Global disruptions are forcing businesses to rethink their automotive supply chain strategies.
In this series of videos, Unipart explores the critical importance of automotive supply chain management for driving business success, with expert insights and personal thoughts from Martin Corner, who currently sits as Executive Director of Supply Chain Management and Logistics at Aston Martin.
Martin, alongside Unipart’s Richard Hankinson, Automotive Sector Director, and Lucie Dobeer, Head of Business Development for Automotive, uses his personal experiences to unpack the critical importance of supply chain strategy in driving business success, particularly in the automotive sector.
They explore how a robust automotive supply chain can be the backbone of a thriving automotive business, and conversely, how missteps can lead to significant challenges.
Martin shares his firsthand experiences within various roles in the automotive sector, navigating through global crises, such as the COVID-19 pandemic and the subsequent semiconductor shortage, and how these challenges impacted the automotive supply chain and became opportunities under his leadership, leading to unexpected successes even in the face of adversity.
They also look to the future, discussing the seismic shifts occurring in the industry and their impact on automotive supply chain management. From the push towards electrification to the increasing emphasis on sustainability, they discuss how these trends will reshape supply chain strategies and what they mean for the future of automotive businesses.
Throughout the conversation, Martin highlights his passionate belief in the importance of having supply chain leaders at the executive level and discusses why he believes this is crucial for businesses to thrive in today’s complex and interconnected global economy
Key highlights:
- The rise of the supply chain leader – Martin explains why supply chain expertise is no longer a back-office function, but a critical driver of business success.
- Lessons from the semi-conductor crisis – Discover how strategic planning and agile decision-making helped Volvo maintain profitability during unprecedented global automotive supply chain disruptions.
- Challenges and opportunities in electrification – Martin and Richard explore the complexities of automotive supply chains in the electric era, including battery sourcing and cost management.
- The road to sustainability in automotive – Richard and Martin discuss building a more sustainable automotive supply chain, from reducing emissions to circular economy principles
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Watch the full videos
Part one:
Part two:
Part three:
Part four:
Read the video transcripts here:
Part one:
Lucie Dobeer: Martin, you are a strong advocate for having supply chain leaders at the top of businesses. Can you walk us through why you believe this is so critical, especially in the automotive industry?
Martin Corner: Yeah, absolutely. My take on this is that the automotive industry has had a very fixed business model, more or less for the whole of its existence.
And it’s relied on global supply chains, high volume, big leverage, picking the lowest-cost supplier, tooling that supplier in a continent somewhere and then really relying on a very stable, low-cost, reliable, efficient supply chain to move those bits and cars all around the world. And the cliché part of the answer is, obviously what we’ve seen in the last few years is COVID pandemic, which totally disrupted the global supply chains.
We’ve seen the semiconductor crisis, which required significant orchestration of our businesses to keep profitability during that period. And then ongoing geopolitical risks, which, like the Suez Canal problem and the Houthis, and I think this instability is going to continue. Now, traditionally in the automotive industry, you’ve had MPNL, material planning, logistics, or production control, or logistics organisations who’ve managed the logistics flows. But what we’ve seen more recently is a better understanding that global stability and reliability of a low-cost stable supply chain is changing.
And actually, the most important thing in the automotive industry is to sell cars and make cars with all the bits on them, to put it in very simple terms, because that’s far more important than saving five pence on a part by sourcing it in China.
It’s actually better that you make the car, and you sell it, and you get the revenue into your business. So, who better to understand how that fits together and to end and really look at a full, total delivered cost package, optimise the supply footprint, make sure the reliability of supply in and out of the factory to the customer is lowest cost, best invested capital, but more importantly, most reliable? Supply chain people.
We see it all end-to-end. And if you spend your career in supply chain, you go from programmes and projects and product strategy, right through to execution, and understand how that fits together and how it fits together in the balance sheet.
It’s really, for me, the skillset couldn’t be better. I don’t think the boardrooms have yet realised some OEMs have started to create Chief Supply Chain Officer roles, but I think there’s still an old fashioned view of logistics in the automotive industry, but outside the automotive industry and other sectors, supply chain is the business. I mean, the cliché would be Amazon, Nike, their business is a supply chain. It’s not making things at high cost. It’s moving things and bringing a customer consumer model at the best level of profitability and agility to the consumer. So, I think the car industry is very slowly working its way there.
And I think it’s definitely the right thing for them.
Part two:
Lucie Dobeer: Martin, you touched, just a moment ago about the semiconductor crisis during the COVID-19. When you were at Volvo, you navigated this crisis in a really particular and pretty robust supply chain strategy. Can you take us through the strategies that you implemented at that time that not only helped the company achieve profits, but did so despite reduced production?
Martin Corner: Yeah, it was an incredible period. Not least because we’d just come out of the COVID crisis, which was absolutely significant, but in a way controlled, because COVID was sort of sweeping around the globe, in a wave from Asia to the West, and you had blocks of continents, countries, and industry shutting down all at the same time.
So everything was stopping at once in a sequence. So that was a disruption. The semiconductor crisis was something else. It was obviously created by the COVID pandemic, as the mothballing of a lot of the semiconductor facilities meant that they’d fallen far behind on their capability to produce, but every single week it was different semiconductors that we were short of.
And the combinations of semiconductors in a car is thousands and thousands in all the different aspects of the car. Car is effectively a software machine now, even the control of your seat, through to the infotainment system, is all software. And there are millions of combination of end items in a car based on the different spec of a different vehicle.
So the complexity is immense. So we were having a situation where every week we were having to cut a significant proportion of our weekly production. And this is where supply chain being responsible for the planning process is so crucial. So we were taking the information on what semiconductors were available every week, and actually every single week determining which cars we could build in our global factories.
And so we had all the models, all the factories, and we had a set of rules as to what we wanted to achieve for the business. So the priorities were mixed. I probably shouldn’t give away what they were for Volvo cars, but let’s just say we were pushing an EV strategy in a market share on EVs.
We had certain models, which were our highest profitability models with the best market share in the segment. And we had a set of rules, which basically each week when we got the supply, we were having to crunch into – this is the best way to run the factories, this is the best way of satisfying the customer order bank, and this is the best way of actually optimising profitability and cash flow.
So the thousands of pieces of information that we were working on all week, every week, to do that was incredible. And, I think we had clear rules, we were steering the conversation, we were managing the expectations of the factory, we were managing the expectations of the commercial group, we were having to change the customer output on a week-by-week basis, and actually managed to upsell the best spec of cars down the best sales channels to protect profitability.
So, it was an incredible period. One thing I would say, I went to a Gartner convention last week about planning, and I realised we were doing all that on brute force and spreadsheets. These days, an AI system would do it like this.
This point on demand and the customer and agility, I think that’s a new dynamic that the car industry needs to face. And I think this situation we’ve faced in the last few years has exemplified it. So I think the car industry, very expensive product, very expensive supply chain, very expensive manufacturing system.
So it’s all been about minimising the cost of that process. Rather than being agile to the customer. So the car industry’s tactics since the days of Henry T. Ford has been you build these huge assets, you fill them up, you’ve maximised the production, because in theory, you sweat the assets, send the cars out so you can have whatever you want, as long as it’s black to go back to the Henry T. Ford thing.
And then you have dealers who are persuading the customers to buy the cars that you’ve given them. So it’s a very strange business model.
And I think the car industry moving towards brand-demand-consumer led agility is the major challenge for supply chains moving forward. And I remember I was in an automotive logistics convention about 2019, and I was one of the people on a panel and we’d said how brilliant we were now at planning and demand forecasting, and a industry journalist stood up and said, ‘you’re useless, you’re decades behind’.
And I think, and I’m going to try and remember this example from five years ago. So I’m getting old. My mind probably not so good anymore, but he said something along the lines of Amazon, for example, have algorithms where if Lucie goes on the internet and searches for a pink teddy bear the algorithm will say, ah, we now need to stock all of these additional products in our UK warehouses. Because, it was working out by one person searching for a pink teddy bear. The algorithm extrapolated up into this is a sign of some sort of trend or zeitgeist.
And I think the car industry, we are still in that flip period of, well, these are the cars we’re offering, these are what this is what we expect to build, surely the customers are going to buy them? But that sort of personalisation and reacting to consumers who become more challenging because, let’s face it, the actual offerings increasing all these Chinese EV companies that are putting cars into the markets.
So many new startup brands then fighting for that space because they’re very expensive products. We need to earn the right to get our customers to buy our cars. So again, it’s another reason why using data and AI and intelligence and making the supply chain agile to the consumer. I think that’s really is the existential challenge for the car industry right now.
Part three:
Lucie Dobeer: So with the industry rapidly moving towards electrification, which will have a significant impact, how are you adapting your strategies to this shift? And looking at the bigger picture, how do you see the regulations, especially in the UK, impacting the market? How does this shift affect the supply chain strategy?
Martin Corner: Yeah, that’s a difficult question for me to answer. And I’ll try and explain why in a simple way. Obviously, from an Aston perspective, we’re not as far on that journey as, for example, Volvo cars were who made a very early commitment to go fully electric or even Nissan were who were the first companies to put a full EV mass-market car out there into the, into the market.
No, electrification is very challenging. I think that you raised a very good point in your question about legislation. And obviously we now have the specter looming of tariffs and legislation against products coming from certain regions, e.g. China. And I think it’s very, you could almost say you almost need somebody in the company or in the supply chain team working full-time on just that part of the business, keeping abreast of what’s going to happen with taxation, duties, regulations.
In the logistics side, we’ve got the obvious stuff of, is it hazardous goods, is it not? All the specific requirements for storing batteries. I think that there’s a major challenge coming in the future in relation to the recycling of batteries. And I know there are some, there are some nice ideas, for example, going back to Nissan, where they were recycling the batteries, so it was a sort of mini power unit for a building or a warehouse, but
Richard Hankinson: Energy storage.
Martin Corner: Yeah energy storage, or you know, there’s, ideas of how you recycle the energy back into the grid. So there’s a lot of fantastic innovation going on, but let’s say, you know, total industry volume in the car industry to hovers around the 10 million mark doesn’t it, per year?, Maybe 10 to 15 million now. And when, if you think if all the cars were EVs, then every five or six years, what happens to those batteries and there’s an environmental impact.
And I think, it’s really a challenge. And then the very simple point of supply chains are a lot of the raw materials, rare earth metals, the lithium, they’re all coming from a certain place. And we’re back to, there’s almost a monopoly on the critical components that are required for electrification, which will take us back to a point where we have less flexibility in sourcing supply chain, more risk, more invested capital because most of it’s coming from China as it stands.
And making an EV car is significantly higher cost than making a an ICE car as well. So the profitability and the margins on them is not as great as the ICE vehicle. So I’m talking now for the industry, not for Aston Martin, because like I say, we’re still at the moment building sports cars with nice powerful engines in them that do a lovely, beautiful roar.
But, but you know, the industry, the industry as a whole, it’s a fundamental challenge. And you can see that a lot of brands now, you only have to read the press, are struggling with their margins. And some of them have halted production and development of EVs. I think when it comes to sort of the big SUV end of the market, a lot of the brands have even stopped their development of that because they’re waiting to see, is there a way of making it profitable?
But you know, like anything, the technology will improve in competitiveness over time and it will make it more affordable. And in the end, you know, the batteries, now the prices should start coming down, but it’s, it’s over a period of years or if not decades. So yeah, it’s a hard question to answer because I think it’s a period of transformation that’s very uncertain for the industry.
And if you add that to the software angle, the industry is changing more in the next 10 to 15 years than it has probably in the last 100 years because, yes, cars have improved, but it’s been a mechanical product on a combustion engine effectively with four wheels and a steering wheel. And now it’s becoming a sort of connected vehicle.
Richard Hankinson: Yeah. The autonomous.
Martin Corner: Yeah. Yeah. And a new technology of powertrain.
Richard Hankinson: It’s fundamental change.
Martin Corner: Yeah.
Richard Hankinson: It is huge.
Lucie Dobeer: Thank you. Richard, what support have you seen, from OEMs, needing from Unipart just to keep up with the consumer demand?
Richard Hankinson: I think it comes down really to three things, and as Martin said, there’s a massive transformation journey, electrification journey going on at the moment.
So it’s a time of huge change. So I think number one is expertise. That’s what they need from us as martin you’ve said it’s ridiculously complicated in terms of how you store move manage these, particularly the batteries, around the world it’s the regulation, the legislation, the compliance, the certifications, the approvals, it’s all very immature at the moment and it’s, I think, to do another quote, one of my favourite ones, is Billy Connolly, you know, the Scottish comedian and, yes, I’m of that age, but he did a sketch on, on corporate plans and he said, you know, ‘pay attention because it’s all going to change tomorrow.’
It’s true because all of the regulations are going to change, we’re even, and you were again touching on it there, Martin, the chemistry is going to change in the batteries. And so we’re getting our heads around this. And then suddenly it’s all going to change again. The aim is to get greater energy density into batteries to get, you know, the cost per kilowatt down, and that’s all coming, but it’s going to mean massive change.
So it’s a very complicated. business managing an electric supply chain and expertise is what our customers need. They need us to have the knowledge of it and to be able to manage that complexity. The second piece is agility because the volumes, and again, something you mentioned Martin, that the fact at the moment is that the, electric market, is starting to soften in the West.
The demand is not quite as anticipated. And ironically the demand for hybrid and ICE vehicles is, you know, is strengthening, or certainly holding up far, far greater than, was anticipated. And suddenly OEMs are finding that, their build plans are in tatters. So the, you know, what is, it’s anything from an 18-month to a three-year planning cycle.
Suddenly it’s had the proverbial bus driven through it. And so that rebalancing of supply and demand, the OEMs are ramping up the capacity to build electric vehicles just at the point when actually they don’t need all of that capacity at the point that they – at the time that they thought they were going to need it.
And they’ve started to ramp down hybrid and ICE vehicle production just at the point when actually that’s, holding up. So you need agility in a supply chain because it’s, constant change and you’ve got to keep on top of that. And I think the final thing is, global, because some of our customers are selling vehicles into 70, 80, 100 markets around the world.
And that legislation is different absolutely everywhere. And just having that capability around the world, matched to the, to that expertise that you need to manage global supply chains is critical and I think it’s it comes down to that. It’s the expertise. It’s the agility and it’s having that global capability. That’s what’s needed for electrification.
Part four:
Lucie Dobeer: You can’t talk about electrification without sustainability. Something that’s proving to be a little trickier to master in the automotive supply chain. But, equally, something that’s quite crucial due to its interconnectivity with building a resilient and future-proof supply chain.
How are you approaching this? And how can businesses in the automotive begin to process this? Martin, let’s hear from you.
Martin Corner: Obviously it’s a hot topic. Obviously, industries in all, well, companies in all sectors and all industries now, ESG credentials are part of the brand, aren’t they? So, being very cynical, Martin Corner, I’m very interested in actually environmental catastrophes that are coming around the corner. So, personally, I want companies to be more sustainable and reduce emissions. But there is a cynical angle to it that companies are driving this in their midterm plans and their declarations to the board and their brand promise.
And obviously this flows through into the world of supply chain and logistics. The big challenge we’ve got, the global, complex, automotive supply chain means unless we can start teleporting things, which actually would make cars redundant anyway, if we could teleport. So, but unless we start, unless we start teleporting things, you’re moving something. And if you’re moving something, ultimately there’s some form of sustainability impact or emissions.
And again, I keep saying using the word existential, the existential challenge we’ve got in the short term is, that global footprint isn’t going to change. The scalability of zero emissions logistics is a long way off. Again, I’ll joke about myself in another thing I was doing a few years back at Volvo. I was interviewed by, it was the shipping industry, I think, on some seminar. And I asked a question, how long is it until we’ll have like, an EV ro-ro Vessel or Intercontinental Vessel?
And I think a couple of them burst out laughing and said, the battery would need to be as big as the hull. So you wouldn’t be able to get any cars in the vessel because the size of the battery required. So that’s the, that’s the challenge we’ve got. So it’s very nice, and I’m sure Unipart will say, we can offer some nice little sprinter vans that could do shuttle deliveries from a warehouse to your factory, EV, fantastic.
But big picture is we’re moving things around so much long distances that that sustainability angle is not there. So in the automotive industry, the promise is going to be moving to an electrified tailpipe. So if the car itself is an EV, that is a massive exponential benefit to the overall emissions for the company. But the supply chain piece, we are well under the microscope.
I’ve got significant targets on my head, and I did have a Volvo cars, but the ability to influence it now with technology that’s available is limited. So we can look at fill rates on trucks, we can minimise movements, but fundamentally, we’re back to the key point, where your supply base is based ultimately determines your emissions because the closer you can get your supplier to your manufacturer, that will do far more than putting an EV truck in or putting on a train. So the downside is when you’re selling a car, you’ve got to move it to the point of sale. And, Aston Martin has UK factories and we sell globally. So at some point it’s got to go on a truck, or a train, plane or automobile. Ideally not a plane, from an emissions perspective, but you know, sometimes needs must, but no, it’s a huge topic.
And I think we’ve, again, we’ve got to work on strategies to optimise it. But for me, that sourcing footprint orchestration and near-shoring things is the best way to reduce emissions in the short term.
Lucie Dobeer: Thank you. And Richard, what’s your thoughts?
Richard Hankinson: I think to use the football cliché, it’s a game of two halves, as Martin said, the supply chains themselves, there’s lots that we can and are doing, to decarbonise, you know, supply chains.
And I think, we’re very proud of the work that we’ve done with, customers like Sky, where, you know, we manage all of their logistics operations, but we’ve eliminated landfill, all plastics have been stripped out of, the supply chain. Beyond that, we’re doing, all of that CO2 measuring, elimination of the, of the plastics, use of alternative fuels, and, synthetics, in that area, HVO, etc, etc. And as you say, ultimately, you know, near-shoring supplies, it’s moving that supply closer to the point of consumption.
So all of that’s good stuff and it’s complex, but that’s going on. But the second half of the equation is me, for me, is around the batteries themselves. And I think I have two things that are outside of the direct control of the supply chain side of the automotive industry.
But they, they need to happen to deliver that sustainable future. And I think the, first thing is, and we’ve touched on it a bit today, but legislation that has to become consistent. Across the world, we have, everybody needs to be able to understand how to move things as simply as possible from A to B because as you say, ultimately you still have to move things, as a supply chain. It’s, a fact of life.
But what you need to do is do that in the most efficient way. And at the moment, we are not able to move parts, batteries in particular, around the world in an efficient way. And for instance, some of the authorisations, the approvals, to be able to fly a battery that is the last resort, but if you have to, you have to, those authorisations can take weeks, even months, to get through from the necessary authorities. And that’s just not acceptable. And by the way, as we’ve said already, it will all change tomorrow anyway. So whatever you have today, you’re going to need different approvals tomorrow.
So all of that, is about how you do this efficiently and we need that standardisation across the, across the world. Bodies like the SMMT are really helping and
how to help the government define that in the UK, but it’s a global challenge.
And then the second area for me is, and this is really my hobby horse, is design for repair for batteries. Because, there’s lots of work going on about how to recycle efficiently, how to get the black mass, and then after the black mass, how to recover the raw materials. That’s essential. But recycling ought to be the last resort as well, because it’s expensive, it’s complex, it’s not easy to do. And even when that becomes lower cost, and easier, it still should be the last resort.
We ought to be able to repair batteries, lift the lid as they, as it, as it’s known. And whether that’s down to cell level or whether it’s at module level, there are companies out there, OEMs that are doing better than others, but the vast majority of batteries are totally and utterly sealed, and any fault means you’re going to have to replace it.
Martin Corner:
Richard Hankinson: That’s not acceptable. That’s not sustainable, and that can’t be the end destination on the electrification journey. I think, Martin, you talked about raw materials earlier, and again, one of my favourite facts was that, if you attempted to wave that magic wand, and switch overnight all of just the UK’s passenger cars to full electric, you would need three times the annual mining volume of cobalt and it’s similar when you get through some of the other chemicals and such like. And that’s just the UK. So we’ve got to get this more sustainable. We can’t continue to mine for new materials out of the earth all the time. So those are my two things. It’s that standardisation and that’s going to have to be a true collaborative effort around the world, to harness the expertise around the industry, around the world to get those standards in place. And secondly, it’s please design for repair for these batteries.
Martin Corner: I think standardisation is a great point because it’s almost been seen like a dirty word. And so if you look at the Brexit debate, I, we, we need to be unique and we need it.
Well, no, for industry standardisation and, legislation is often a very good thing. Because it takes us forward into a better place. And, I mean, the fact is Aston Martin takes the sustainability side of things very, very seriously. But I think I picked what Richard said. I think the, there are things in our hands we can do, like cutting out plastics
Richard Hankinson: in our transportation. For me, the big lever, like I’ve already said is the footprint itself and minimising movements.
Martin Corner: But beyond that, I think you’re right, Richard. It’s actually the technology itself, which the development of that’s going to be critical. And I’m reading a book called a Nexus.
Now, have you heard of Yuval Noah Harari? He wrote a huge bestseller called Sapiens.
And he’s written a book now called Nexus. And I’ve started reading it. It’s about really the development of information systems through to the age of AI. And it’s sort of, if you’ve grown up in the 80s and 90s, and you watch movies like Terminator and The Matrix, part of it, you feel very terrified of what’s coming because we’re pretty much on the cusp of AI is already automatically developing things.
So, the positive angle could be AI might be developing the better technological solutions far faster than humans could. It’s when the AI overlords take over and, squelch our brains to make this new sustainable technology, that’s the problem now. Joking aside, I think that that is the fundamental thing that will change this. I know we’ve talked about hydrogen and, but maybe there is a version of that around the corner that we don’t know what it is yet? Because, 30 years ago, people wouldn’t have imagined electric cars particularly being mass market. So there could be something around the corner. We just haven’t imagined yet, that actually solves the problem.
Richard Hankinson: Yes, I think the electrification per se and electric vehicles is not the only solution for powertrains going forward and it is going to be horses for courses. You know, the use case, will, the use case varies and powertrains will vary.
Without a shadow of doubt and hydrogen has its place, but it’s the momentum now of electric is, huge. And, I don’t think that’s going to change. But hydrogen has its place in particularly for longer journeys for trucks into city, deliveries, etc.
Martin Corner: And speaking as a layperson, I know they’re doing a lot of studies now on energy production in a version of nuclear fission, but using water.
And there’s a few projects around the world on that, and you think, well, if that comes off, that’s clean energy for free, isn’t it? And you think that these are the trailblazing things that could really shift society, and you could argue if that happens, well then the same could go into transportation and cars and everything. But the question is how fast will this pace of technological change happen? And will it be fast enough?