Latest DHL report details the automobile industry's modern, revolutionary convergence with the tech

The increasingly hi-tech composition of vehicles, driven by growing consumer expectation of product innovation, is propelling this revolutionary convergence between the two industries.

A white paper on the quiet revolution by Lisa Harrington, president of lharrington group, was commissioned by DHL to identify the challenges and opportunities facing the auto industry worldwide.

The convergence is interlinked with the rise of the global mega supplier, as 82 per cent of components used by automakers are now sourced from suppliers. 

This increased dependence, up from only 56 per cent 30 years ago, changes the hierarchy of players away from the traditional power base of the original equipment manufacturers (OEMs). 

The industry now requires greater standardisation, visibility and risk management in supply chain operations to maintain its competitive edge.

“Gone are the days of siloed industry operations where a OEM had a supplier base solely from within the automotive industry,” Harrington said yesterday. 

Today’s average midsize vehicle has about 40-50 microprocessor-driven systems requiring 20 million-plus lines of code, compared to a Boeing 787 with less than 15 million lines, she said.

While consumers stand to benefit from increasingly intelligent and tech-savvy cars, manufacturers must face the challenge of greater risk and uncertainty entering their supply chains. 

Businesses must be proactive and work with suppliers to ensure supply chain practices are fit for a modern operation to avoid business interruption.

The new supply chain is built on three pillars – standardisation, visibility and risk management. 

The industry must work to standardise the management of the physical and information supply chain. This will allow OEMs and their suppliers to streamline operations and cut costs. 

For many companies, this journey towards standardisation is at the core of their strategic plans to transform their global supply chain.

Visibility is underpinned by the latest applications of information technology into supply chain operations. IT has the ability to inject visibility through analytics and tracking systems that record every transaction through the supply chain. 

This type of visibility allows companies to oversee exactly what’s moving across their global network, at any time. Visibility enables a more effective risk management strategy, the third pillar, by reducing uncertainty in the supply chain.

Michael Martin, vice president for strategic development global automotive at DHL Supply Chain, said the infusion of new suppliers into the automotive space means that supplier risk management has taken on new urgency and complexity. 

Competing with other industries for tech supplies, not the least of which is the consumer tech industry, brings with it a new-found risk. 

Players need to diversify their supplier base by sourcing locally or near-regionally to reduce dependence and hedge their risk.