Designed for Success: Supply Network Optimization

Automotive supply chains have come under enormous pressure. Current challenges range from logistics disruptions to increased customization requirements. How can the network be optimized for more end-to-end resilience, flexibility, and transparency? In a new Point of View by Deloitte, experts suggest a comprehensive answer: Companies should implement a continuous supply network optimization process, based on data from the connected supply chain.

Just as the pandemic slump seemed to disappear in the rear window and demand rebounded, global supply chain worries threw a spanner in the works of the automotive industry’s recovery. And yet, this is only one of the issues arising in the unprecedented period of upheaval the industry is going through. To paraphrase Charles Dickens, it finds itself at once in the best and in the worst of times. While new trends, technologies and business models open up exciting opportunities, a host of adverse events keeps affecting global supply chains. After pandemic constraints came the microchip and materials shortage crises, logistic disruptions, and the war in Ukraine. As if exogenous shocks were not enough, changing consumer preferences, new regulatory developments and the drive for more sustainability all result in extra pressure on supply chains, for instance in form of the partner tracking requirements imposed by the German Supply Chain Act. 

In order to deal with this complex landscape of challenges, Deloitte’s new Point of View argues that a comprehensive optimization of the supply network design is needed, as well as an optimization of the entire design process itself. The foundations for this approach: real-time data and digital solutions.

Supply as a strategic asset

For a comprehensive overhaul of the supply network, existing rigid structures should be replaced by a dynamic network with maximum risk visibility and increased operational agility. Problems need to be identified as quickly as possible, and network structures need to be nimble enough to allocate the capacities needed to remedy problems at the right time and in the right place. Today, enabling data-driven technologies around the connected supply chain make this end-to-end approach absolutely feasible, based on a broad set of internal and external data (operational data, stock levels, traffic and weather data, market data etc.). Not only does this help to solve current supply chain problems. It also transforms the supply chain from its historic role as a burdensome cost factor into a strategic asset that represents a valuable competitive differentiator. By adapting a continuous network (re-) design approach, strategic decision-making and operational day-to-day supply management merge in a virtuous circle of permanent improvement. 

A network of capabilities

Where cost once was the all-dominating focus of supply chain efforts, resilience has now become a key feature of a future-proof setup. Flexibility, quality and sustainability represent further capabilities that are necessary for any future-proof supply network. In fact, the network should be designed around these very capabilities rather than around the traditional physical nodes and their functional embedding (such as manufacturing, logistics, tax, inventory). Instead of creating new nodes for emerging needs, existing nodes are reconfigured and equipped with the necessary capabilities according to competitive priorities. Current network design efforts are typically performed on a one-off basis in intervals of three to five years, with considerable effort. In contrast, adopting a continuous capability-centric network design approach with data-driven end-to-end agility is a significant step ahead. With its superior adaptability, it fulfils the needs of mature companies with global operations. 

Tools and enablers: Supply chain expertise by Deloitte

As a data-driven, digitally enabled approach, network optimization is only possible with the right set of technology tools. Whether for the automotive industry or clients in other segments of discrete manufacturing, Deloitte experts use a variety of dedicated software suites from vendors such as Coupa Llamasoft, AIMMS or Anylogistix. On top of that, Deloitte also developed proprietary assets for different aspects of the optimization effort. Deloitte IlluminateTM creates visibility into the supply chain and generates actionable insights by analyzing live data from the supply network with AI technology. Deloitte Supplier 360 ° Control TowerTM offers real-time risk monitoring and supply control with dashboards and role-specific interfaces. Deloitte Delivery CentreTM helps with managing partners, including quality control and capabilities monitoring. Finally, Deloitte’s comprehensive ESG Management Services address all important sustainability aspects across the supply chain – governance, CO2 footprint, supply tracking and much more. 

Download the Point of View “Supply Network Optimization” and learn more about Deloitte’s approach to supply network optimization.