Automakers Seek Calm Beneath The Shortage Tsunami
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February 24, 2021
Pandemic-Triggered Massive
Wave
The pandemic has
caused a wave of inevitable effects that are now surging worldwide, and the
auto manufacturing industry is directly heavily impacted, including
repercussions on the supply chain market. Known as a "shortage tsunami",
industry experts and analysts have reported a massive scarcity of
microprocessors, which might cause a disruption in production that is projected
to last until 2023.
During last year's
lockdowns, automakers were forced to halt their production temporarily. At the
same time, semiconductor manufacturers focused on producing laptops,
smartphones, and gaming consoles.
When cities started to
open again, and economies began to bounce back, the unexpected strong recovery
contributed to higher sales and production, which carmakers are still
struggling to recuperate from.
Ripple Effect: Shut
Down And Reduction
In the first quarter
of this year alone, many carmakers witnessed how this shortage tsunami had
badly hit them. General Motors has recently shut down three fabrication plants
due to this shortage. Its fourth plant also shows a decrease in production. The
Detroit-based car company did not disclose how many vehicles it would lose
because of this shutdown. However, AutoForecast
Solutions estimated that GM's
hit would be approximately 10,000 cars.
Major OEMs are
suffering from shortages worldwide, including carmakers in Japan, such as
Toyota, Honda, and Nissan. Honda and Nissan have decided to decrease car
production due to the minimal supply of modern vehicles' semiconductor chips.
In its Swindon factory in the UK, Honda suspended its production for four days
because of this chip shortage.
The Aftermath And Casualties
According to advisory
company AlixPartners, it is estimated that car manufacturers'
revenue loss will be over $14 billion in just the first quarter and roughly $61
billion for the whole year. Some initial assessments
also reported that automakers could lose an estimated 230,000 car units in
North America during the same quarter, a shortfall in production that equals 5%.
Furthermore, the chips' shortage is projected to disrupt the output of approximately
672,000 vehicles worldwide, forecasting
firm IHS Markit
said.
So far, a total of 564,000 vehicles have been lost from production due to this shortage tsunami, and approximately 964,000 vehicles in totality for this year globally, AutoForecast Solutions reported.
Automobile Industry:
Finding Ways To Stay Afloat
Amid this upheaval of
waves, carmakers have not been left alone in the crisis - governments have
stepped in to help automakers. Taiwan
Semiconductor Manufacturing Co Ltd (TSMC) and several major tech companies are
centralizing their efforts to ease this shortage. TSMC, the largest chip
manufacturer globally, has confirmed the increase in its production, and the US
government has requested them to resolve the issue. At the end of this week,
Wang Mei-Hua, Taiwan's economic official, will meet virtually with US officials
and semiconductor manufacturing companies to talk about supply chains.
The impact of the pandemic and the shortage tsunami on the supply chains at an international level has emphasized the need for a more effective supply chain management. Both the Trump and Biden Administrations have exerted their efforts to rebuild US supply chains to prevent future scarcity of necessary items for manufacturers, including semiconductors
Shortage Management: Sailing Beyond The Huge Wave
In times like this, it
is imperative to find the help that can make automakers sail beyond their
capacity. Shortage management is one of the best services companies should
consider to address this kind of crisis. Car manufacturers should work with
their suppliers to develop a Business Continuity Plan (BCP). Businesses should
also determine with third-party suppliers in various locations to diversify the
supply chain and prepare for shortages, most especially for electric components
with longer supply cycles.
Employing shortage
management services from a leading global full-service
distributor allows visibility
into stock availability and movement within the supply chain network and
determines potential roadblocks. Intelligent supervision coming from supply
chain experts can help prevent the high cost of a disruption in production.
Global shortage
management is part of the new normal carmakers should embrace in a
post-pandemic world. And as the wave continues to surge and uncertainties loom on
the horizon, the automotive industry should learn to swim or manage within the
crunch.
