A Resilient Response to Shortages
Martin Pahulje - April 20, 2021
Resilience in a supply chain is a key component for success. As any disruption or delay can drastically impact supply chain operations, it is crucial that you be able to adapt and adjust quickly to minimize wasted time and money. DVZ magazine has highlighted recent supply chain challenges faced by the automotive industry. Companies such as Volkswagen and Daimler are currently struggling to overcome challenges with shortages and disruptions. We will walk you through how these interruptions affect the automotive industry so that you may prepare your organization and become more resilient than ever.
Supply chains work like a domino effect; when one aspect of the supply chain network is affected, all others are as well. This ripple effect is evident through recent disruptions in nearly every industry over the past year, but there are rising shortages affecting the automotive industry. A prominent case of this is Toyota’s auto-chip shortages. Production delays resulting from extreme cold weather have drastically delayed the shipment of necessary auto-chips, which were already becoming scarce due to low supplies and increased demand. This has significantly impacted Toyota’s manufacturing operations, resulting in several plant suspensions. Had Toyota implemented a more resilient supply chain, perhaps the damage from this disruption could have been lessened, but they are not the only automotive manufacturers dealing with these shortages and disruptions.
Daimler AG, more commonly known as Mercedes-Benz, is facing a shortage of their own. Car production within Daimler has been significantly disrupted due to delivery problems with their semiconductor manufacturers. These difficulties have resulted in production halts, specifically in the A-Class and other models, in addition to forcing short-time work in team members. Currently, there is a worldwide supply shortage of specific semiconductor components, necessary materials for the manufacturing of electric model vehicles. These fluctuations in supply at such short notice are cause for concern for supply chain operations. Still, there is hope that the semiconductor bottleneck will not impact the other electric models. While the situation at Daimler is being monitored closely, experts are still unsure of the impact this shortage will have on the company or the industry as a whole. Daimler is not the only manufacturer being impacted by the restricted supply situation for semiconductors. Volkswagen is also feeling the effects of this shortage, deeming it a side effect of the rapidly recovering car market. This rapid growth is causing global disruptions in vehicle production across all manufacturers, resulting in widespread supply chain interferences. Prior to this disruption, manufacturers such as VW had already been facing delays caused by the COVID-19 pandemic. To combat this, countermeasures and alternatives are being examined to minimize the effects of supply chain bottlenecks and limit the number of vehicles affected.
Semiconductor manufacturers are looking to increase production to keep up with the growing pace of automotive production and the increasing demand for semiconductors. As cars today are becoming more electric-based, these semiconductor components are vital to continuing production. There are few products today that work without electronics, and vehicles are not an exception. This dependency increases risk for automakers, as is evident through the problems caused by these shortages. The success of the automotive industry relies on seamless collaboration between all manufacturers within the supply chain network, including those who manufacture individual components. With supply chains growing increasingly complex and continuously facing disruptions, a resilient supply chain is more critical than ever. In order to function within a broad and complex network that must face unforeseen challenges, supply chains must be flexible and resilient. While you cannot prepare for all shortages and disruptions, there are some best practices to implement in your supply chain to minimize their damage. We will discuss the importance of developing a resilient supply chain and how it can help you combat shortages in the future.
The Vitality of Resilience
These shortages may be concerning for those operating in the automotive industry, but there are ways to minimize their damage. Taking the measures to build a more resilient supply chain will prepare your organization to bounce back from any shortages and come back stronger. Two significant components of a resilient supply chain are communication and collaboration. In this case, it is clear that effective communication is necessary between automotive manufacturers and semiconductor manufacturers. It is imperative that shortages and disruptions be communicated as quickly as possible to remedy the situation in a timely manner. By optimizing your supply chain communications, you can ensure that all parties within your supply chain receive the same information and data in real-time to ease the path of communication. This ensures that there are no lags in communication and no time wasted in sending emails or playing phone-tag.
The key to achieving efficient communication, and thus resiliency, is through digitization. This process entails converting your supply chain into an integrated sequence of planning and production solutions that work together to create a more cohesive supply stream across each touchpoint of the supply chain. In connecting the data sources and outlets in your supply chain, you will develop a more responsive, agile, and transparent supply network. Furthermore, a digitized supply chain will assist you in breaking down cross-organizational silos and collaboration barriers – two increasingly significant obstacles with the rise of shortages and disruptions. This is highly beneficial in optimizing your supply chains, bringing you faster data access, communication, and higher levels of transparency – all of which will prepare you to handle the unexpected.
To achieve complete digitization within your supply chain, you must first align your technical and operational goals. If you are looking to avoid and combat shortages, an excellent step is to implement smart technology with predictive capabilities. Smart software will use historical data and market trends to predict disruptions, thus giving you the notice you need to prepare stock and adjust your supply chain accordingly. Equipping your supply chain with solutions such as AI, IoT, and multi-dimensional monitoring can alert you of delays, disruptions, and shortages so that you can make adjustments for your supply chain. These functions will give you real-time notice of any disruptions, so that be ready to handle them with a plan in place. Rather than having your equipment and team members sitting idle, you can be prepared to switch operations to ensure that your customers are still getting the products and services they desire in a timely manner. Shortages cannot always be avoided, but with a digitized and resilient supply chain, you will be able to minimize their adverse impacts and recover more quickly than ever before.