Who We Serve - Automotive

High Tech = High Risk

As automotive technology continues to advance, the demand for high-end components like computers, sensors, and cameras has significantly increased, or in the case of electric vehicles - batteries that require expensive rare earth elements. This has further stressed the automotive supply chain, as many of these components have long lead times, complex manufacturing requirements and suppliers who are scrambling to reinforce their own supply chains to meet skyrocketing demand. Suppliers risk falling behind on orders, enduring costly delays, and irritating their customers if their supply chain management and logistics methods are not able to keep up with a rapidly changing business environment. Consequently, some customers have been left waiting up to a year to take delivery of their vehicle – a wait time previously unheard of in the automotive industry.

It is no secret that cancelled orders for microprocessors left domestic and foreign auto manufacturers scrambling when demand unexpectedly surged. They had lost their place in the order queue after consumer electronics manufacturers swooped in to fill the vacuum they left behind. The result was slashed production of new vehicles, which created a scarcity that drove up prices of both new and used vehicles. What this exposed was the fragility of the just-in-time automotive production process that had so efficiently and effectively served the industry until it failed. With lean production lines and inventories, there was no excess to draw on to compensate for the lack of supplies and parts. And while shortages of high-end components are easy to see, there were also shortages of hundreds of embedded "non-critical" components that stopped production.

Although increased inventory levels often translate to higher costs, many auto manufacturers are doing just that, stockpiling parts, reaching out to secondary suppliers, or even buying parts on the open market to keep production lines humming. They are also bringing production lines closer to home to reduce transit times and costs. Finding alternative suppliers with spare capacity on short notice is a huge challenge and also incurs its own spool-up costs and quality risks.