Essential Tips for CEOs to Thrive in the Auto Industry

Some of the primary tasks for CEOs to consider when developing the best resilience strategy for their organization are developing improved monitoring systems, discovering pragmatic ways to ensure supplies of essential resources, and providing a "good enough" product.

FREMONT, CA: As supply chain disruptions grow more frequent and extensive, it’s natural for business leaders to want to fix every flaw or mistake to prevent future problems. However, achieving a fully resilient supply chain is increasingly recognized as unrealistic. Instead, a practical and flexible approach has proven far more effective—a mindset many automakers are now adopting. As companies across industries strive to rebuild their supply chains for greater resilience, the automotive sector’s strategic responses to recent disruptions provide valuable lessons for businesses everywhere.

Key actions for CEOs to consider

Resisting the desire to centralize decision-making: As companies create increasingly intelligent systems for monitoring their supply chain and responding to disturbances, there is a natural tendency to consolidate decision-making power under a single team in charge of resilience. However, centralization might cause significant delays in responding to situations that the organization cannot afford. A more effective method is to achieve a balance between centralized and decentralized decision-making. One automotive company used a hybrid model, putting tactical or more straightforward decisions in the hands of employees working on the ground in day-to-day supply chain operations while the central supply-chain-resilience team controls larger decisions that may involve significant investments or affect the entire supply chain.

For example, the procurement team has the authority to make targeted adjustments to inventory policies, whereas the central team makes strategic decisions, such as prioritizing the list of priority risks and solutions throughout the company's supply chain. The company thinks this structure will allow it to respond more quickly to urgent situations while guaranteeing thorough diligence for changes with wider repercussions.

Providing a "good enough" product: Some automakers avoid shipment delays by modifying or deleting non-essential features and components. Their reasoning is that, following the supply challenges of the last few years, people are more willing to tolerate a product that does not provide everything they desire.

Automakers have discontinued driver assistance systems and other technologies that rely on obsolete computer processors. As the chip shortage eases, it's unclear when automakers will reverse their judgments. For example, if an analog control panel is less expensive than a digital one and clients prefer analog, is it worth switching back? Weighing customer preferences, the competitive landscape, and supplier availability can help organizations make short and long-term decisions.