Damaso, Yourprimecar.com
The unprecedented contingency created by COVID-19 will leave a mark on the automotive industry. Some changes will take more than others, but without doubt, the coronavirus will reshape the global automotive supply chain as we know it.
Car Supply Chain weaknesses exposed
Some times it is necessary a crisis to uncover hidden weaknesses. That is precisely the case of the automotive supply chain. The disruption caused by the coronavirus pandemic clearly exposed how vulnerable is the car industry to the effects of globalization. After decades of outsourcing parts production to factories in China and other countries, automakers now face unprecedented shortages, preventing them from producing vehicles. Take Toyota for example. A research paper published by the Social Science Research Network (SSRN) shows how Toyota’s supply network count with over 2000 external suppliers. That’s huge. Just imagine the complexity involved. Toyota’s suppliers, in turn, subcontract other firms to manufacture their component and so the chain continues. Is it condemnable to manufacture where it is cheaper? Absolutely not. However, the tendency to delegate the manufacturing process of almost all parts to external suppliers has undoubtedly minimized the capacity of car manufacturers to respond to this crisis appropriately.
Reshaping the global Automotive Supply Chain
It would be a shame if such a shocking and traumatic crisis left nothing but chaos. Ideally, the entire world should learn something from this situation. Fortunately, at least in the automotive industry, there are signs pointing in that direction. Specialists around the world are gathering information in an effort to decode the complex topology of the automotive global supply chain and thus get a clear picture of its patterns, connections, and weaknesses. The current debate within the industry is not about the high dependency on foreign parts since that’s inevitable due to globalization. The debate is how a change in paradigms may help automakers to protect themselves from future crisis. For instance, some automakers are seriously considering the need to develop new KPIs (Key Performance Indicators) including both traditional metrics such as cost and quality and new metrics such as resilience, responsiveness, and reconfigurability. This approach would help the car industry protecting from future situations caused by economic or political instability, natural disasters, and other factors affecting the supply chain. That would also mean that automakers would be less dependent on factories in China for parts and materials, even if that represented higher costs per part.
Other changes include leveraging advanced manufacturing technologies such as automatization to become more resilient and less dependant on the human factor. Fully automated factories, that require minimal human presence on-site are nothing new to the car industry, but they may proliferate in the near future as a response to coronavirus outbreak. The demand for automation will also extend to the transportation industry. Self-driven and/or remotely controlled heavy trucks, forklifts, and delivery vehicles are being considered as a good option to achieve a more resilient supply chain.
How long these changes could take? Due to the complexity of global economics that is something almost impossible to predict. Nevertheless, something you can rest assured is that the global automotive supply chain will never be the same. New technology advances in manufacturing processes, materials, automation, and artificial intelligence will certainly have an important role in the near future.
