The Importance of Supplier Quality Visibility in the Rapidly Expanding EV Market

By ETQ on November 8, 2021

As of 2020, there were approximately 1.8m electric vehicles (EVs) in the US — over three times as many as in 2016. The industry is only set to grow, too, with forecasts suggesting that, by 2025, the market value of EVs on the road will amount to around $1 trillion. The components used within EVs alone are forecast to be worth $300 billion within the same timeframe.

With the EV market growing rapidly, drastic change will be needed to ensure it’s scalable. With small components, charging technology, precious metals, recycled materials, and batteries all coming together in the manufacture and operation of an electric vehicle, there are many supply chain elements and supplier quality challenges to address. Enterprise-wide visibility has never been as important in managing such a complex supply chain.

Raw materials challenges today

We’re already in a position where supply chain visibility is vital for carmakers. There are several raw materials involved in the manufacture of an electric vehicle. Batteries, in particular, require lithium, nickel, cobalt, manganese, aluminum, copper, and more. Lithium presents a challenge to the industry because, while there’s no physical shortage of it, it’s difficult to get out of the ground profitably. Getting lithium into the supply chain involves significant capital needed to mine it.

The refinement of nickel also poses a problem for a company’s bottom line. It’s much cheaper to process the metal in Asia than in North America or Europe. For many companies, this means the manufacturing process needs to be spread across the globe. That’s why companies in the EV space need to have complete visibility into this global supply chain — from raw materials and components through to the final build of the vehicle.

How this growth could present challenges

In any rapidly growing industry, there can be several challenges. With the demand for electric vehicles increasing, supply chain managers need to be aware of possible challenges.

Scaling too quickly

Many of the components in electric vehicles are like those used in smartphones. That similarity means a lot of electronics companies are adapting to working in the transportation industry.

The problem here is that a cellphone has just one battery cell and that scale only slightly increases with something like a laptop battery. The batteries in electric vehicles, however, contain thousands of cells. This difference means that suppliers of these components need to increase production on a massive scale to keep up with demand. With both parts manufacturers and carmakers scaling quickly, this could lead to a drop in supplier quality. However, being able to predict trends and monitor the entire supply chain can help to avoid this.

Increased production

Battery production facilities are popping up across the US and many manufacturers are converting existing plants to ones capable of producing EV batteries. With this increase in production comes several logistical challenges. As a supplier adds more plants, more moving parts need to be monitored for quality, profitability, and more.

Finding new suppliers and building in-house

Supplier quality is an important part of the broader quality management process. As carmakers bring new supply chain partners on board, they need to ensure the quality matches what they can build in-house. Battery production is one of the key parts of the EV manufacturing process. As a result, Tesla, Volkswagen Group, BMW, General Motors, Geely Auto Group, Ford, and many more invest billions of dollars into the lithium supply chain. In order to do this, they are looking to diversify suppliers, which allows them to expand their ability to produce batteries.

In a volatile market, securing the supply chain in this way helps to ensure quality and reduce risk. That is especially important when dealing with raw materials such as lithium.

Scaling R&D

In addition to producing vehicles at the level demanded by customers, R&D must also scale. Manufacturers must keep up with the rapid pace at which this technology is developing. Just look at battery capacity; 2018-2019 versions of some common electric cars display a battery energy density that’s 20-100% higher than their 2012 counterparts.

According to an analysis by Reuters, investment in new technology is growing, and carmakers have already spent $90 billion in EV-focused research and development.
These investments inform sourcing decisions in the years ahead
and could have a massive effect on the supply chain.

Why visibility is important

With such a complex supply chain that’ll only become more so as EV production scales, enterprise-wide visibility helps businesses monitor suppliers and in-house manufacturing. Software like ETQ Reliance can offer insight into the entire supply chain to help manage quality and aid in decision making. With strong and accurate supplier quality visibility, manufacturers can:

  • Spot quality issues before they get to the customer
  • Monitor supplier quality
  • Find opportunities to reduce waste and increase efficiency
  • Address problems before they become too big to handle
  • Identify changes in suppliers and customers
    Recognize areas for training and development

How quality management software offers this visibility

ETQ Reliance has several features that can give more comprehensive supply chain visibility. These allow you to:

  • Integrate supplier data with your own for whole-life understanding
  • Better understand where to cut costs and increase productivity
  • Identify trends and issues through start-to-finish data
  • Drive innovation thanks to collective ownership of data
  • Assist employee learning and understanding
  • Identify the value areas that make your business stand out

With a rapidly growing industry relying on volatile raw material markets, visibility into what’s happening in the supply chain is important to help avoid delays, drops in quality, and recalls. This kind of insight can help to improve productivity, profitability, efficiency and reduce risk as the space becomes larger and more competitive.

Learn more about supplier quality visibility here. We’d be excited to show you how ETQ Reliance can give you deeper visibility into your own supply chain quality and manufacturing processes.

FAQ

What is enterprise-wide visibility?

Enterprise-wide visibility is a complete overview system for every process, product, service, and supplier within your business. Using data to generate an overview of the business can help to show how the business works and where there could be room for improvement.

What are the benefits of enterprise-wide visibility?

Enterprise-wide visibility gives management teams deeper insight into how the business is running. This benefit can help monitor and improve quality, identify trends, fix problems before they arise, and increase efficiency.

What are the raw materials in an electric vehicle?

The most common raw materials in an EV are lithium, nickel, cobalt, manganese, aluminum, and copper. These materials are typically used in the production of batteries and other electronic components.