Using data to assess automotive supply chain risk relies on cross-functional coordination and convincing the board

Managing risk in the inbound supply chain is a full-time job and the lessons learned over the past four years are being built into team functions to increase resilience against a range of potential threats.

At this year’s Automotive Logistics and Supply Chain Digital Strategies Europe conference Simon Inskip, director of supply chain digital and innovation at JLR, counted compliance, climate and the switch to electric vehicles as three areas fraught with risk. Being found to be non-compliant with regulation can impact a company’s ability to trade and that is a risk that JLR definitely has a containment strategy around, according to Inskip.

In terms of unexpected environmental problems, Inskip said JLR had coping techniques learned from previous events that it could reuse effectively – “a repeatable playbook” and structure that has been built into the teams.

While the switch to electrification is being pushed by environmental legislation, the new products carmakers are developing to decarbonise their vehicles are at risk of not selling, at least not in the volumes previously anticipated as European carmakers are currently finding out. “We don’t know how that’s going to land and whether it is going to go the way we want it to go,” said Inskip. “How do we prepare to support the business through that big change?” – a question for all carmakers have been asking themselves. Jaguar will reveal a new electric model in 2025 and its concept 00 under the new brand identity has divided opinion.

Political change also brings with it risk and that is something a lot of carmakers are facing, with governments changing in Europe and the US. JLR’s Inskip said questions over trade and tariffs in the US were a particular concern right now because of the incoming Trump administration and the fact that a fifth of JLR’s output goes to the US.

“That’s a very important market to us, so again it’s around understanding what those changes mean for us and how can we prepare to be successful in a variety of different outcomes,” he said. 

An octopus for complex problems 

Vehicle makers also face risk from unforeseen problems with their suppliers and are looking for greater transparency down to the tier-n level to avoid unexpected failures. Daimler Truck has set up department focused on supplier risk management and gathering as much data as possible to gain the foresight required to avoid disruption.  Marion Gillich, head of supplier risk management at the company, explained that her department was looking at a range of issues that could affect its suppliers, including financial stability, natural disasters, regulatory compliance, cybersecurity and decarbonisation. In fact, the Supplier Risk Management department at Daimler Truck has taken an eight-armed approach to coping with the huge level of complexity expected in the next couple of years and trying to build greater transparency.

“We’re building a digital tool that we call Octopus [and] we’re collecting data for eight different risk categories, and like the octopus, every arm has its own brain,” said Gillich, adding that data from each is fed into an overall picture of supplier risk for Daimler Truck.

The picture for each supplier is customised based on the data gathered and that can come from a variety of external sources, also supported by AI. The data gathered can be used to identify key performance indicators (KPIs) that Daimler Truck can use to measure each supplier’s health.

Gathering that data is one part of the process but Gillich’s department is also looking at what to do to manage the consequences of supplier vulnerability on Daimler Truck’s business.

“We’re looking at all the single indicators and we’re driving then the consequence management out of it,” she said. “One of our eight arms is reputational sustainability risks. We have been collecting carbon disclosure project (CDP) scores from our suppliers over the past four or five years and creating an annual report sent to the management.” From that information the company can decide what to do if the score drops or if it goes up.

On the risk to suppliers of natural disasters Gillich said Daimler Truck could work with supplier management and logistics counterparts to prepare mitigation for those suppliers who were in areas of high risk for flooding, for example.  

Data-rich detection

Similarly, JLR has processes around data-fed risk detection, which Simon Inskip described as a sensing platform. “When a risk becomes an issue and it needs management get resolved, then we have processes and mechanisms stepped up to support that,” he said. “The data side of things has been a case of evolving while we’ve had to run at the same time so some of the thinking that we have now for data needs to be retrofitted back to what we’ve already done. But ultimately those learnings have forced where we need to go in the future as well.”

Inskip said that JLR had to move fast on its risk-sensing capability and is in the second year of full deployment and already the carmaker is looking for greater data granularity and substance from its platform and that means increasing the accuracy of input data. “When you know, for example, the address and the location of all your tier ones then its happy days,” said Inskip. “I get all the risks associated to that location and if there is uncertainty around that, then that uncertainty is played back in the risks that you get as well.” 

Cross-silo clarity

Ensuring accuracy of data for end-to-end supply chain transparency and risk assessment means opening the previously independent functional silos of an organisation and connecting them for context. According to Julien Thompßen, global automotive and manufacturing industry lead at software service provider Celonis, to really get end-to-end transparency to assess supplier performance and identify signs of risk you need to cross borders within an organisation and between organisations.

“I see a path for collaboration not only inside a company but also between a supplier and an OEM, for example, and it doesn’t have to be super complex when we talk end to end,” said Thomßen. “Focus first on what you already have in terms of fundamentals and then think about what end-to-end really means for you. Is it super complex or can we maybe do it with what we have?”

Thomßen said that inventory management was currently one of the most important domains for automotive suppliers given how recent crises have impacted stock levels.

“Inventory management is the perfect example for an end-to-end domain because it’s not a process, it’s a combination of procurement, logistics, sales and production,” he said. “It is bringing these processes together and understanding where are gaps in-between these processes; that is what we want to address.”

Thomßen used the example of planning parameters and the regularity of updates to supplier lead times. Combining planning and results data for the attention of the material logistics planner can drastically reduce the lead time and save a lot of working capital.

“It comes down to making it clear for the individual that this action has a value impact for the company,” said Thomßen. “I think making it clearer to the upstream people about how their actions are also affecting the company downstream is the point.”

Ultimately technology is not the real problem, it is getting acceptance for the uses of the technology across the board. At carmakers Thomßen said that big processes, such as order-to-delivery, had many lords that needed convincing. 

“You have the production lord, you have the sales lord and you have the logistics lord,” he said. “You might convince one or two but convincing everyone at the same time is much harder.”

Thomßen’s advice to risk managers was to pick the right battles according to what provided the biggest value needed at the time. “Set a proof point with your technology, make a point why that technology is needed and also be humble and honest,” he said. “If a simple Power BI dashboard is sufficient, then don’t fight it, it won’t get you anywhere.”