Supply chain challenges have been rampant over the past year, touching almost every industry in one way or another. One sector that various issues have heavily and continuously impacted is automotive manufacturing. Supply shortages, as well as production and shipping delays, have ultimately resulted in dealer inventory gaps in car lots across the globe.
Let’s take a deeper look into the shortages affecting the automotive industry and how these ripple effects take a toll on other facets of the supply chain.
With multiple production plant shutdowns causing setbacks in the early months of the pandemic, many auto manufacturers are still bouncing back. Now facing shortages of supplies, some are closing again to conserve cash until resources can fulfill production goals.
Amongst the hundreds of thousands in cumulative vehicle production cuts caused by supply shortages, manufacturers are also facing the production loss associated with increased worker absenteeism related to COVID-19. This is pushing some manufacturers to provide on-site vaccination in hopes of avoiding more widespread delays from illness.
Early shutdowns resulted in lower production of multi-purpose semiconductor chips used in many vehicles and electronics. With the pandemic causing increased demands for smart home technology and gaming consoles, semiconductor scarcity has stretched far and wide from the auto industry to other markets.
This has resulted in increased delays in the availability of microchips needed for vehicle production, pushing some manufacturers to create temporary solutions that may become unique relics post-pandemic. This microchip shortage is likely to change not only how the industry meets the demands of automakers but also the new demands of our far more digital-dependent world.
Another challenge facing automakers is the current availability of natural rubber used for tires and many other automobile components. Shipping delays, stockpiling, and a leaf disease ravaging rubber plants have all contributed to added pressure on rising prices. These challenges are unfortunately timed, as demand for automobiles bounces back due to stimulus spending and a slowly reopening economy.
Additional supply delays, paired with the lengthy maturation process of rubber trees before harvest, mean it is unlikely that these inventory issues will be resolved any time soon.
Supply Chain Backlogs
When paired with dwindling supplies, delays, and roadblocks caused by the already bottlenecked supply chain at some of the largest ports across the country, the Suez Canal incident resulted in further delays to an already snarled supply chain. With backlogs predicted to last through the summer and potentially beyond, delays in the global supply chain are likely to continue for the foreseeable future.
The subsequent supply shortages and COVID-related shutdowns have also affected the overall availability of many vehicle models. Nearly all automakers have been impacted by this shortage, and projections show that this may not be resolved until 2022, causing production delays and dealer inventory concerns across the board for many months to come.
In an industry that often employs “just-in-time” replenishment and manufacturing to survive, the current supply demands and shipping delays may transform the automotive industry as we know it. Reach out to your TOC representative today for more information regarding the most recent supply chain news, as well as advice on navigating these unpredictable developments. We’re here for you.