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REVEALED: How Do Disruptions in the Supply Chain Affect the Automotive Industry

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REVEALED: How Do Disruptions in the Supply Chain Affect the Automotive Industry

The automotive industry’s reliance on its supply chain running smoothly is important to ensure the consistent production of vehicles for consumer and corporate demand, especially considering that most vehicles can contain between 15,000 and 25,000 component parts.

Read also: Transforming the Automotive Industry with Sustainable Vehicle Recycling

Chris Thompson, Operations Director at Electrix International, a global supplier of stainless steel electrical enclosures, has offered some expert insight into the supply chain issues facing the automotive industry, including the impacts it has and posing some potential solutions.

Reduction in workforce

One significant concern in the automotive industry is the significant shortage of laborers and workforce. In fact, an ABB survey of around 600 global industry experts found that skills shortages of talented laborers were of the greatest concern in North America, with 56% of experts outlining it as a problem. 48% also stated that new skills were required to adjust to the fast-changing landscape of the industry, with more needing to be done to attract people to join the industry.

Technology shortage

One significant issue within the automotive supply chain is the shortage of key technological components, like semiconductors, that go into vehicle production. These inventory shortages increase delivery lead times, and the scarcity of parts has forced manufacturers to raise costs, meaning final prices for consumers are even higher than before.

In fact, the cost of a new car in 2024 is now an average of $48,759, which could increase further should these delays increase. Not only does this have an impact on new car purchases but also on the aftermarket industry, as it affects repair and maintenance services being unable to work on vehicles with replacement parts.

Geopolitical and naturally occurring phenomena

It’s not just physical issues that can affect the supply chain, as the wider landscape of the world can have a huge impact on the automotive industry. Geopolitical developments that automotive manufacturers have no control over can cause interruptions in the flow of goods and materials. For instance, Volvo and Tesla had to suspend manufacturing due to the conflict in the Red Sea in early 2024. Conflicts and tensions between countries affect trade and tariffs placed on materials like steel and aluminum, which in turn raises costs for manufacturers. The knock-on effects can have huge implications in the long term.

In addition to geopolitical situations, naturally occurring phenomena and disasters can also contribute to production and supply chain issues for the industry. Whether it’s hurricanes, wildfires, or earthquakes, they’re unpredictable in their very nature and can be hugely disruptive to production facilities and transport networks. The knock-on effect leads directly to supply shortages and delays in production.

How does the industry respond to these challenges?

The automotive industry has been forced to create and implement strategies to deal with these challenges, with one solution being to diversify supply chains, which involves reducing their reliance on single-source suppliers. This means establishing strategic partnerships with multiple suppliers, as well as investing in localized production facilities, and making the most of emerging technologies to streamline and optimize operations.

This creates more flexibility in managing the supply chain to react quickly to the impact of disruptions and continuing with processes despite unforeseen circumstances. The market and industry are constantly evolving, so staying on the cusp of new strategies can avoid major disruptions.

Disruptions within the supply chain have emerged as a significant challenge for the automotive industry, whether it’s geopolitical tensions or natural disasters. The challenges posed to the market have impacted everything from the production of new vehicles to increased costs of units to materials and affecting consumer demand. This is why it’s so crucial for the industry to explore proactive solutions to mitigate these risks and build a stronger risk management strategy.

Sources
https://caredge.com/guides/new-car-price-trends-in-2024 

https://www.scmr.com/article/disruptions-remain-cog-automotive-supply-chain-wheel3 

 

supply chain

REVEALED: How Disruptions in The Supply Chain Affects the Infrastructure Industry

Supply chains across industries are a focal point for the success of processes and operations. Disruptions can have huge consequences not just for individual businesses but the entire industry. This is why it’s important to strengthen resilience within each step of the chain so it’s appropriately prepared for anything from industrial action to huge geopolitical events.

Read also: Red Sea Global Trade Disruptions: How to Overcome the Chaos

Chris Thompson, Operations Director at Electrix International, a global supplier of stainless steel electrical enclosures, has offered some expert insight into the supply chain issues facing the infrastructure industry, including the impacts it has and posing some potential solutions.

The immediate effects on infrastructure projects

With infrastructure projects lasting years or even decades, there are plenty of concerns about the effects of supply chains on them. Project delays are a huge concern, with the lack of available materials being a direct contributor. Crews’ workflows are disrupted while waiting for components and materials, which also means completion dates and schedules are hugely affected.

This can have a ripple effect on the project’s cost. When materials become scarce, their prices inevitably rise. Contractors are forced to absorb these inflated costs or pass them on to public agencies, potentially derailing entire projects due to budgetary constraints.

This volatility can leave infrastructure projects in limbo and uncertainty. Because of the lack of predictability, timelines and budgets cannot be planned. For example, the construction of new roads and bridges, vital for easing traffic congestion and improving connectivity, has been hampered by shortages of asphalt, concrete, and steel. Delays in obtaining permits and regulatory approvals, exacerbated by the pandemic, have further stalled progress on these projects.

Long-term effects on the industry

Beyond the immediate challenges, supply chain disruptions also raise concerns about the long-term health of the infrastructure industry. The shortage of skilled professionals is a well-documented issue. Supply chain disruptions exacerbate this problem by creating periods of inactivity and uncertainty. People may be hesitant to enter a field where projects are constantly at risk of stalling due to material shortages.

There has also been a significant stagnation in innovation. Infrastructure development often relies on the adoption of new technologies and materials. However, supply chain disruptions can stifle innovation by making it difficult for contractors to experiment with novel materials due to concerns about availability and cost.

Strengthening for the future

Addressing the challenges posed by supply chain disruptions requires a multi-pronged approach. There are some potential solutions, with one fundamental change being to utilize domestic manufacturing. Encouraging domestic manufacturing of critical infrastructure materials can lessen reliance on global supply chains and mitigate the impact of disruptions abroad. Investments in local production facilities and incentives for manufacturers can strengthen the domestic supply chain.

Diversifying suppliers for infrastructure projects can also be a massive solution for preventing supply chain disruptions. Businesses shouldn’t rely on a single source for critical materials. By diversifying their supplier base and building relationships with local and regional manufacturers, contractors can create redundancy and avoid being caught off guard by disruptions in one source.

Stronger communication throughout the supply chain is crucial. Contractors, developers, and material suppliers must be transparent about their needs and anticipated demands to allow for better forecasting and planning. Utilizing collaborative platforms and information-sharing initiatives can help improve visibility throughout the supply chain.

Emerging technologies, such as advanced planning software and digital inventory management tools, can help contractors better anticipate and manage material needs. Additionally, exploring new construction methods that utilize prefabricated components or modular construction can potentially reduce reliance on traditional materials and streamline the construction process.

The infrastructure industry is facing a critical juncture. Disruptions in the global supply chain pose a significant challenge, but they also present an opportunity for innovation and adaptation. By implementing strategic solutions and fostering a more resilient supply chain, the industry can ensure the timely and cost-effective delivery of essential infrastructure projects crucial for the nation’s continued growth and prosperity.

Source: Electrix International