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In this post, our CEO Tony Duggan looks at the supply chain outlook for 2020 and the impact of climate change, trends in the automotive industry and how to unlock working capital and optimise it .
Demand drivers
The lightning rod for the climate emergency that is Greta Thunberg will no doubt have an impact on accelerating consumer demand for environmentally friendly electric vehicles.
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Moving beyond dieselgate
This demand creates a real opportunity for the industry which is already adjusting from diesel manufacturing to reinvent itself through environmentally friendly electric vehicles.
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Aligning the supplier base
The change in the supply chain, and the supplier base to support this growth will be significant with 5000 parts per vehicle rather that 30,000 in a traditional petrol car. This will require suppliers to make significant capital investment. This is at a time when there is an increase in days payables outstanding levels, stretching suppliers’ working capital to the limit.
Unlocking working capital in a JIT model
The reported €215bn of excess cash reported by PwC requires a new kind of financial supply chain that reflects the auto industry’s very own and innovative Just-In-Time (JIT) strategies for getting inventory to the assembly time when needed.
Working capital optimisation
Implementing a JIT approach to the financial supply chain would enable cash to be released to invest in new technology supporting the rapid transition to electric.
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Cash optimisation with confidence
Connecting buyers, suppliers and maximising those working capital resources requires confidence, which can be achieved by underpinning that utilisation with access to 3rd party funding to support peaks in demand.
Opportunities in 2020
The efficiency that can be achieved from such optimisation reflected in faster time to market could contribute as much as 1% to the margins of the automotive supply chain, which is the difference between huge success and modest growth in the sector.
Tony Duggan is co-founder and CEO of Crossflow. He served as Supply Chain Director at Wickes and B&Q prior to serving as Product Development Director at SWIFT, the global banking network. He also managed an outsourced fintech development project for HSBC in Hong Kong.
