Automaker Giants Facing Crippling Shortage on Semiconductors
Hope for recovery is ignited among automakers as things are slowly finding their way back to normalcy in this new year of 2021; with COVID-19 vaccines already on distribution, people working in the automotive industry are seeing the market demand bouncing back to a near-normal state. As the sales volume and the need for additional production grows, however, uncertainty grows together. New waves of the COVID-19 outbreak continue to plague the global market, casting a long and dark shadow over the tiny candlelit hope for recovery. More importantly, the once-crippled supply chain of automotive components still remains compromised and stuck in shortage, and increased orders and reassigned productions are further straining the feeble system.
Here is a summary of what happened to the automotive industry giants:
Most of the automakers are recovering from last year's hard COVID-19 hit
Semiconductor suppliers reassigned production capacity to consumer electronics during the worst of the COVID-19 slowdown in automotive sales
NXP’s chief executive Kurt Sievers: "seeing a sudden surge in orders from automotive clients that was causing supply bottlenecks"
Continental, one of the largest auto suppliers, says that the bottlenecks are expected to continue well into 2021
Facing these new challenges, supply chain professionals in the automotive industry are searching for a comprehensive solution that will help quickly resolve the current production halt, and prevent a possibly detrimental supply shortage for OEMs.
Utilizing Backups: Problems and Rethinking Digitalization
The catastrophic supply chain disruption Toyota experienced on February 1, 1997, is something that all automakers should take a close look at. A fire at the Aisin Seiki Co. destroyed most of its capacity to manufacture P-valves. Because of Aisin’s ability to produce parts at a low cost, Toyota had come to rely on Aisin for this product. According to the Wall Street Journal, Toyota officials immediately called different part makers to obtain P-valves, including Somic. Somic had the flexibility to free up machines and shift its production line to make P-valves. On February 6, right on schedule, it delivered its first P-valves to Toyota. Toyota dodged a bullet, but it was possible because they had access to a ready supplier like Somic.
Like Toyota, automaker giants like usually have backup supply plans in stock as part of the effort to implement a flexible supply chain strategy — but making urgently needed parts immediately available like Toyota did with Somic is rarely executable and is not a reliable plan.
The important point is that backup suppliers are not currently manufacturing parts for their potential customers. As we can see in the above article, it is not wise to assume that a backup plan supplier can—on short notice—provide sufficient quantities to support an OEM customer’s market demand. The fact that they are capable of producing enough parts for your company may actually be an indication that they are already producing similar products for your competition, who can take advantage of the bulk of that supplier’s capacity. In other words, to meet new customer needs, plan B suppliers will likely have to both develop specific manufacturing processes and invest in additional capacity.
The uncertainty stated above is exactly why industry leaders estimate the bottleneck issue to continue throughout the year 2021: not because they lack the capacity, but because of the underlying issue within the whole SCM(Supply Chain Management) ecosystem, including their tooling. Without sufficient data that can be easily viewed, and without a direct communication line within a single data managing platform, managing backup suppliers would always be tricky.
Multiple supply chain issues are found in:
lack of data visibility over the company's external suppliers
the automotive manufacturing tooling left unmonitored (data not collected or collected manually)
increased lead time from suppliers
disturbance in collaboration and communication with suppliers
These issues can hinder global automakers from conjugating their costly backup supply plants, ultimately adding the risk of compromising their critical manufacturing flow.
That is why, according to Deloitte, "automotive manufacturers are taking a hard look at the resiliency of a globally integrated supply chain brought to its knees by parts production disruptions." It states that the automotive industry can begin its recovery process by digitalization: especially its tooling. Digitalization from your footholds, not only your end-products, has become more crucial than ever.
Journey to Regaining Supply Chain Resiliency
Our digitalization experts at eMoldino provide comprehensive supply chain solutions to manufacturers seeking to minimize uncertainty and maximize efficiency on parts, ultimately changing the dynamics of how you collaborate with OEMs and suppliers.
Our device collects data regarding location, shot count, cycle time, and temperature, making it easier for companies like Daimler to track the manufacturing environment and manage potential risks of mold dysfunction or a supply shutdown -- which leads to considerable cost reduction. The data is then transferred to a cloud-based analytics platform, securely managing the data, and enabling smooth communication between OEMs and suppliers. Our solution team is also on the development of implementing AI and machine learning technology to the data and the platform; all these efforts to participate in the industry 4.0 wave will ultimately increase client companies' net value.
Industry giants like Samsung Electronics have applied eMoldino's solution in their supply chain of mold and die, and have already seen the tremendous benefits of cost reduction and risk management, especially during these times when an urgent supply chain checkup was required to take on various COVID-19 related issues.
Ask for a quick showcase of our delivery-monitoring analytics; see how we create value for top-tier manufacturers worldwide.
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