A Drive through supply chain challenges in automobile industry

July 3, 2021 2:37 pm

[vc_row][vc_column][vc_column_text]Leaders from the automobile industry shared their perspective of the challenges faced during the times of pandemic and its recovering and surging; and, to learn that technology and automation are the times now.

Automotive is one of the core industries of the Indian economy. Indian automotive sector had faced numerous challenges, especially during the coronavirus period. Indian automotive industry (including component manufacturing) is expected to reach ₹ 18 trillion (US$ 251.4- 282.8 billion) by 2026. In the space of the last two quarters, the Indian automotive industry has witnessed a V-shaped recovery, quite different from previous recoveries which were spread over two to three years.

OEM Update conducted round table conference on “A Drive Through Supply Chain Challenges in Automobile Industry”, session. The leaders: Anmol Ukey, General Manager–Sales, Vitesco Technologies (formerly Continental); Inderpreet Singh, Vice President Sales, Addverb Technologies T.K. Ramesh, Managing Director, Micromatic Machine Tools Pvt. Ltd., Ace Micromatic Group, from the automobile industry comprising panel, discussed about growth and opportunities in automobile sector during the session and elaborated the queries raised as session moved on besides highlights upon PLI scheme, fuel pricing and other issues.

Definitely in the automotive and consumer mobility industry, this year when pandemic was about to recede it reared its head again, as a second wave, it caused a slowdown in sales again. So, we all can understand, it was not a national level lockdown. The second wave altered the near-term outlook of the industry, for which we are yet to understand the full impact upon automotive industry in view of the prevailing external factors. So, that supply chain orders pending demands can be fulfilled in coming months.

Sharing his views on this perspective Ukey explained, “What we believe in terms of the impact which we are having right now, is as close to seven to 8 percent. it was around 30 percent to 35 percent last year. Nobody was aware that the pandemic will come into the 2020. So, according to us, yes, I can say there is a spike, it is not a linear curve, which we are having there are the spikes into the industry and challenges which I foresee is coming from the two-wheeler market. Four-wheeler markets are more organised, and they are foreseeing how the things will move on and accordingly they were moving.

To overcome, we produced the goods at our end, joined hands with the OEMs also, and, we kept some inventories at our end, some inventories at the OEM ends, some inventories in between the warehouses. When the ramp up started, that point of time, Maharashtra was closed whereas the Tamil Nadu was open. And then we have taken some kind of special permissions from the government wherein they declared that if we are going for export-oriented products, then we can open the industry. A lot of challenges, we faced across these days. But we have learned a lot also from these kinds of challenges.

With respect to challenges during pandemic, and the rise of manufacturing, what more prospects are there to explore in the coming future; especially when the government also released support in the form of incentives for under the PLI schemes. And, is fiscal, monetary or other supports is expected by the automotive industry!

Expressing his views about industry in reply to query that Ramesh mentioned, today, we talk of China being digitally connected, and from an IT perspective, their arms, etc. The SARS in 2003 pushed China’s digitalisation by five years ahead of time, and perhaps what a lot of what they’re doing today is because they got prepared in 2003, while we got hit, and that did not become a pandemic, and this became a pandemic. So, yes, we definitely learned in troubled times.

Explaining from an automotive perspective, Ramesh says, see incentives, government are important, and they need to provide the policy framework. But that is an enabler. You know, they create an environment that enables development or innovation or whatever to happen. But who does the innovation, innovation still has to be done by the industry itself?

And even before we go to let’s say, logistics, supply, all of that happens, you need to really innovate at the product level itself, or the technology to manufacture parts only after you make a part. The government is trying to do its job about by creating environment, by creating policies, but I believe, direct support, if government needs to – let’s say – burst into the market. So, nothing drives in industry like market, if there is a customer, and if customer wants, then the industry will find ways and means of doing it. This, again has been proven, right through history and right through countries. So, balancing the marketplace is an extremely important part and giving freedom.

Finally, when we are looking at the automotive sector development, ‘like what Anmol was saying or. Singh was saying’, all these days’, one of the biggest challenges of supply chain is when something becomes difficult to manufacture cost effectively at an OEM; their strategy is to render it out. And, when they render it out, the expectation is innovation is better in smaller companies’ costs go down in smaller companies. But today, while all of that is correct, costs go down innovation is better teamwork is better in smaller companies, but technology plays an extremely important role. And this technology cannot be rendered out and the vendors are in that kind of a stage that they cannot invest in technology and that is where the uncertainties come into the picture.

The industry already has got Asia, Pacific, Europe, Americas, okay. And after the pandemic, earlier, the thinking process in the automotive was, for example, if you take Toyota, they are making transmissions here, they were making gearbox somewhere else they are making and an OEM, ultimately only does assembly and maybe he puts presses to make the outer shell of the car because that’s very complex to transport. So, this change is one significant change that is happening now. Where from a de-risking perspective, you will have regional complete manufacturing hubs, it’s So, beginning to So, start now. And this is where the China plus one and again. So, this kind of multi smaller manufacturing is something that I believe will help in from supply chain and geographical perspective.

Since a year, we were listening a word upon Atmanirbharta to promote manufacturing an economic package of 20 lakh crore is also laid out in keeping with Atmanirbharta campaign and manufacturing process enhancement, government has introduced production linked incentive schemes for automobile and auto component sector. In the present scenario, how much inspiring is it to move to local manufacturing with the help of technology and robotisation as you very well mentioned during your sharing the views?

Singh deliberated, we have been focusing on various large manufacturers right and, they thought smaller suppliers or vendors, who have been supplying them and probably positioning making India a hub for make in India right. So, you know, and probably with the time and the situations which have, which is they have seen with pandemic coming in, they’ve understood the importance of technology.

So, let’s not let’s take the pandemic out, because pandemic has its own challenges, and that’s what we’ve seen, but that those challenges are worldwide, right? It’s not only for India, right. So, I think this boost which you just talked about, right, it has definitely made them feel that, you know, they have to go ahead with the international standards, they are ready to invest, they have come back to us, as I shared, right, we are fortunate that we, in the pandemic, you know, we have been able to get, much more interactions with all these companies. And this is a realistic thing, maybe, you know, as I said, we are fortunate because I understand a lot of industries have their own challenges.

And the reason, for that is, this pandemic has, has made people learn, you know, that is why technology is important. Because, these are the kinds of situations which, have made them learn how to handle these kinds of abnormal kind of situations which are there.

But now, it’s high-level catching up in India, and because we are developing everything within India, right, as I, as I showed right within India, for the world. So, for the Indian companies, it’s highlevel really, really fruitful. And, we are very happy to do that, for all of them, making sure that they come out with all the challenges and helping them and so I think, Make in India and the kind of the boost what they’re getting from government, is going to pay off them very well. Yes, that’s what probably I feel the technology is going to be a key for them going forward. An access for technology to accept well, is going to open up huge market for automobiles, like the post COVID situation market is going to be much better for automobiles people want to have their own transport facility and even the transport public transport challenges what we have in today’s scenario, but still again, it is getting connected with a cost escalation we see that you know, most of the manufacturers are getting ready to increase the cost of final product or their cars and bikes. How it is going to create an impact on automobile industry as well as the supply chain which are connected to automobile industry.

Yeah, absolutely I was referring to the cost escalation increase in price for final outputs. Recently most of the auto manufacturers are moving with this you know present tendency of increasing the price, how it is going to create impact on automobile industry as well as the supply chain. The industry the prices are getting elevated every day in terms of the fuel, and the new regulations are coming in future years.

There is a lot of R&D work which is going inside the organisations which will impact into the higher cost. So, what we believe the industry will not grow, but the end consumer who needs it will go for the cars or the bikes. So, it will be a must buy for them.

View on industry getting prepared to manage supply chain challenges, and what one can anticipate for this industry.

The supply chain issues again, because, you know, all the smaller warehouses, what they had, they are coming up with a larger facility and making sure that, you know, the investments towards the technology, making sure that they have the best warehouse management systems to act. so, you know, these are the things which are going to be there in future within the warehouse making sure the supply chain works faster, because it’s all about throughput, right? If there is a wagnor, which is being manufactured right, then you know, from the warehouse itself, it should be so much technologically upwards that it should be able to take out products within few minutes, you know, which we can have, which we cannot do right now., The reason for that is because there is no automation is all humans, which are working there, right, and things are too slow.

Whether it is sourcing or it is transport or it is warehousing whatever you talk about in the in the supply chain activities, it also deals with cash flow challenges in today’s scenario, government is bringing a lot of schemes for MSMEs SMEs and inviting people to invest in those. How do you see what are the you know, measures we can take So, people invest more in technology as well as modernisation of supply chain?

Ramesh observed, again, as far as people investing in technology Yes, schemes from government help. So, I believe its fear is going to be the very important aspect from an industry perspective. See, it’s not anymore Question of, can I afford not to invest in! What will it happen! See, because I believe that, okay, it may not be one year, two years, but definitely the next three to five years. If the technology is not there, the company is not going to exist, let’s be very clear about it. A radical way in which things are happening, you know, it will be Kodak moments, look, what’s going to happen to what happened to them, So, the push for investment is going to come from the need to survive, struggle and grow. Okay. But again, you need to exist today, to fight tomorrow.

So, the loyalty level is also gone. Because of this, you know, this pandemic issue, type people are moving out. So, technology, you know, I think the acceptability is coming. And people have understood that.

While giving closing statement for panel discussion, Ramesh said, I learned so much learning is something that never ends. And again, what everyday life teaches us is to pick up and then I hope and wish that the people who participated from a participant perspective enjoyed and you know it as much as we did. Hence, whether it’s automotive, whether it’s not automotive, three things are absolutely becoming very, very clear. It’s all about change and adaptability. And again, it is in times like this, that we go and push ourselves beyond limits, because there’s no other choice. And that’s where, you know, when we are challenged, and when we are challenged, see otherwise, there’s always a precedent something to lose.

Concluding session, sure for short term, automotive companies like those in other industries fear the unforeseen effects of the second wave of Covid-19. The industry will require government help in the form of reforms and incentives. We believe we’re trying to do our best. There will be failures, there will be governmental issues. That’s because we all wish that it could be get better and better and better. And that’s how the human mind works. This is the intention that keep empowering the industry, keep enrolling people, and giving them more confidence, encourage them to think that way, like, what is workable next! And, is possible next.[/vc_column_text][/vc_column][/vc_row]