7 Ways Consumer Demand Has Impacted the Automotive Supply Chain

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7 Ways Consumer Demand Has Impacted the Automotive Supply Chain

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There are hundreds, if not thousands, of factors that impact the world’s automotive supply chains — from tariffs and other trade policies to increasing extreme weather events, interest rates, inflation, sustainability pressures and the rise of artificial intelligence (AI). But over the past few years, one force has reshaped not just the automotive supply chain, but all supply chains, unlike any other: Consumer demand.  

Increasingly, today’s supply chains are driven by the consumer waiting at the end. Today’s consumers want products delivered quickly to a range of sites. They want customized and personalized product options. They want accurate, on-demand availability information at the time of purchase — and real-time tracking throughout the delivery process. And they want free or low-cost shipping.  

This shift is not only transforming traditional retail, but also reshaping industries like automotive, where the way cars are bought and sold has changed dramatically. From online car purchases and subscription models to direct-to-consumer (D2C) sales by manufacturers, the automotive industry is experiencing a similar revolution driven by evolving consumer expectations. When buying a new car, consumers are increasingly seeking a business-to-consumer (B2C) experience that’s like shopping at Amazon. By 2030, 80% of new vehicle purchases will occur online, and 60% to 80% of new cars will be directly sold to consumers. 

Not only is there a growing demand from consumers to make their car purchases online, but there is increasing demand for vehicle customization. This includes the flexibility to make specific changes to the configuration, model and trim for their new car. As they make changes, consumers want to know exactly how various configurations will impact timeframes for manufacturing and delivery, as well as pricing — on demand, in real time. 

In response, the automotive industry is pivoting away from its traditional push-based or make-to-stock (MTS) approach — characterized by a “flood the zone” production model, where dealers maintain 60 to 80 days of inventory. Instead, they’re moving to a hybrid push- and pull-based, configure-to-order (CTO) model with lower inventories. While this is a general industry mindset shift, let’s take a look at seven specific ways consumer demand is reshaping the modern automotive supply chain.  

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1. Rapid adoption of advanced technologies 

Legacy systems, manual processes and human analysis just aren’t adequate to keep pace with ever-changing consumer demand. Just about every automaker has been forced to embrace digital solutions that increase real-time visibility, drive out costs and inefficiencies, and fluidly match supply with shifting demand. In this case, consumers have done the world’s automotive supply chains a favor. There’s no question that supply chain digitalization — whether forced or not — has resulted in happier consumers, happier employees, happier executives and happier shareholders. In seeking vehicle shopping experiences that mirror B2C retail experiences, consumers are significantly advancing the sophistication and profitability of automotive supply chains. 

2. Real-time order transparency  

One obvious benefit of supply chain digitalization is that it enables complete, real-time visibility across the end-to-end automotive supply chain. Today not only consumers, but all stakeholders in the chain, need real-time awareness. Consumers want to know when their order begins production, leaves production for the shipping department, and is loaded onto a boat or truck. They want complete confidence in when their new vehicle will arrive. But real-time order visibility benefits internal stakeholders too, enabling them to respond to any shipping delays or other disruptions before they impact consumer promises. 

3. More accurate forecasting 

Remember when production and delivery timelines used to be low-pressure and more leisurely? Remember when consumers used to be more patient and understanding? E-commerce and the Amazon effect have changed all that. For products manufactured overseas or built-to-order, today long lead times are solely the company’s problem. The only way to balance long lead times with fast-changing consumer demand is to dramatically improve forecasting precision. For automakers, this challenge is only compounded by product diversity and vehicle electrification. It’s difficult to get the product mix right across electric vehicles (EVs), internal combustion engine (ICE) models and hybrids — as well as all channels and regions. Getting the mix wrong can lead to excessive, aging inventory on the one hand and missed sales opportunities on the other.  

Automakers that can accurately assess consumer needs and adapt their supply chains accordingly will be the ones to remain profitable. Fortunately, powered by artificial intelligence (AI) and machine learning (ML), today’s forecasting engines and algorithms are incredibly accurate at considering hundreds of demand-influencing factors and arriving at accurate predictions. They help automakers not only produce or order the right products, but balance inventory across multiple locations. Advanced forecasting is essential for having the right product at the right place, at the right time, for speedy delivery that delights consumers — without decimating profit margins. 

4. Increased production efficiency 

The worldwide automotive industry is a great example of how consumer demand has driven significant production changes. The need for vehicle customization at scale — as well as the shift from ICEs to hybrids and EVs — make the modern automotive demand forecast a constantly moving target. Considering the high capital investments required to manufacture cars and trucks, and the long lead times involved, that’s a very big deal. The only solution is to adopt more flexible, agile production planning processes that sense new orders in real time and re-configure assembly plans on a continuous basis. That may sound next-generation, but leading automakers are embracing flexible production — combined with increased forecasting accuracy — to intelligently balance costs with consumer satisfaction.

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5. Improved supply chain flexibility 

Of course, production isn’t the only function where digitalization has driven increased agility and responsiveness. AI, ML and advanced analytics are at work today across the automotive supply chain, improving speed and nimbleness from procurement to final delivery. Daily process automation, smart pallets, intelligent loading-building, real-time route optimization and camera-based technologies have already revolutionized logistics — and digitalization is bringing new innovations every day. Decision automation means that many choices and course corrections happen automatically and immediately, so consumers never even see or feel the bumps along the way. 

6. Direct-to-consumer supply chains 

The next-day or same-day delivery that consumers want? That’s largely been enabled by the many manufacturers who have switched to a direct-to-consumer sales model. These companies have opted to build their own e-commerce websites where consumers place orders directly, eliminating any third parties. This new industry standard is just one more byproduct of the immediate gratification consumers expect from their buying experience. For automotive manufacturers, combining D2C shipping with flexible production practices can be a huge boon to the bottom line. The D2C model means that the expenses traditionally associated with storing inventory, third-party distribution and retooling between production runs are cut drastically. 

7. Platform-based software architectures 

As automakers have struggled to keep up with rapidly growing consumer expectations, software providers like Blue Yonder have responded by offering more flexible architectures that include a platform-based delivery model. Connected on Blue Yonder Platform, cloud-native software solutions share the same data and work together in an orchestrated manner, supported by interoperability.  

During the consumer’s vehicle ordering and configuration process, Blue Yonder Platform supports a real-time inventory and pipeline search. This enables customers to check the availability of a vehicle with the desired configuration within the dealer network or in the pipeline, providing them with an estimated time of arrival (ETA) on demand, in real time. If the desired vehicle is not available in the dealer network or pipeline, consumers can obtain real-time estimates of when they can expect their personalized vehicle. Blue Yonder’s dynamic order slotting and sequencing capabilities — which look at material, time, capacity, buildability and transportation constraints, as well as vehicle routing and scheduling — interact with the ordering system to provide reliable expected dates. 

One of the unique advantages of partnering with Blue Yonder is that our end-to-end capabilities exist on a single platform, with a single point of data ingestion via Snowflake’s data cloud. Blue Yonder delivers unprecedented end-to-end capabilities that include volume planning, feature and mix planning, forecasting, order generation, parts requirements planning, order slotting and sequencing, configure-to-order, transportation capacity planning and logistics fulfillment. Regardless of which function planners are involved in, and the challenges faced in that process, it’s a game-changer to have a core, cloud-based central platform that integrates, orchestrates and execute actions — helping to build sustainable and resilient operations, mitigate risks and provide end-to-end visibility. 

Consumers are just getting started 

If you think consumers are done exerting their influence on the automotive supply chain, think again. As leading manufacturers profitability improve their service levels and personalization capabilities via digitalization, consumers will just become more demanding — and the stakes will get higher for the world’s automotive supply chain teams. 

As you look over these seven trends, how well has your organization kept up with consumer needs? Can you do more to serve consumers better, while also satisfying your shareholders? Chances are that the answer is “yes.” Consider reaching out to Blue Yonder to discuss the many ways consumers will continue to drive automotive supply chain innovation — and how you can prepare today for tomorrow’s new demands.