Verisk 3E

The automotive sector`s information challenge

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Courtesy of Verisk 3E

Few industries face the mounting challenges and scrutiny of expanding environmental compliance requirements, ecological mandates, consumer expectations, and NGO watch groups as much as the automotive industry. The entire supply chain for the automotive industry is being affected by legislation from the EU end-of-life vehicles (ELVs) Directive that addresses the recycling, reuse and recovery of unserviceable vehicles, to more recent and aggressive laws, such as the EU Directives on waste electrical and electronic equipment (WEEE) and the restriction of hazardous substances (RoHS) in such equipment (CW 3 September 2013), and US legislation on conflict minerals (GBB April 2013) and corporate average fuel economy (Cafe) standards. Voluntary tools can also be important, such as Gadsl, the global automotive declarable substance list.

Chemistry is the common denominator in much of this transition and plays a significant role in replacing or reducing hazardous substances. Chemistry and engineering are equal partners in weight-reduction initiatives for structural design and replaceable parts. Cafe standards and other fuel efficiency-driven mandates, coupled with the inexorable rise in fuel costs, are breathing life into new technologies that may replace traditional power sources, materials and parts. Viability, sustainability, affordability, safety and availability of materials all factor into design models, supporting the chemistries that drive development.

Automotive manufacturers have a challenging agenda, which includes:

  • addressing the rising demands upon automotive performance, handling and efficiency;
  • exceeding expanding environmental and ecological compliance requirements, and consumer expectations;
  • accounting for, and evaluating, new technologies, chemistries and engineering, and their impact on the supply chain; and
  • identifying critical analytics to improve monitoring and performance across complex global supply chains.

Major manufacturers have institutionalised a strong supply chain compliance framework to keep pace with the evolving regulatory landscape, and to track impacts of compositional changes in raw materials, component parts and finished goods. Formalised restricted substance standards and material declaration and disclosure policies have been imposed upon Tier I suppliers. These suppliers have compiled and combined their primary customers’ compliance requirements with their own, and imposed them on their supply chains (Tier IIs).

The depth and amount of information that suppliers must access, evaluate, compile, integrate and disclose is growing exponentially. Suppliers to the automotive industry must be able to identify requirements (customer-specific, regulatory, industry standards, etc), overcome present and future compliance challenges, and tap a host of unrelated data sources in order to remain relevant, flexible and competitive. These disciplines are more than tactical manoeuvres, and should become part of an organisation’s strategic blueprint to achieve and sustain market access, competitive agility, supply chain resiliency and business continuity.

Market access

Supply chain conformance and flexibility help to maintain valued accounts and open up new markets. Conversely, non-conformance will put existing revenue at risk and limit market access. Rest assured that if you cannot meet supply chain mandates, your customers will find a supplier that can.

Competitive suppliers demonstrate their ability to obtain and provide critical information quickly. This information will likely include:

  • material declarations;
  • conflict mineral certifications;
  • verification of supply chain work practices (assuring no human rights violations);
  • disclosures of restricted substances;
  • ingredient-level cross-reference with specified global regulations and tools, such as REACH, RoHS, WEEE, Prop 65, the UN Montreal Protocol and Gadsl); and
  • raw material chain of custody records.

Requests for proposals (RFPs) are important instruments in the vendor qualification process, and they help determine if prospective suppliers can meet product performance and compliance requirements. Organisations that have developed supply chain-specific RFP content as a means of soliciting information (when publishing the RFP) and as a presentation of capabilities, resources and data (when responding to the RFP), have proactively positioned themselves ahead of the curve.

When it comes to meeting the needs of your customers to ensure market access, it is wise to convey the impression that you have the most to offer, regardless of the difficulty of the task. A little of the old-school, first to market, approach can enhance your global supply chain capabilities and improve your market access.

Competitors who cannot deliver the information may find themselves quickly eliminated, along with long-standing suppliers who are unable to meet the evolving and expanding requirements. Proactive compliance will help improve a company’s standing with current customers and open up new and emerging markets.

Competitive agility

Automotive industry suppliers that can act fast and favourably to supply chain pressures in a host of environments will improve their competitive position. Incomparable data resources, compliance expertise and supply chain collaboration do not happen by chance. Traditionally, strategies to provide aggregated data from disparate, yet verifiable, sources, analyse and evaluate critical information, and deliver and integrate data into a multitude of platforms, might have been viewed as a complex and costly undertaking – even optional actions in some industries.

However, the tide has changed. The wave of supply chain compliance in the automotive industry may wipe out some businesses, while the competitively-agile will thrive. In order to prosper, companies must be willing to invest in supply chain infrastructure that is flexible enough to expand at a moment’s notice. Today’s large software systems could quickly become inflexible and antiquated in the future. In contrast, processes and integrated tools built around fluctuating, modularised data sets and expanding compliance requirements, are designed to adapt to the rapidly changing, global regulatory landscape.

Competitively agile suppliers should be proactive in their marketing efforts. Customer testimonials, compliance achievements and awards, endorsements from NGOs, and CSR and green chemistry initiatives, make a brand more appealing. Marketing position statements, collateral, web pages, sales pitches, bid proposals, and RFP content should trumpet your organisation’s investment and commitment in environmental, ecological and humanitarian supply chain activities and impacts.

Supply chain resilience

A framework to identify, analyse and mitigate all forms of supply chain risk must be constructed to establish and maintain a robust and resilient chain, upstream. This concept is far from new, but can constitute the most difficult supply chain challenge. 

Prior to globalisation, unpredictable, unique and adverse events had regional impact. Supplier diversity meant having more than one vendor for the same raw material or component part. What happens when a tsunami takes out all three suppliers for one plastic cockpit part, and all are unable to manufacturer or deliver for an extended period? Where do you turn when a critical chemical required for speciality paint is sourced by most Tier II & III suppliers from manufacturers in the same country, which is facing geopolitical conditions that have temporarily halted exports?

Before globalisation, this could be managed by the procurement department, with a little research and a lot of common sense. In today’s world, complex, dynamic, global supply chains face risks from natural disasters, geopolitical unrest, massive IT failures or breaches of security, pandemics, and the unforeseen release of weapons of mass destruction (WMDs), to name a few. To mitigate these risks, there must be a structured plan that involves strategies, policies and partnerships, supported by analytical data and predictive modelling.

The necessity of predictive risk analytics can often go ignored when a company gets caught up in measuring data for the sake of it. Simple information and easy-to-understand formulae often crowd out the collection of detailed statistical data sets and complex evaluations. Probability and statistics are an integral piece of supply chain resiliency.

Business continuity

Supply chain disruptions, regardless of cause, can risk revenue, relationships, reputations and brand. An active business continuity plan is based on performance. Continuity involves the perpetual monitoring and auditing of your global supply chain end-to-end to anticipate disruptions and significant, expected (emerging/rapidly changing chemical regulations) and unexpected (natural disaster) events.

A structural element of a solid business continuity plan is a robust management of change (MoC) process. MoC procedures should be developed with the expectation of progressive change (increased data disclosure, additional regulatory pressures, reformulated chemistries, re-engineered designs, new technologies etc), as well as potential disruptions. A plan where the primary focus is disaster recovery is not an acceptable substitute for business continuity. Testing in a controlled, yet live, environment to simulate changes (minor, mid-sized and major), and potential disruptions, is an effective and proactive method to demonstrate supply chain continuity.

Strong business continuity plans are essential, and are often able to anticipate change and disruptions before they occur. When one element of the supply chain begins to bend under pressure or shows signs of weakness, seamless and preplanned corrective actions are set in motion to limit, if not eliminate, negative impacts. The goal is simple: no surprises; no downtime; no supply chain interruptions.

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