The Indian automotive sector will will need to undertake a bottom-up evaluation of the provide chain architecture and its vulnerabilities against external variables like the pandemic, according to a current EY India report titled ‘non-linear automotive supply chain — Covid-19 and beyond’, which has located that the effect has been deep rooted.
The automotive provide chain and manufacturing segment has been evaluating mid- and lengthy-term impacts of Covid -19. These consist of procurement organizing and supplier management, integrated sales and operations organizing, manufacturing, logistics and distribution
Vinay Raghunath, companion and automotive sector leader, EY India, stated: “The Indian automotive supplier base is currently not too diversified for majority of components. This was to drive volume-based price efficiencies. However, this strategy is highly exposed to risks arising from disruptions in geographies that supply key auto components.”
The report also highlights the effect of Covid-19 on the Indian automotive provide chain and its inherent inefficiencies. It outlines concentrate locations which could support its functionality in the interim and beyond.
The Indian automotive sector imports $17.5 billion worth of auto elements. Before the pandemic, to enforce ‘Make in India’, the government in the Union Budget 2020-21 hiked customs duty on raw components and inputs imported by domestic companies by 2.5-5%, and fully constructed units (CBUs) from 30-40% for industrial automobiles other than electric.
Traditionally, logistics fees in India have been comparatively greater than neighboring nations. The crucial challenge for the Indian automotive provide chain would be to handle the expense escalation year-on-year, driven by increasing fuel fees. OEMs, hence, will need to discover the capacity of crucial suppliers to fulfill orders from option places.
According to the report, the vital initially step would be to determine a company’s crucial direct suppliers and dependencies — each in the provide and the demand side. It calls for an in-depth mapping physical exercise to recognize its capacity to meet provide needs and responses through possible danger scenarios. This will allow the creation of a versatile ecosystem comprising suppliers and distribution partners. Increased and true-time visibility of their networks will outcome in improved preparedness in case of disruptions to certain nodes or routes.
Som Kapoor, companion, automotive sector, EY India stated, “Organisations need to consider an end-to-end risk assessment of their supply chain covering demand and supply risks, operational performance, global trade implications, customer impact and people aspects. These can be followed by simulating crisis scenarios and validating response tactics.”
Exploring agile and versatile provide and distribution networks could drastically minimize the dangers linked with unpredictability of demand. Being very dependent on a lowest expense supplier and minimal inventory may considerably effect the provide chain, as organization atmosphere bargains with dynamic demand qualities of the market place.
Digitisation of the provide chain will also provide the vital edge to address the altering demands of shoppers. There is a will need to appropriately evaluate newer variables for designing the optimal provide chain model, basis the feasible external scenarios.