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What Is Just-In-Time (JIT)? 

Just-in-time (JIT) is an inventory management strategy that seeks to optimize the production process by minimizing inventory levels and reducing waste. This approach is based on the idea that raw materials, components, and finished goods should be produced and delivered exactly when they are needed. Before this approach became common practice, inventory was being stored in large quantities which had the unintended consequence of increased inefficiency and bloat which taxed the entire production line. JIT, which has its roots in the Toyota Production System was created to eliminate inefficiencies in this manufacturing process. 

Advantages of JIT 

One of the core principles of JIT is the reduction of inventory holding costs, such as storage, insurance, and depreciation expenses. By producing and delivering goods only when they are needed, businesses can avoid tying up capital in excess inventory and minimize the risk of obsolete or damaged goods. This approach also helps to free up valuable warehouse space and reduce the amount of capital invested in inventory. 

Another key aspect of JIT is the focus on continuous improvement and waste reduction. By identifying and eliminating non-value-added activities, such as excessive transportation or overproduction, companies can streamline their operations and increase efficiency. This lean and efficient approach to manufacturing encourages businesses to constantly evaluate their processes and identify areas for improvement. 

While JIT creates unparalleled efficiency, it requires a high level of coordination and communication among suppliers, manufacturers, and distributors. In order to ensure that goods are produced and delivered on time, Tier 1s and OEMs must closely monitor their supply chains and maintain strong relationships and open lines of communication with upstream producers. This often involves sharing information and collaborating on forecasting, production schedules, and demand planning. 

Disadvantages of JIT 

However, JIT is not without its challenges. The strategy relies heavily on accurate demand forecasting and a stable supply chain which, as learned during the COVID pandemic, are anything but constant. Any disruptions, such as natural disasters, pandemics, or supplier issues, can lead to production delays. Additionally, the reliance on frequent, small deliveries can increase transportation costs and the risk of delivery delays in the event of a missed delivery. 

What Is Just-In-Sequence (JIS)? 

Just-in-sequence (JIS) is an advanced inventory management strategy that builds upon the principles of just-in-time (JIT). JIS ensures that components are delivered not only at the right time but also in the precise sequence required for assembly or production. By synchronizing the delivery of parts with the assembly line’s requirements, JIS may further enhance efficiency, minimize waste, and streamline the production process. 

Advantages of JIS 

Just-in-sequence (JIS) features several notable advantages that make it an appealing inventory management strategy. One of the key benefits is the reduction of inventory levels. Reduced inventory levels minimizes holding costs and frees up valuable warehouse space. By delivering components as needed and in the precise order required for assembly, JIS helps companies maintain lean and efficient operations.  

Another advantage of JIS is its potential to improve production efficiency. When parts arrive in the exact sequence needed for assembly, manufacturers can eliminate the need for additional sorting and handling, thus saving time and resources. Furthermore, JIS enhances quality control by enabling manufacturers to identify and address component defects more rapidly. This is possible because issues can be spotted and resolved before parts reach the assembly line. JIS also promotes greater supply chain visibility, as the strategy requires close collaboration and information sharing among suppliers, manufacturers, and distributors. 

Disadvantages of JIS 

Despite its numerous benefits, JIS also has some disadvantages that businesses must consider. One of the main challenges associated with JIS is its reliance on accurate demand forecasting. Any discrepancies between forecasts and actual demand can lead to production delays and increased costs, as the correct sequence of parts may not be delivered. Much like JIT, JIS is also vulnerable to supply chain disruptions and the effects of a delay can be outsized. 

Factors such as natural disasters, labor strikes, or supplier issues can significantly impact the delivery of components in the correct sequence. These stoppages may cause delays and stockouts that affect the entire production process. Moreover, JIS can result in increased transportation costs since shipping intervals become more frequent with smaller deliveries  rather than bulk shipments. This can be particularly disadvantageous for businesses located far from their suppliers or in areas with inadequate transportation infrastructure. Implementing JIS also requires a high level of coordination and complex logistics management. Managing the logistics of delivering components in the correct sequence can be both challenging and resource-intensive. JIS is common practice in the automotive industry between Tier 1 Suppliers and OEMs. However, their counterparts in other industries must do their own calculation to identify the point at which the benefits of JIS are outweighed by additional administrative costs. 

Combining JIT and JIS 

Effectively integrating JIT and JIS inventory strategies involves several key elements. First, robust coordination and communication among supply chain partners are crucial. A comprehensive information-sharing system covering demand forecasting, production schedules, and delivery requirements ensures timely and sequenced component delivery. Both strategies focus on continuous improvement and waste reduction, making supply chains more efficient and responsive. 

Building strong supplier relationships is vital for successful JIT and JIS implementation, enabling strategies for timely, sequence-specific deliveries. Combining JIT and JIS demands a flexible production system, adaptable to demand fluctuations and component sequencing according to production requirements. This advanced coordination and flexible system requires investment in advanced technologies, employee cross-training, and modular production lines. Suppliers and OEMs must also develop risk management strategies when running JIS/JIT production. This helps mitigate supply chain disruptions and may involve supplier diversification, strategic inventory buffers, or contingency planning. 

How Seraph Can Help with JIT and JIS 

By using JIT and JIS, businesses achieve an efficient production process that minimizes waste, reduces costs, and improves supply chain responsiveness. These approaches demand coordination, communication, continuous improvement, and investment in advanced, flexible production systems. However, the tight coordination can often become disrupted, requiring immediate action and deep expertise to solve. Our team of specialized operational consultants can work alongside manufacturers and act as a support structure to optimize JIT/JIS production and operations. Our advisors are former management at many suppliers and OEMs and are experts in JIT/JIS production as well as many other areas of operations. Contact us today to schedule a discovery call, or see our case studies for more information.  

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Analyze The Situation 

One of the lessons learned during the Fukushima disaster is that suppliers beyond Tier 1s matter a great deal to the rest of the health of the supply chain. However, very rarely is it obvious which other suppliers lie upstream of Tier 1s. As long as all of the materials arrive on time, it doesn’t really matter where everything else is coming from. This is true until materials from Tier 2, 3, and 4 suppliers (and so on) stop flowing and affect the rest of the downstream supply chain. The first thing that any automotive manufacturer must do is observe and understand the supply chain and where lower-tier goods come from, how they get there, and what intermediate steps are.  

Toyota, in response to the Fukushima disaster, made extreme and positive changes to supply chain transparency. Toyota built a supply chain database and collected information for each item produced by each supplier. This allows the OEM to understand almost immediately which parts of production will be affected in the event of a natural disaster. Furthermore, Toyota requested its Tier 1 suppliers to collect information for Tier 2 suppliers and beyond to ensure as much transparency as possible. 

Having access to this kind of information allows Toyota to understand the extent of the disaster’s effect on production and plan for alternative production methods. This approach has significantly accelerated their ability to adapt and respond to natural disasters. 

Diversify Suppliers 

Beyond implementing plans for supply chain transparency, one of the best things that OEMs and even Tier 1 suppliers can do is to diversify their own stream of suppliers. The main kind of diversification to protect against natural disasters is geographical diversification of the different suppliers. Not only will this mitigate the effects of natural disasters, but it will also help to reduce the effects of other negative events like political unrest, recessions, and more. 

Toyota, in response to the Fukushima disaster, made a concerted effort to diversify its supply chains and component sources. Essentially, Toyota took a distributed approach to inventory management and distributed production among several different suppliers from which they now order. The goal in doing this is to establish a backup system before any natural disasters ever happen. This ensures that production can still be done from a variety of different locations. Even if one goes offline, production levels can still be maintained. 

Transparency 

In addition to diversifying suppliers, Toyota is also taking the initiative to share information, case studies, and best practices to help suppliers to make their own plans. While some may consider this information as proprietary and sensitive, sharing it contributes to a more robust supply chain. By teaching and sharing ideas with critical suppliers, Toyota has been able to create a highly stable supply chain that can continue working even during natural disasters. 

Increase Inventory 

The topic of maintaining a certain amount of inventory must also be addressed when evaluating production capacity. Just-in-time inventory can reduce inventory costs to the lowest possible level. However, there is a commensurate danger that, if the supply chain suffers for any reason, adequate inventory may be unavailable. Manufacturers must therefore understand the different risk levels associated with each supplier (especially critical suppliers). Their understanding of these risks will inform, in part, the amount of inventory kept on at any given time. Toyota as well as many other OEMs have reevaluated the amount of inventory kept on hand (or at auxiliary warehouses). JIT/JIS certainly has its benefits. However, critical supplies that exist in a zone of frequent natural disasters should have extra buffer inventory. 

Deploy Recovery Teams 

Finally, several OEMs (Mazda, Nissan, Toyota, and more) and Tier 1s have created disaster response teams to support continued production in areas affected by natural disasters. To make these lists as relevant as possible, yearly monitoring for natural disaster vulnerability is necessary. The members of recovery teams should also be comprised of highly skilled managers who know how to run a plant, can think creatively, and communicate effectively.  

Applied to COVID 

While many of these preventative measures were developed by Asian car manufacturers to mitigate the risks of an earthquake, they proved to be quite effective during the COVID pandemic. Supply chain visibility and transparency helped these OEMs whether the pandemic better than other manufacturers. Cross-referencing the areas affected most by pandemic restrictions gave Toyota and Mazda an advantage to begin planning production at alternate sites. Global shutdowns and force majeure ultimately brought all production across the world to a standstill for several weeks. However, those companies that understood their supply chains and could move with agility to replace production were those that performed the best. 

How Seraph Can Help 

Natural disasters are rare events that may or may not ever affect a manufacturer. However, every company has crises from time to time that affects production schedules and productivity. Organizations in these positions often turn to Seraph to help control, stabilize, and improve the situation in as little as 12 weeks. Our team of specialized operational consultants works alongside manufacturers and acts as a support structure to optimize logistics and operations. Our advisors are former management at many suppliers and OEMs and are experts in production, operational efficiency, and crisis management. Contact us today to schedule a discovery call, or see our case studies for more information.

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To navigate the current global climate, it is critical for businesses to recognize and prepare for escalating conflicts around the world. While traditional wars between nation-states, such as Russia’s invasion of Ukraine, are increasing, non-traditional war zones are also becoming more frequent and widespread, leading to a complex geopolitical landscape. As a result, companies that are strategically positioned to take advantage of these conflicts will benefit commercially, while those that are unprepared will become victims of the resulting chaos. It is essential for companies to recognize the potential opportunities and risks associated with this changing global climate, and to adapt their strategies accordingly to ensure their success in the long run.

It is crucial to comprehend that these conflicts are expected to escalate in the years to come, especially in regions with typically weak or ineffective governance, such as Africa, Southeast Asia, and Latin America. The competition for scarce resources in these areas has the potential to generate rivalries and tensions between nations that have not been seen in many decades. The rising threat posed by China, coupled with its increasingly outward aggressive posture, highlights the possibility that these conflicts could become increasingly kinetic and potentially have global consequences.

The impact of rising tensions between the USA and China, along with the potential for sanctions, could have significant effects on materials that are integrated into the automotive, aerospace, and defense industries. As conflicts continue to escalate, companies must prepare for potential disruptions to their supply chains and sourcing, especially in regions with weak or ineffective governance. The rising threat posed by China and other emerging conflict zones highlights the importance of companies strategically positioning themselves to take advantage of opportunities and mitigate risks.

The re-emergence of great power rivalry, a phenomenon not witnessed since the collapse of the USSR, looms ominously over the geopolitical landscape. The potential for this rivalry to ignite conflicts, not only in the South China Sea but also around the world, as countries compete for valuable resources, is a concerning reality. The Democratic Republic of Congo (DRC) is a stark example of this scenario as it suffers from a volatile mix of violence and political instability, while being home to highly coveted mineral resources that are essential to the high-tech industry and critical to the national security priorities of multiple nations.  There are many other mineral-rich countries critical to the supply chain of the automotive, defense, and aerospace industries that also face instability threatening their supply chains.

The rising tensions between global powers necessitate that businesses must prepare to adapt and position themselves accordingly to take advantage of emerging opportunities. Neglecting to do so could result in missed opportunities and potential setbacks. Therefore, it is essential for businesses to prioritize resiliency in their supply chains by investing in the necessary resources, systems, and talent to navigate and take advantage of the shifting global landscape.

IMPACT OF RISING USA-CHINA TENSIONS AND POTENTIAL FOR SANCTIONS

As we are all aware, the relationship between the United States and China has been gradually deteriorating due to the escalating geopolitical rivalry, trade imbalances, and human rights violations, along with mounting concerns over China’s technological advancements that threaten to undermine US global supremacy. Recent events have only served to exacerbate these tensions to unprecedented levels, most notably the discovery and subsequent downing of a Chinese spy balloon that violated US airspace and collected intelligence on sensitive military installations.

In response to these provocative actions, President Biden has implemented new sanctions against six Chinese firms that support China’s military. Furthermore, recent trade restrictions targeting China’s high-tech and semiconductor industries aim to slow China’s ability to compete in the technology sector, without which China’s ability to compete economically and militarily would be neutered. This highlights the potential consequences of escalating tensions between the two nations, including the worst-case scenario of a Chinese invasion of Taiwan and a possible US-led response.

CURRENT STATE OF USA-CHINA TRADE

The economic relationship between the United States and China is unparalleled in size and complexity, with both nations still heavily reliant on each other despite recent decoupling in areas such as high tech. In 2022, the trade imbalance between the two countries was $383 billion in China’s favor, with the U.S. importing $537 billion and exporting $154 billion. This staggering imbalance underscores the depth of interdependence between the two economies, particularly in terms of consumer and commercial goods, medical supplies, pharmaceuticals, and the intermediate processing of raw materials. Any imposition of sanctions on China poses a complex challenge given the extensive interdependence of the U.S. and its allies with the Chinese economy. Each economy relies on the other for different items as shown in the graphics at the end.  For example, although China may not directly be a producer and exporter of raw materials to the United States, it plays a critical role as an intermediary processor for many materials, transforming them from their raw stage into inputs suitable for higher-level manufacturing. For instance, iron ore needs to be processed into pig iron to produce various types of steel.  China is by far the world’s largest producer of pig iron and plays a critical role in supporting the world’s steel-based industries. 

RUSSIA SANCTIONS PLAYBOOK

Sanctions used to be viewed as a less-than-serious tool in the international community, but the devastating economic impact of the financial sanctions leveled against Russia by the United States and Europe since the invasion of Ukraine has completely changed that perception.

Russia’s invasion of Ukraine led to an unprecedented escalation of economic statecraft, with coordinated Western sanctions severely limiting Russia’s access to advanced technologies and isolating the country.  The United States chose to coordinate with traditional allies and partners, a coalition of more than 30 democracies accounting for more than half of global economic output, to impose severe restrictions on trade with Russia.

The coordinated nature of the sanctions magnified their impact, making it more difficult for Russia to evade them. This raises questions about whether coalition policymakers can remain united in response to other pressing challenges, such as the growing power of China.

The question arises: Could we impose comparable sanctions on China in the event of a hypothetical invasion of Taiwan? While the answer is likely yes, it is important to note that the costs would be significantly higher for all parties involved due to the increased complexity and extensive entanglement of the Chinese economy with the United States and its allies.

THE WORST CASE: CHINESE BLOCKADE OR INVASION OF TAIWAN 

The global economy could be on the brink of a catastrophic hit estimated at a minimum of $2.5 trillion per year if China invades or blockades Taiwan. The impact would be extensive, affecting global trade and investment on an unprecedented scale, with the repercussions, felt immediately and difficult to reverse. Even if the conflict does not escalate to involve other combatants like the United States and its allies, the disruptions would leave few countries untouched.

The most significant impact would be on Taiwan, where a blockade scenario would result in a halt to trade, particularly in semiconductors. The world relies heavily on Taiwan for advanced logic chips, with Taiwan producing 92% of these chips. Many industries depend on equipment containing Taiwanese chips, including electronics, automotive, and computing, and they could be forced to forgo as much as $1.6 trillion in revenue annually in the event of a blockade

The United States and Europe would also suffer significant economic impacts, although the European Union, which exports more to China, would be hit harder than the US, particularly in critical goods such as pharmaceuticals and chemicals. While both the US and Europe rely heavily on Chinese imports in various industries, the US economy is not as heavily reliant on exporting to China, which would spare it further damage in an escalating economic war.

Disruptions in Chinese imports would cause noticeable shortages, rising prices, and discomfort for consumers and producers in importing countries. However, China’s export-focused economy, with over 50% of its exports going to the US and US allies, is highly susceptible to Russian-style sanctions. Even if sanctions or military escalation do not occur between the US and China, disruptions to global trade finance would significantly impact trade between China and the rest of the world.

China would be the most open to damage in this scenario because its economy is heavily reliant on foreign imports to fuel its economic machine while also relying on its exports to the world to generate income. Also, losing access to Taiwanese semiconductors would be a severe blow to China’s manufacturing sector and the overall economy. Investors would reduce their exposure to possible financial sanctions and broader economic risks, leading to a further decline in China’s economic activity.

IMPACT OF OTHER RISING CONFLICTS AROUND THE GLOBE

The global supply chain is currently experiencing multiple bottlenecks, including shortages of tin, molybdenum, lithium, oil and gas, lumber, nickel, zinc, and wheat. These shortages have the potential to cause significant downstream impacts on businesses and consumers and are expected to persist. These scarcities could lead to further instability.  Example conflicts impacting global supply chains:

Afghanistan – Speculation that China will seek to dominate Afghanistan’s mineral resources, including lithium, after the U.S. withdrawal in 2021. Resources at risk: Lithium for electric vehicles and clean energy storage systems, copper, nickel, cobalt, and rare earth elements.

The Taliban are sitting on $1 trillion worth of minerals the world desperately needs | CNN Business

China – U.S. export controls on cutting-edge chips, chip design software, chip manufacturing equipment, and US-built components of manufacturing equipment, as well as prohibiting U.S. citizens from working in Chinese chip firms. Resources at risk: Semiconductors and chips.

Trade War Impact on Automotive Industry

Myanmar –  Due to the regime’s foreign currency controls and the restricted supply of fuel, becoming increasingly difficult to buy gasoline and diesel resulting in businesses halting operations unless availability improves. Resources at risk: OEM components due to fuel shortages

Motor vehicle factories in Myanmar under threat of closure | Thai PBS World

Pakistan – Auto assemblers in Pakistan will likely witness a delay in the import of CKD kits in the near term after SBP’s downward revision of the import transaction approval limit to $100,000 from $500,000.  Resources at risk: CKD Kits; imports disruption

Auto assemblers in Pakistan likely witness delay in import of CKD kits – Mettis Global Link

Russia – Russia’s invasion of Ukraine and the ensuing sanctions have significantly affected the availability of raw materials and the prices of those left on the global markets.

Resources at risk: oil, gas, agricultural products, aluminum, nickel, palladium, vanadium, potash (fertilizer input), neon gas The supply of critical raw materials endangered by Russia’s war on Ukraine

Ukraine – Much of the country’s manufacturing and mining capabilities have been destroyed or impeded due to Russia’s invasion. Resources at risk: wire harnesses, neon, agricultural products

Exclusive: Russia’s attack on Ukraine halts half of the world’s neon output for chips | Reuters

Yemen – Ongoing war in Yemen threatens the millions of shipping containers and barrels of oil that pass through the Bab el-Mandeb off Yemen’s coast every day. Increased threats could cause insurance costs to rise and ships to take alternative, longer routes hence increasing. costs. Resources at risk: security of vital strategic sea route

Yemen war risk could strangle strategic sea trade routes | Reuters

In addition, other areas to consider include high-risk zones around the world, such as Beirut, Iraq, Israel, Libya, Mogadishu, Syria, Somalia, Bangladesh, Brazil, Colombia, Haiti, Mexico, and multiple countries in Africa. These regions present significant opportunities for growth in our target area.

 

IDENTIFYING KEY MATERIAL INPUTS AND ALTERNATIVE SOURCES

The global supply chain has made it possible for manufacturers to source materials from different parts of the world. As global supply chains have become increasingly interconnected, the dependence of businesses on certain key materials has grown. However, it has also made companies vulnerable to disruptions that may arise from political, economic, or environmental factors. This vulnerability is particularly evident in the automotive, defense, and aerospace industries, which depend on specific raw materials for their products. The chart below identifies many of these key materials, their common usage, and the top producers/exporters of these materials to the United States. 

As is evident within the data, many of the critical inputs American manufacturers need to thrive are reliant on regimes historically unfriendly to the United States or regions that are experiencing or have the potential to become geopolitical hotspots. By understanding the vulnerabilities inherent in some of these materials along with potential alternatives, companies in these industries can reduce their risks and strengthen their supply chain resilience by potentially sourcing critical materials from friendlier and more stable countries.

Take the example of China, a major producer of many of the key materials identified in the chart. With rising tensions between China and the USA that have been described earlier, there is a growing risk that businesses may face significant disruptions to their supply chains due to the ratcheting up of tensions leading to potential sanctions and even war. This could result in increased costs, delayed production, and even product shortages.

WHAT BUSINESS LEADERS CAN DO

Given the potential implications of escalating tensions between China and Taiwan, US businesses should consider taking a number of proactive steps to prepare. The risks of not doing so are too great to ignore, and businesses that fail to take action may find themselves facing significant disruptions and increased costs in the years to come.

• Assess supply chains to identify any areas where they are heavily reliant on areas of rising tension and potential conflict.
• Companies may want to look for alternative suppliers, stockpile critical components, or explore opportunities to reshore production in order to reduce their exposure to potential disruptions.
• Stay informed about the latest developments in the region by monitoring geopolitical risks and engaging with industry associations or government agencies to stay up-to-date on potential changes to trade policy or regulations.
• Develop contingency plans in case of disruption, such as diversifying their supplier base, increasing inventory levels, or exploring alternative markets.

Access Supporting Charts, Graphs and Endnotes

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Identifying Areas for Cost Reduction 

To identify potential inefficiencies, automotive companies or even consultants hired by automotive companies must conduct an analysis of the production process. This in-depth analysis of the manufacturing process may take considerable time but will leave the manufacturer with an idea of what needs to be addressed. Gathering data is the first step in the process, including analyzing production schedules, performance metrics, equipment efficiency (OEE), and maintenance cycles. Analyzing this data will help the manufacturer identify and understand bottlenecks that delay the rest of the process. In addition to looking internally, manufacturers should also look externally to evaluate what other options there are for lower-tier suppliers. Supply chains have been stretched to their breaking point which have caused a dramatic increase in critical automotive suppliers, especially in the automotive industry. Manufacturers would be well-served by identifying critical suppliers and diversifying their upstream risk. 

Developing and Implementing Cost Reduction Strategies 

Developing a comprehensive cost-reduction strategy is essential for any organization looking to cut production costs in the automotive industry. The first step in creating a cost-reduction strategy is setting clear goals and objectives. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Identifying key metrics that can be used to measure progress towards these goals is also important. This will help the organization track progress and adjust as needed. 

Once goals and metrics have been established, the next step is to create a plan of action. This plan should detail the specific steps that will be taken to achieve the goals and metrics, along with a timeline for implementation. It is important to involve all stakeholders in the strategy development process, including management, employees, suppliers, and customers. This will ensure that all perspectives are considered and that the strategy is aligned with the organization’s overall goals and objectives. 

Implementing the cost-reduction strategy is the next step, and it is important to be mindful of the techniques used to ensure its effectiveness. Communication and training are critical in this stage, as employees need to understand the goals, metrics, and actions that form the strategy. It is also important to monitor progress and adjust as needed, which can be done through regular reviews. 

Creating a culture of cost-consciousness within the organization is also crucial for implementing the strategy effectively. This can be achieved through employee training, communication, and incentives that encourage cost-saving behavior. By fostering a culture of cost-consciousness, employees will be more likely to identify and implement cost-saving measures on their own, leading to greater cost savings overall. 

Automation and Technology 

Investing in new technologies and equipment that can improve efficiency and reduce labor costs is one strategy automotive manufacturers can use to cut production costs. Automation is one of the most effective ways of achieving this since it reduces the marginal cost of additional units produced. Automation of assembly lines and using robots for tasks like welding can help reduce the need for human labor, which can lower costs while also increasing efficiency and quality. 

Given the clustering nature of automotive facilities, it’s common to see regional wages rise much faster than national averages. In areas with many new plants like the American South or Monterrey in Mexico, new job openings are outstripping population growth. Open positions can only stay unfilled for so long before companies surrender and pay a higher rate. Without investments in automation, labor costs will eat every ounce of profit left in a company and spit out the bones to be acquired by a company capable of applying technology.  

Outsourcing and Offshoring 

Outsourcing and offshoring certain parts of the production process to lower-cost suppliers or manufacturing locations can also aid in reducing production costs. This may include sourcing raw materials and even manufacturing certain components. By outsourcing non-core functions, suppliers can take advantage of lower labor costs and access to specialized expertise and equipment. Offshoring to countries with lower costs of living can also help reduce production costs. However, it is important to consider the potential risks and challenges that come with outsourcing and offshoring, such as language barriers, cultural differences, and longer lead times for delivery. To mitigate these risks, it is important to carefully select and manage suppliers, and to establish clear communication and quality standards. Manufacturers who wish to keep their supply chain within their own country may look for states and provinces with lower costs of living to establish plants. 

Lean Manufacturing 

Lean manufacturing is a cost-saving strategy that involves implementing techniques to reduce waste and improve efficiency. Lean manufacturing is not always a silver-bullet solution, but it does play a role in improving efficiency and reducing overall costs. One of the key components of lean manufacturing is the implementation of just-in-time (JIT) inventory systems. JIT inventory systems are designed to reduce the number of raw materials, work-in-progress, and finished goods inventory that a company holds. By having inventory delivered just in time for when it is needed, organizations can reduce the cost of holding and managing inventory. 

Another key aspect of lean manufacturing is the use of visual management tools. These tools, such as Kanban boards, help to make the flow of materials and information more visible, allowing for more effective problem-solving and decision-making. Regular Kaizen events, which involve continuous improvement efforts led by employees, can also help identify areas for cost reduction and increase efficiency and revenue.  

Materials Optimization 

Materials optimization is a cost-saving strategy that uses lightweight composites, advanced alloys, and high-performance plastics. By using high-performance plastics and other alloys, manufacturers can reduce costs by replacing metal components in certain areas of the vehicle. This will also lead to savings for the consumer in the form of a lighter vehicle that consumes less fuel. 

Process Optimization 

Optimizing internal processes saves costs by analyzing and streamlining production processes to identify inefficiencies and reduce costs. Value stream mapping is a way to visualize the journey of a product or service, from its origin to its final destination in the hands of the customer. It’s a tool used to identify and document every step in the process, including the good, the bad, and the ugly. When dealing with process optimization, value mapping can yield exponentially high dividends.  

With a value stream map, it helps to easily spot inefficiencies, bottlenecks and waste in the process. Once these problem areas are discovered, companies can focus on increasing the value-adding steps, while eliminating or streamlining the non-value-adding steps. This can lead to shorter lead times, better quality, and increased productivity. 

Value mapping can also be done with an eye toward the future. This illustrates the process as it will look after the improvements have been made. By comparing the current state map to the future state map, companies can see the expected improvements and the steps required to implement them. 

Additionally, at the cell-level, using data analytics can help manufacturers gain insights into production performance, this can help identify areas where improvements can be made, such as reducing downtime, increasing efficiency, and reducing costs. By analyzing production data, manufacturers can identify patterns and trends that can be used to improve performance and reduce costs. 

Conclusion 

Reducing production costs is an ongoing challenge for manufacturers in the automotive industry but it must be a priority to thrive in the next decade. Identifying potential areas of improvement and implementing strategies can help manufacturers to reduce production costs. Hiring a consultancy can also be a great way to help automotive manufacturers develop strategies for reducing production costs, as it can provide manufacturers with expert advice and support in identifying areas for cost reduction and implementing cost-saving measures.  Our team of specialized operational consultants, works alongside automotive manufacturers and acts as a support structure, adding value from day one. Our advisors are former management at many suppliers and OEMs and are experts in production and operational efficiency. Contact us today to schedule a discovery call, or see our case studies for more information. 

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Identifying Bottlenecks in the Supply Chain 

Identifying bottlenecks in the supply chain is a crucial first step in improving efficiency. Bottlenecks are points in the process where there is a constraint or limitation that slows down the flow of materials or products. These bottlenecks can occur at any point in the supply chain, from raw material procurement to the final assembly of the product. 

To identify bottlenecks, it is important to thoroughly analyze and understand the supply chain sequence. This can be done through techniques such as data analysis, process mapping, and value stream mapping. Data analysis involves using metrics such as lead time, on-time delivery, and inventory levels to identify areas of the supply chain that are underperforming. Process mapping creates a visual representation of the steps involved in the supply chain, allowing for a clearer understanding of how each step connects and where bottlenecks may be occurring. Finally, value stream mapping maps the flow of materials and information from raw material to finished product and can help identify areas of waste or inefficiency in the process. 

Implementing Solutions to Address Bottlenecks 

Once bottlenecks have been identified, the next step is to implement solutions to address them. There are a variety of approaches that automotive companies have taken to improve supply chain efficiency, including implementing inventory management systems and adopting just-in-time production practices. 

Inventory management systems, such as enterprise resource planning (ERP) systems, can help optimize inventory levels and improve forecasting accuracy. This may reduce the amount of excess inventory that a company holds, lowering storage and carrying costs. Just-in-time (JIT) and just-in-sequence (JIS) production is a manufacturing strategy that involves only producing and delivering the necessary materials and products at the exact time they are needed in the production process. This can help reduce waste and minimize inventory costs. 

Technology is also occupying a greater role in supply chain efficiency improvement. Artificial intelligence (AI) and the internet of things (IoT) can be used to automate and optimize various processes in the supply chain. For example, AI can be used to analyze data and identify patterns and trends that can inform decision-making and improve forecasting accuracy. The IoT can be used to track materials and products in real-time, allowing for more efficient use of resources and better management of the supply chain. 

Collaboration and Partnerships 

Collaboration and partnerships work through creating strong relationships up and down the supply chain to increase efficiency. Working closely with automotive suppliers and other stakeholders in the supply chain can help identify opportunities for improvement and allow for the sharing of resources and expertise. One key benefit of collaboration is the ability to better manage risk. By working with a diverse group of suppliers, companies can reduce their reliance on any one supplier, mitigating the risk of supply chain disruptions. Collaboration can also lead to the development of more efficient processes, as different stakeholders can bring different perspectives and ideas to the table.  

Establishing and maintaining effective partnerships requires clear communication and goal alignment. It is important to set clear expectations and establish regular communication channels to ensure that all parties are on the same page. It is also important to establish a mutual understanding of the benefits that each party hopes to gain from the partnership. 

Diversification 

Diversification of suppliers can help mitigate supply chain disruptions in several ways. If a company relies heavily on a single supplier and that supplier experiences a disruption, it can have a major impact on the company’s operations and throughput. By working with a range of suppliers, the company can better distribute the risk across multiple parties and minimize the potential impact of any one disruption. 

Diversification can also provide access to a wider pool of resources and expertise. By working with a range of suppliers, a company can tap into a diverse range of capabilities, knowledge, expertise, and experiences. This can help the company be more agile and adaptable in the face of changing market conditions. Diversification can also improve the company’s bargaining power. By working with a range of suppliers, a company can negotiate better terms and prices, leading to cost savings and improved profitability. 

Improve Forecasting 

Improved forecasting can help optimize inventory levels, align production and supply with customer demand, and reduce waste. By using tools such as statistical modeling, machine learning, and market research, companies can improve their forecasting accuracy and make more informed decisions about their supply chain management, leading to cost savings and improved efficiency. 

Inventory 

One key area where improved forecasting can make a difference is inventory management. Accurate inventory forecasting can help a company optimize its inventory levels, reducing the amount of excess inventory that it holds. This can lower storage and carrying costs and improve cash flow. Accurate inventory forecasting can also help a company avoid running out of stock, which can lead to lost sales and customer dissatisfaction. By using techniques such as statistical modeling and machine learning, companies can improve their forecasting accuracy and make more informed decisions about their inventory management. 

Demand 

Another area where improved forecasting can be beneficial is demand forecasting. Accurate demand forecasting can help a company better align its production and supply chain with customer demand, improving efficiency and reducing waste. By using techniques such as market research and sales data analysis, companies can get a better understanding of future demand and adjust their production and supply chain accordingly. Improved demand forecasting can also help a company better manage its inventory levels, ensuring that it has the right products in stock at the right time. 

Conclusion 

Supply chain efficiency is critical for the success of automotive companies. By identifying bottlenecks, implementing solutions, collaborating, and diversifying the supplier base, companies can streamline their supply chain and improve efficiency. Improved forecasting can also play a key role in optimizing inventory and demand management. 

An automotive consultant, such as Seraph, can be a valuable resource for companies looking to improve their supply chain efficiency. Thanks to our team of specialized operational consultants, Seraph can work alongside a manufacturing operation and act as support structure to add value from day one. Our advisors are former management at many suppliers and OEMs and are experts in production and supply chain efficiency. Contact us today to schedule a discovery call, or see our case studies for more information.  

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Building, buying, leasing, renting, or selling a car has become a more complex task than it was ever before. Among the various factors nurturing this crisis, the shortage of semiconductors (chips) is still one of the primary obstacles influencing the entire automotive production cycle.  

With the heavy concentration of the automotive industry based in the Detroit metropolitan area, The Washington Post came to assess the widespread crisis within the industry.  

The unavailability of car customizations, substantial price increases, the excess of time added to dealership dynamics, and all the unfinished new cars sitting in parking lots prove that the disruption within the automotive market has substantial ramifications. The Washington Post talked with Thomas Kowal, Seraph’s President, about the labor complexity that is currently challenging the industry. 

Kowal pointed out the difficulty that management and workers are having regarding the instability of materials. The back and forth between material availability leaves production and workers in frustration. The market is still carrying the effects of the pandemic’s struggles, which after two years are still as relevant as they were at the beginning of the semiconductor’s shortage. 

Read the full article from The Washington Post: https://www.washingtonpost.com/technology/2022/07/23/chip-shortage-detroit-manufacturing/ 

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