaks, it has been extremely difficult for manufacturers to source raw materials and deliver inventory on time.
Changing Consumer Preferences
Another challenge faced by the automotive industry relates to changing consumer preferences in car sales. While every industry exists to meet consumer needs, the automotive industry comes with a unique set of challenges. This is because cars are a large long-term investment, and consumers want to make sure that they are getting competitive pricing for the best products that will last them a long time.
At the same time, technology is constantly changing and evolving — making it difficult for manufacturers to keep up. It can be hard to predict which technology trends consumers will latch onto and which ones they will reject.
Take autonomous driving, for instance. While some consumers are very excited about this technology, others are hesitant or downright against it.
Lack of Visibility
Much of the automotive industry struggles with an overall lack of visibility. For example, 81% of the automotive industry is concerned about visibility in the supply chain since most parts are sourced from third-party manufacturers. Understandably, this can cause some anxiety since you’re trusting other companies to provide you with the parts you need to meet your own orders.
There’s also a lack of cost visibility in the industry, with prices that tend to vary. Cost uncertainty makes it difficult for players to determine their own price points and profit margins. This problem can easily spread throughout each level of the supply chain in a snowball effect.
If one level isn’t sure of their prices, the next level can’t set their own prices, which prevents the next level from doing the same.
Carrier Capacity Constraints
Another challenge that affects the automotive industry relates to carrier capacity constraints. Carriers help the supply chain function as they transport vehicles from manufacturers to dealerships so that they can be sold to consumers.
However, COVID has impacted this industry as dealerships are having to source their vehicles from many different locations to counteract shortages. As a result, drivers have to complete more stops than before while picking up one to two vehicles at a time rather than an entire truckload.
Furthermore, COVID has also contributed to a driver shortage with fewer drivers willing to risk their health to be on the road and be exposed to countless people at gas stations; truck stops, rest stops, etc. Due to basic economic principles, low supply and high demand have caused transport prices to rise.
But the cost of transport isn’t the only thing rising — gas prices are also rising. Today, the average cost of a gallon of diesel fuel is $3.296 nationally. A year ago, the average cost was $2.420. These higher costs are passed on to consumers who must be willing to pay a premium price for the car they want.
Finding Solutions to These Challenges
Finding solutions to these challenges isn’t easy. In fact, there’s often no straightforward solution for supply chain issues caused by unpredictable and uncontrollable events like natural disasters and global pandemics.
However, the good news is that most of these challenges can be addressed with proactive and beneficial policies and technology. For starters, technology can be used to predict consumer demands and trends betterto better predict consumer demands and trends so that manufacturers can stay on top of these trends. Technology can also be used to provide inventory and price visibility that players in the supply chain need to set their own prices.
Finally, the driver shortage can be addressed by implementing better policies to entice drivers. Trucking is a notoriously rough industry, and carriers can take the edge off by offering incentives and better service.
What Is a Transport Brokerage?
What role does a transport brokerage play in all of this? While a transport broker may not be able to help with parts issues, they can definitely help you get your finished inventory to dealerships so that it can be sold. And these days, this service is worth its weight in gold.
Transport brokers work with automotive supply chain managers to arrange the transportation of vehicles. They act as an intermediary so that both sides can work together for a more seamless experience.
Why Use a Transport Brokerage?
Transport brokers offer a whole host of benefits to shippers. For starters, they are able to quickly find a transportation solution that gets your vehicles from point A to point B safely and in one piece.
They only work with the safest and most experienced drivers so that you have the peace of mind that your inventory is safe and secure while on the road. They handle all of the logistics for you from beginning to end so that you don’t have to lift a finger throughout the entire process.
How to Use a Transport Brokerage?
Working with transport brokers can make your life easier — but only if you work with the right ones. You need to do your due diligence before you begin working with one. Be sure to check customer reviews, BBB complaints, and FMCSA certifications. Once you feel confident in the company, you can reach out for an exact quote.
Be prepared to provide them information about the vehicle(s) you need to be transported (size, weight, features, etc.), where you need them transported to and from, and when you need them delivered.
From there, you can make the best possible decision, bearing in mind that the cheapest option isn’t necessarily the best option when you’re dealing with thousands of dollars of merchandise.
Conclusion
If you’re looking for professionals, look to RPM. RPM offers a whole host of vehicle transportation solutions to meet your needs. We work with OEM, retail, rentals, remarketing, auctions, and fleet management and can offer full truckloads, singles, specialized, and inoperable.
Reach out to us today for a quote.
Sources:
What Are the Top Five Automotive Trends for 2021? | Automotive World
Global Chip Shortage Makes It Tough to Buy Certain Cars | Consumer Reports
The Automotive Supply Chain, Explained | Medium