Automotive Supply Chain – Cheat Sheet.

The automotive supply chain is complex and spans across multiple stages, from raw material procurement to vehicle assembly and aftermarket services. This cheat sheet provides a high-level overview of key components, processes, and terms related to the automotive supply chain.

Cheat Sheet Expanded Below:

1. Key Stages in the Automotive Supply Chain

a. Supplier Levels

Tier 1 Suppliers: Provide direct parts/components to the OEM (Original Equipment Manufacturer). These suppliers are typically highly integrated into the production process (e.g., electronic systems, engine parts, safety features).
Tier 2 Suppliers: Supply parts to Tier 1 suppliers, which are often more standardized components (e.g., metal components, intermediate assemblies).
Tier 3 Suppliers: Provide raw materials or basic components that are used to create Tier 2 products (e.g., steel, rubber, plastics).
OEM (Original Equipment Manufacturer): The company that assembles the final vehicle and sells it to the market (e.g., Ford, Toyota, Volkswagen).
Aftermarket Suppliers: Companies that provide parts and accessories for vehicles post-sale (e.g., replacement parts, performance upgrades).

b. Supply Chain Stages

Raw Material Sourcing: Mining and procurement of materials such as steel, aluminum, rubber, plastics, and rare earth metals (critical for electronics).
Manufacturing of Components: Production of individual components like engines, transmissions, batteries, brake systems, and electronic control units (ECUs).
Subassembly: Combining various parts into larger systems like drivetrains, electrical systems, or seating modules.
Vehicle Assembly: The final vehicle is assembled by integrating various subassemblies and components into a complete vehicle at an OEM factory.
Logistics & Distribution: Finished vehicles are transported to dealerships, while parts are distributed to the OEM assembly lines and service centers.
Aftermarket: Post-sale services and parts, including maintenance, repairs, and upgrades.

2. Key Components & Parts

Powertrain: Includes the engine, transmission, axles, and other components that drive the vehicle.
Chassis: The vehicle’s frame, suspension, and wheels.
Body: Exterior body parts, including panels, bumpers, windows, doors, and roof.
Interior: Includes seats, dashboard, infotainment systems, and climate control.
Electrical & Electronics: Batteries, sensors, ECUs, wiring harnesses, and safety systems (e.g., airbags, ABS).
Autonomous & Electric Vehicle Components:
- Battery Pack: Key in electric vehicles (EVs), often from specialized suppliers.
- Power Electronics: Inverters and converters that manage energy flow.
- Autonomous Sensors: Cameras, LIDAR, radar, and GPS used in self-driving systems.

3. Supply Chain Management & Key Concepts

Just-in-Time (JIT): A production strategy where components are delivered to the assembly line just in time for manufacturing to minimize inventory costs.
Lean Manufacturing: A methodology focused on reducing waste, improving efficiency, and lowering costs across the production process.
Supplier Relationship Management (SRM): The management of interactions with key suppliers to ensure a reliable, high-quality supply of parts.
Kanban System: A pull-based inventory system that uses visual signals to trigger the movement of goods.
Global Sourcing: Purchasing parts and materials from suppliers worldwide to take advantage of cost efficiencies, though it can lead to longer lead times and potential disruptions.

4. Logistics & Distribution

In-Plant Logistics: Movement of components from warehouses or production areas to the assembly line.
Third-Party Logistics (3PL): Outsourcing of logistics functions (e.g., warehousing, transportation) to third-party providers to improve efficiency.
Cross-Docking: A practice in which products are directly transferred from incoming to outgoing transportation without being stored.
Reverse Logistics: The process of handling returns, repairs, recycling, or the resale of used parts (important for the automotive aftermarket).

5. Key Trends in the Automotive Supply Chain

Electrification: The shift toward electric vehicles (EVs) is changing the supply chain with new suppliers for batteries, charging stations, and power electronics.
Digitalization: The use of IoT, blockchain, and data analytics to track parts, manage inventory, optimize production, and improve supplier collaboration.
Sustainability: Increasing focus on reducing the environmental footprint, including sustainable sourcing, recycling, and low-emission vehicle production.
Globalization vs. Localization: The balancing act between reducing supply chain risks (e.g., through nearshoring) and maintaining cost advantages of global supply chains.
Supply Chain Disruptions: Events like the COVID-19 pandemic, natural disasters, and geopolitical tensions have highlighted vulnerabilities in the automotive supply chain, leading to a shift towards resilience and flexibility.

6. Automotive Supply Chain Challenges

Supply Chain Risk Management: Addressing risks related to material shortages, supplier disruptions, transportation delays, and geopolitical factors.
Component Shortages: Issues like the global semiconductor shortage have impacted production schedules.
Inventory Management: Balancing the need for JIT with the risk of stockouts, especially for critical components.
Labor Issues: The automotive industry is labor-intensive, and workforce disruptions (e.g., strikes, shortages) can impact production.
Regulatory Compliance: Adhering to strict safety and environmental standards at both regional and global levels.

7. Key Performance Indicators (KPIs)

On-Time Delivery (OTD): Measures how often suppliers deliver parts to the assembly line on time.
Inventory Turnover: A ratio that measures how frequently inventory is sold and replaced over a period.
Lead Time: The amount of time between ordering and receiving materials or components.
Cost Per Unit (CPU): Measures the cost of producing a single unit of the product.
Quality Metrics: Includes defect rates, returns, and warranty claims.

8. Common Terms in the Automotive Supply Chain

OEM (Original Equipment Manufacturer): The company that assembles the final product (vehicle) and sells it to the consumer.
VMI (Vendor Managed Inventory): A supply chain practice where the supplier manages inventory levels at the OEM’s facility.
EOL (End of Line): The final stage in the assembly process, when a vehicle is fully assembled and undergoes final checks before shipment.
BOM (Bill of Materials): A list of all parts and materials required to assemble a vehicle.
MRO (Maintenance, Repair, and Operations): The activities and materials necessary to keep a production facility running.

9. Key Players in the Automotive Supply Chain

OEMs (Original Equipment Manufacturers): Companies like Toyota, Ford, GM, Volkswagen, and BMW that manufacture and assemble vehicles.
Tier 1 Suppliers: Companies like Bosch, Magna, Continental, and Denso that provide advanced systems and modules.
Tier 2 Suppliers: Companies that provide components like fasteners, wires, or rubber gaskets to Tier 1 suppliers.
Logistics Providers: Companies like DHL, Kuehne + Nagel, and DB Schenker that manage transportation and logistics operations.
Technology & IT Providers: Companies offering software, IoT solutions, and digital platforms to improve supply chain management (e.g., SAP, Oracle).

This cheat sheet gives an overview of the key concepts, components, and strategies in the automotive supply chain. It’s a rapidly evolving field, especially with the rise of electric vehicles, autonomous technologies, and the global push for sustainability.

Automotive Quotes

“The Toyota style is not to create results by working hard. It is a system that says there is no limit to people’s creativity. People don’t go to Toyota to ‘work’ they go there to ‘think’.” ~Taiichi Ohno, Father of the Toyota Production System.
“I think there are more politicians in favor of electric cars than against. There are still some that are against, and I think the reasoning for that varies depending on the person, but in some cases, they just don’t believe in climate change – they think oil will last forever.” ~Elon Musk ~Elon Musk.
“Connectivity offers a great opportunity for General Motors. When you look at the investment we have made in OnStar and putting 4GLT in and the access you have to not only put data in, and we haven’t really tapped into the data you can use from the vehicle.” ~Mary Barra, GM CEO.
“We cannot rely on mass inspection to improve quality, though there are times when 100 percent inspection is necessary. As Harold S. Dodge said many years ago, ‘You cannot inspect quality into a product.’ The quality is there or it isn’t by the time it’s inspected.” ~W. Edwards Deming
“If I had asked people what they wanted, they would have said ‘faster horses.’” ~Henry Ford
“If you recognize that self-driving cars are going to prevent car accidents, AI will be responsible for reducing one of the leading causes of death in the world.” ~Mark Zuckerberg, CEO of Meta.
“If you are going to do TPS (Toyota Production System) you must do it all the way. You also need to change the way you think. You need to change how you look at things.” ~Taiichi Ohno
“The Tesla electric semi could change the trucking industry the same way the iPhone changed the cell phone industry.” ~Dave Waters