An OEM’s competitive advantage— to enable and capture opportunities for synergy

Manufacturing and operations professionals are focussed on how to deploy maintenance strategies that will provide advantages to their operations on a global scale. Advanced digital and analytical technologies are reinventing the rules of manufacturer competition, how work will be performed and what leaders must do to lead. Whether you call it Industry 4.0, Manufacturing 4.01 or the Connected Factory, what’s taking place presents a remarkable opportunity for industrial OEMs. Importantly, the foundation of all these gets built as company’s transition from the traditional supplier-customer relationship to a strategic partnership which is based on your company strengths, breadth of engineering knowledge, and the ability to design and fabricate products to customer’s demanding specifications. This, in turn, help companies to intimately involve with all levels and aspects of their customer’s organisations, and develop a reputation as the ‘go to’ supplier and maintain attractive product margins. In an exclusive interaction, Mohit Jauhari, Head of SCM at Shriram Pistons & Rings informs Upamanyu Borah, why productivity gains becomes essential — during this stage of macroeconomic disruption — and that application of management skills, processes, and technologies to couple key functions and capabilities of the chain and take advantage of the available business opportunities whilst developing strategic partnerships — are methodologies that can ensure a company’s future success.

Could you explain the main issues being faced by the automotive spare parts and component market currently?

There are two main issues facing the companies these days.

First, challenges in sourcing material — especially from global sources — as logistics challenges have multiplied manifolds owing to the sudden trade barriers/movement restrictions, etc. — appendaged by the acute shortage of containers. This has had an impact on the availability/prices in local markets — as local suppliers have been inundated with the sudden spurt in demand which has impacted availability of material. Prices have also skyrocketed owing to the huge gap in demand and supply.

Second, lack of digitisation is also hitting hard, especially the underprepared companies. Since any auto supply chain is dependent on a network of suppliers — many of them being in the ‘primitively digitised space’ — even the optimally digitised companies are struggling to synergise with the chain. This is impacting the overall efficiency of supply chains — as the weak links are playing spoilsport for the entire chain. Overstocking as well as stock-outs is happening at a frequency never ever seen in recent times.

As the world emerges from the COVID-19 pandemic, we could be facing an unprecedented global economic upturn. Is the automotive spare parts manufacturing sector ready for that?

Whilst it is good to see the upturn/economic recovery, the challenges mentioned above need to be addressed really fast so that the companies can thrive in the upturn. As the world realises the importance of ‘availability’, focus has started shifting to local sourcing as well as creation of long-term strategic relationships. An OEM’s competitive advantage is highly dependent on this integrated management function— to enable and capture opportunities for synergy. However, this is going to take time to fructify. Hence, I foresee the current set of challenges to remain for the next 1 to 3 years — till we switch over to the new business model.

What will most likely happen if this situation plays out, with large spike in global demand across multiple industries and manufacturers trying to react at the same time?

Chaos will be the new normal — owing to the huge gaps in demand and supply that will play out for the next 1 to 3 years (depending upon the type of company and its existing set of dependencies/linkages).

Companies which are digitally mature and already have strategic alliances will be the ones to thrive till the New Normal stabilises. By leveraging a highly integrated supply chain, such companies have enjoyed many of the advantages while simultaneously benefiting from the investments, innovation, efficiencies, and specialisation of highly focussed suppliers.

Going forward, I foresee large-scale consolidation with a lot of focus on localisation. This will lead to inflationary momentum in the short-term, till the global economy graduates to the stabilised New Normal.

How do companies ensure that they are prepared for this upturn and be able to adjust to these changing demand signals?

Long-term strategic alliances and digitisation will hold companies in good stead in the long run. Focus on cost control/optimisation using these tools will be of utmost importance for companies to first Survive — and then Thrive in the New Normal. Once they reach the threshold, companies should leverage strengths to capture growth in underrepresented areas and tailor product propositions to meet customer needs more effectively. They should continuously re-engineer and simplify processes to deliver efficiency in tech-savvy world.

Going forward, what level of technology is the Indian auto component and spare parts industry looking at, and how it is being addressed?

Blockchain technology will be here upon us sooner than anyone can visualise. End-to-end connectivity across the supply chain — from customer’s customer to the supplier’s supplier — and that too in real-time will help companies synergise their operations towards enhanced efficiencies at optimised cost. IT tools that provide low-cost end-to-end automation and visibility of real-time information — helping create inclusive procedures with a highly-diverse systems-led approach — will see widespread acceptance.

Shriram Pistons & Rings has been at the forefront of technology adoption and intervention, and implementing solutions that improve customer experience and provide world-class convenience. We are working to bring futuristic technologies in a suitably customised manner to enable our large customer base to reap the benefits of technology-driven transformation.

How do you ensure smooth coordination between ecosystem partners that have become critical components of the business model? In the wake of the crisis, what were its wider implications?

Larger companies will have to take it upon themselves — to hand-hold and upgrade their supply chain partners. This is critical as the weakest links of the chain need to be upgraded so that they can contribute to the overall strength of the network.

In fact, supply chain participants must individually and collectively assess the probability of production-stopping events and their tolerance for risk, which must be balanced against the savings from increased sole-sourcing, tighter integration with remaining suppliers, and reduced inventories and production capacities. Thus, although good communications and resource sharing can be helpful in preparing for and responding to disruptions, supply chain, participants must be careful to avoid unacceptable levels of risk in their zeal for awareness and mitigation.

How can companies in the auto component manufacturing industry plan for additional COVID-19 related disruption?

Digitisation and long-term strategic collaboration — with a lot of focus on local sourcing/adequate availability at all times is the Magic Mantra to be ready for any unforeseen/unprecedented natural disaster or an occurrence like the COVID-19 outbreak.

Companies that can take swift actions and change course as per ever-evolving macroeconomic pandemic scenarios will make through to the new future.

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