Supply chains continue to falter
No end in sight
Audi trade
© press-inform – the press office
As long as the corona pandemic has dragged through everyone’s life, disrupted supply chains will continue to cause problems. The auto industry, which has been perfectly balanced for many years, has suffered as a result. There is no end in sight to the problems.
In recent decades, a widely branched supply chain system has been established worldwide, which transports goods between countries and continents across all industries. One of the most eager participants: the car industry. What initially looked like a short but painful problem seems to be developing more and more into a permanent state, the disruption of which is unlikely to be significantly rectified in the new year 2022. “What’s happening in supply chains around the world is not only disruptive but also historic,” said Daniel Yergin, Vice Chairman of IHS Markit, “Moreover, the new intense focus on inflation increases the urgency of understanding what’s going on in supply chains in the year 2022 is imminent.” The ongoing pandemic is not the only factor, even in its latest Omicron variant, because there are also significant capacity, logistics and manpower problems.
“Each industry is struggling with its own set of challenges and circumstances, which collectively make up the great supply chain disruption,” explains Peter Tirschwell of IHS, “Only when you look at the problem from a holistic perspective can you truly understand and grasp it , why solving the problem will take longer than everyone would like.” Delivery times, especially in the automotive industry, increased significantly last year and January 2022 began with many companies reporting continued severe restrictions on production, input costs rising faster than at any other time in the decade before the pandemic and Omicron creating new uncertainty .
IHS analysts have been conducting surveys of purchasing managers for 30 years, and never before have supplier delivery times increased by the same extent as in 2021. Many companies are reporting delays of three to four times normal times. Port congestion slows the circulation of ships, containers and other means of transport, increasing transit times and significantly increasing shipping prices. Peter Tirschwell: “At the beginning of 2022 the situation is not getting any better. We would like to be able to say that we are seeing signs that the congestion is clearing. But honestly, that is not the case. A recurring problem since the pandemic is that the system doesn’t have time to recover before the next shock comes.”
As consumer spending shifted from services – travel, leisure and entertainment – to home improvement and from brick-and-mortar to e-commerce, especially in the key regions of Europe, Asia and the United States during last year’s crisis, the container supply chain became one never before exposed to previous loads. Electronic commerce requires appropriate distribution centers and they were not even remotely prepared for the demand. Analysts estimate that five to seven years of e-commerce growth has been compressed into a single year. In addition, national economic programs have increased purchasing power. As a result, the volume of US import containers, for example, increased by almost 20 percent in 2021 compared to 2019 – a higher growth rate than in the decade before COVID. “The crisis in container supply chains is being exacerbated by capacity. Sea carriers and freight forwarders are reporting that there are enough ships and containers to even handle the increased demand,” says IHS analyst Peter Tirschwell, “the problem is that much of this capacity is idle or running slower. This has resulted in significant capacity being taken off the table. It is estimated that 10-15 percent of capacity was lost due to congestion.”
According to almost all experts, the global semiconductor and electrical steel shortages will continue and force car manufacturers to limit their own production and deviate from long-standing assumptions such as lean inventories and just-in-time production. “The supply chain problems in the automotive industry are unprecedented. If the question is whether these problems can be solved immediately, the answer is no,” says Matteo Fini, responsible for automotive supply chains at IHS, “recent experiences with the bottlenecks in the preliminary products are forcing automakers to question everything they’ve done in supply chain management for the past 30 years.” It also means many are moving away from the famous “Toyota way” of lean manufacturing and minimizing inventory. More and more automakers are considering stocking up on certain parts because they cost relatively little compared to a production shutdown that can cost an OEM up to $50 million a week.