The article critiques auto OEMs' push-based systems and proposes a new demand-driven method to improve supply chain flow and resilience. Problem: The auto OEM supply chain suffers from inefficiencies caused by push-based systems, frequent schedule changes, and inaccurate forecasts, leading to inventory mismatches, financial strain, and instability for Tier-1 and Tier-2 suppliers. In downturns, prolonged underutilisation increases working capital pressures, and disrupted schedules exacerbate instability and losses. Solution: Employ consumption-driven replenishment, SKU-level buffers at central warehouses (CWHs), and dynamic inventory adjustments to demand to ensure that the flow of inventory is in sync with sales. Benefits: This approach reduces demand fluctuations, boosts supplier reliability, ensures undisturbed production and builds resilient, efficient supply chain partnerships.

Key Takeaways

The 'bull-whip' effect of an OEM's decisions has a big impact on component suppliers. This 'bull-whip' can be nullified.

An SOS for the OEMs

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Explore the critical challenges faced by auto OEMs and effective strategies for supply chain management from Vector Consulting Group's Kiran Kothekar.