David Dauch, CEO of driveline supplier American Axle & Manufacturing Inc., admitted that it seemed to many people that the global microchip shortage would only be an inconvenience for the âfirst of the yearâ – but it looks like now to a problem that will linger until 2022.
The semiconductor shortage is not the only major crisis facing the supply chain.
The persistent shortage of resins and plastics resulting from the storm-induced shutdown of Texas refineries in February, significant shipping delays at seaports on both coasts of the United States, and constraints on the availability of steel and aluminum continues also disrupt the normality of the industry.
On top of all this, there are the chronic work challenges that manufacturers have faced due to concerns about COVID-19 – and even before the start of the pandemic.
With insufficient staff, producers have struggled to keep factories running in line with consumer demand.
âIn my 35-year career in the industry, I have never seen the sourcing challenges we face today,â Dauch said in the webcast. “Not a day goes by that we don’t face a new challenge.”
The crux of the matter, he said, is “the lack of visibility into certain elements of the value chain. You never know what you are getting into on a daily basis.
âWe need our industry and our value chain to be very robust – and right now they are fragile.
Akshay Singh, director of industrial and automotive industries at PwC, agreed that the industry needs more visibility on its Tier 2 and Tier 3 suppliers.
âReally developing that supply chain transparency in the future is actually paramount,â he said, âso if something like that happens, [suppliers] know where the bottlenecks are and where they really need to deploy the resources to really fix the problem. “
But strengthening the industry’s supply chain will be further complicated by the shift to vehicle electrification, experts predict.
“We are concerned that suppliers are almost, in some ways, getting a double hit,” Fream said of OESA, referring to the looming decline in internal combustion engine production. “We’re already starting to work with the supply base to discuss what’s next for them, helping them plan where their product lines need to go and think about where they’re spending their capital investment now,” making sure they balance the needs. .
âLet’s face it. There will be ICE vehicles for a long time,â she added. “But given that, we still need to strike a balance where that investment goes. It’s the real nugget that suppliers need to look for right now and make sure they’re targeting their particular business and products.”
This will require flexibility from suppliers, Dauch said.
âThe market and the customer are the boss, and we all have to accept that,â Dauch said. “We can’t do anything and die on the vine,” he added, “or we can adapt to the market and ultimately position ourselves and differentiate ourselves in the future.”