Have you purchased a car lately? If so, you may have noticed that today’s auto retailers offer tons of rebates and low-financing packages to consumers. This often decreases the profit margin for auto manufacturers, leaving them to look for opportunities to make up costs and sustain profits.
The primary places they look? Their supply chains.
This idea isn’t new; auto manufacturing and logistics have been pivoting together since the 1970s. Manufacturers realize that outsourcing their logistics to a 3PL saves time and money, allowing them to focus on the core competencies within their businesses.
The U.S. auto industry has had its ups and downs financially as well as competing with non-domestic manufacturers – hence the introduction of 3PL partnerships. In the ‘70s, people wanted vehicles that “represented their smaller spaces for parking and need for higher gas mileage,” especially in areas where driving was the only way to get around (like California).
Consumers were trying to find their best value; in-turn, car companies were trying to reduce the cost of vehicles. Logistics outsourcing was a way to improve productivity and eliminate waste. Also seeking to battle the problem of inflation, auto manufacturers realized that the cost of inventory was a key area to minimize. This hugely propelled just-in-time (JIT) shipping.
JIT allowed carriers to increase frequency, reliability and service. Smaller quantities meant quicker-to-market engineering and quality control.
Moving into the 1980s and ‘90s, outsourcing continued to grow in auto manufacturing. JIT fed raw materials to auto plants. More and more 3PLs were specializing in logistics solutions for the auto industry.
Today, auto manufacturers that outsource their logistics to a 3PL reduce their operational costs by 20% on average! Popular services include managing storage, distribution and inventory as well as integrating procurement, processing, warehousing, marketing and distribution with finance. Moving forward, auto and logistics partnerships are still growing as they continue to find greater efficiencies in the supply chain.
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