The global automotive industry is undergoing a revolution, as manufacturers and consumers make the switch from internal combustion engine (ICE) models to electric vehicles (EVs). While this fundamental shift will produce enormous benefits for the environment, it’s creating challenges and complexity for the world’s automotive demand planning teams.
It’s difficult to get the product mix right — across EVs, ICEs and hybrids — by channel and region. To add to this complexity, today’s consumers are demanding and craving product customization. As smart features, electric powertrains and hybrid models continue to emerge, and as new options constantly become available, this trend is expected to grow.
For automakers, the abundance of choices makes it challenging to predict the exact configurations that will align with market demand. This often leads to overproduction of vehicles and options, resulting in an inventory of slow-selling models that sit unsold at dealerships and force profit-eroding discounts. In addition, consumer preferences and demand vary greatly across global markets. Getting the mix wrong can lead to excessive, aging inventory on the one hand and missed sales opportunities on the other. Original equipment manufacturers (OEMs) that can accurately assess consumer needs and adapt their supply chains accordingly will be the ones to remain profitable.
Meanwhile, automakers need to make high capital investments in new technologies, plants and delivery channels to support diverse models and consumer needs, with no guarantee that these investments will pay off. And, while the global chip shortage is firmly in the rearview mirror, automakers still face supply shortages, in part due to the large component inventories needed to simultaneously produce EVs, ICEs and hybrid models. When production is stalled because of parts shortages, manufacturers lose margins, sales and customer loyalty.
Perhaps the biggest challenge? Automakers are trying to navigate this chaotic, complex market environment with outdated solutions that simply weren’t built for the task. Supply chain planning teams are unable to predict comprehensive demand across all models, regions and channels — or sense demand changes quickly enough to avert losses. They can’t anticipate, rigorously analyze or optimally resolve disruptions. And, too often, they can’t share real-time data throughout the organization and collaborate across functional siloes.
