How EV manufacturers can navigate supply chain complexity

There is a strong demand for the global transition away from vehicles with conventional internal combustion engines (ICE) toward those with electrified powertrains. This demand is creating greater complexity for original equipment manufacturers (OEMs) and their supply chains.

Electric vehicle (EV) unit sales are expected to reach 2.13 million vehicles by 2027 according to Statista. To meet this target, OEMs and their supply chain partners will need to establish a manufacturing ecosystem that accelerates time to market (TTM), while navigating regulatory requirements as well as part shortages and other disruptions stemming from unforeseen events.

Transportation accounts for roughly 23% of global energy-related greenhouse gas emissions, according to the Intergovernmental Panel on Climate Change, with road transport accounting for 72% of that.

Global warming is caused by greenhouse gases trapping heat in our atmosphere. Carbon dioxide, a greenhouse gas, is released into the atmosphere in massive quantities when fossil fuels are burned. Studies have shown that a rapid shift to EVs could cut more than 800 million tons every year by 2040.

EV manufacturing supply chain challenges

Although EVs are comprised of fewer mechanical parts as compared to traditional ICE vehicles, they incorporate highly sophisticated technology that is much more difficult to source and mass produce. A key component of the EV is its battery, which requires raw materials such as lithium, nickel, and cobalt.

The mining of these metals is concentrated in China, South Africa, Indonesia, and the Democratic Republic of Congo (DRC). Once the raw materials are sourced, the final batteries are assembled primarily in Asia. Due to the sustainability and labor concerns with mining in areas such as the DRC and the fact that battery production is consolidated in Asia, EV manufacturers are having to reevaluate how and where they source certain materials.

The semiconductor chip is another critical EV component that is costly and time-consuming to produce. Rising demand for semiconductors across electric transportation, consumer electronics, and high-tech industries combined with the arrival of the COVID pandemic has also limited its supply.

To overcome these challenges and ramp up production, manufacturers must develop the right sourcing strategy for batteries, semiconductors, and other high-risk components.

Emerging EV sourcing strategies include:

• Diversification of the supply chain: Having multiple approved manufacturers and suppliers across diverse regions expands your options for obtaining critical parts in the event of sudden disruptions. Additionally, sourcing parts from suppliers that are near the EV production site lessens the impact of natural disasters and other incidents which can create supply chain logistics issues.
• Vertical integration of the supply chain: To gain greater control over production planning and product quality, some manufacturers are leveraging robotics, automation, and other innovative platforms to produce many of their EV components in-house — from the battery and electric motor to self-driving algorithms and control systems.
• Alliances with manufacturing specialists: Because the production of EV products requires dedicated processes, equipment, and facilities, establishing partnerships with electronic manufacturing service (EMS) providers and other experts in the field provides OEMs with specialized capabilities that they need to accelerate TTM and differentiate themselves from the competition.
• Adoption of more sustainable sourcing practices: In lieu of cobalt, some manufacturers are turning to more sustainable and ethically sourced raw materials such as manganese and iron for EV battery production. The recycling of old batteries is another practice that is being used to reduce the cost and environmental impact of mining or importing raw materials.

Reducing environmental impact with a sustainable, green supply chain

Despite having many similarities, sustainable supply chain management and green supply chain management are not interchangeable. While sustainable supply networks concentrate on minimizing their impact across many facets of life to ensure the industry can continue to function into the future, green supply chain methods aim to improve environmental health.

Sustainability naturally takes environmental concerns into account. Sustainable green supply chain methods include actively pursuing the switch to biofuels, incorporating recycled materials into production, and using less energy.

Supply chain and transportation sectors know that operating in a green manner will not only keep the planet sustainable but will also promote the long-term viability of the operation itself. Because of this, the present push for sustainability as well as supply chains and transportation requirements could not be better aligned.

Enhancing EV supply chain visibility

Implementing a robust digital system that manages product information and enables visibility across the supply chain is essential for EV manufacturers to mitigate risks and meet their new product introduction (NPI) goals.

Cloud-based product lifecycle management (PLM) software solutions provide a secure, centralized platform for internal teams and external supply chain partners to exchange product information and collaborate in real time from anywhere in the world.

By facilitating continual, bidirectional communication, key players are always up to speed on the latest product design changes, part shortages, lead times, quality issues, and other critical items that impact production. Information for approved manufacturers and suppliers can be linked to the product bills of materials (BOMs) so that teams can quickly find alternate sources for components in the event of shortages or extended lead times.

Furthermore, the PLM system can be integrated with electronic component databases to help manage environmental requirements for REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals); RoHS (Restriction of Hazardous Substances); and conflict minerals — and ensure that products are designed with compliant parts.

Fast-tracking EV production

To gain a competitive edge in today’s EV market, OEMs must quickly adapt to the ever-changing regulatory landscape and ongoing disruptions that come with producing new products. The adoption of new digital technologies and sourcing strategies will play a pivotal role in mitigating supply chain risks and getting high-quality products to market fast.

To learn more about overcoming supply chain complexity in EV manufacturing and other topical developments, visit Arena, a PTC Business