Disruptions caused by the pandemic impacted practically every facet of the automotive supply chain. Even before recent disruptions, it hasn’t been easy to manage the huge volumes of invoices generated within the motor industry, many of which are still paper or PDF and processed manually. As any AP professional is aware, processing incoming invoices typically requires a lot of manual effort and time that can be costly and prone to human error or even fraud.
Few industries have as many moving parts as the automotive industry. When dealing with hundreds of different suppliers, it’s easy to get overwhelmed by the number of invoices coming in. On top of this, the industry is currently plagued with a number of supply chain issues. With the global chip shortage along with labor shortages, keeping up with consumer demand in the automotive industry has never been so difficult. By automating the accounts payable process, companies in the automotive industry can ensure maximum efficiency in an industry where efficiency can make or break a company.
Global chip shortage
The typical new vehicle uses about 1,400 microchips. But, an unforeseen surge in demand for smart, chip-enabled devices of all kinds meant that the market needed enormous volumes of different types of chips, all at the same time. Supply chain planners in the industry were unable to predict this scenario, and there was no way they were able to produce enough of the different kinds of chips quickly enough to satisfy the increasing demand.
With these chips in short supply, many of the world’s top automakers have been forced to cut production and temporarily close down many of their manufacturing facilities. This, in turn, has led to a shortage in vehicle production as well as supply chain issues. According to consulting firm AlixPartners, the semiconductor chip shortage is expected to cost the global automotive industry $210 billion in revenue in 2021. Automating accounts payable can mitigate additional supply chain slowdowns and avoid further disruptions.
Other shortages and rising costs
Chips are just one of a multitude of disruptions the industry is facing, including everything from resin and steel shortages to labor shortages. Recent labor shortages have impacted almost every sector of the economy. Upward pressure on wages is being seen across the automotive sector with most having to pay higher wages and even provide special bonuses to attract skilled labor. Higher starting wages are expected to be permanent and last beyond the effects of the pandemic. Another impact on the labor supply comes from what is called the e-commerce effect, in which online retailers are hiring a significant amount of skilled labor, which results in a major lack of available labor for other industries, including automotive-related projects.
It’s no surprise that these supply chain issues are leading to rising costs. In order to offset these increasing costs and avoid passing the higher prices off to customers, automating necessary business processes is a must. By automating the accounts payable process, automotive brands can reduce the cost of receiving and processing invoices.
How AP Automation can offset these problems:
- The approval process often includes multiple different people and various steps throughout the path. Implementing an AP automation system streamlines this flow and ensures that anyone relevant to the approval is instantly notified, thus greatly decreasing the time to approve.
- Faster approval and payment of supplier invoices means automotive companies can take advantage of suppliers’ early payment discounts, further reducing costs.
- After implementing AP Automation software, companies should see a decrease in the cost to process each invoice. In fact, the cost of receiving invoices falls by 64%. In total, industry experts believe that accounts payable processing costs would ultimately be reduced by $4 to $8 per invoice.
- Fewer errors and faster processing times improve relations with suppliers and could even lead to becoming a supplier’s priority customer.
Automotive case studies
For ThyssenKrupp, Comarch delivered a platform guaranteeing highly efficient and reliable electronic document exchange with customers, logistics service providers, and authorities. The aim was to systematize and optimize electronic document exchange processes between Thyssenkrupp’s department responsible for supplying components and engineering services to the automotive sector and its business partners. Before starting cooperation with Comarch, the different functions were fulfilled by several different EDI providers to exchange documents, which made optimal synergies impossible. By working with Comarch, ThyssenKrupp was able to harmonize all their different systems into one convenient location.
Comarch was chosen for a global EDI project with MAN Truck & Bus. Comarch was primarily chosen for its capacity to ensure compliance with the numerous different national laws regulating the electronic exchange of invoice data both on a business and technical level. In the course of the project, various types of partners are being onboarded to the EDI system and connected with MAN. Therefore, it was particularly important that Comarch be able to implement all technical interfaces and convert any document format to MAN’s preferred standard. With the help of Comarch EDI, MAN has been able to make daily operations easier and has helped to significantly reduce the corresponding administrative effort.
The automotive space is unique when it comes to managing supplier payments. With AP Automation, companies in the auto industry can increase internal controls and visibility throughout the entire invoice lifecycle.