Several significant disruptions have significantly impacted the automotive shipping industry in recent years. As global supply chains emerge from the pandemic and inch toward resiliency, the automotive industry continues to struggle. An ongoing shortage in semiconductor supply is making vehicle manufacturing much more difficult across the globe. The supply bottleneck, combined with the shortage of materials and parts, affects several major carmakers and their suppliers. Facing current capacity issues and addressing their impact on the supply chain is a critical first step for automotive shipping recovery and growth.
1. Why Semiconductors Are Still in Short Supply
The automotive industry is dealing with the current semiconductor shortage due to a two-fold issue affecting global supply chains and production lines. First, the auto industry has recovered more quickly than expected as consumers are buying more vehicles. Second, the ramp-up of automotive materials and components, including semiconductors, has primarily been much slower. This has resulted in industry-wide reductions in automobile production. The automotive shipping industry has had to make on-the-fly adjustments to try and correct the off-kilter supply-and-demand balance of the market.
2. Limited Amount of Semiconductors Reduces Ability to Finish Manufacturing and Creates Additional Supply Chain Bottlenecks
Because of the limited accessibility and difficulty securing vital semiconductors, automotive manufacturers have been unable to meet consumer demands. With pre-production levels not lining up to the demand for new vehicles, disruptions are occurring more and more frequently. This bottleneck makes it difficult for automotive shipping manufacturers to ramp up production as much as possible. The deeper issue lies in how this reduction in output only further complicates production lines and adds to the existing bottleneck.
3. A Lack of Semiconductors Can Further Lead to Fewer Completed Orders for New Trucks
A global shortage of semiconductors can also directly impact the shipping and transportation industry that helps keep the auto manufacturing industry rolling. This is impacting more than retail shipping as commercial vehicles are also being produced at a much slower rate. Due to the deficit, many commercial automotive manufacturers have adjusted production rates to ensure supplies are not further stressed until recovery can be assured. Automotive shipping and freight class trucking production have slowed, but the goal is for this temporary adjustment to speed overall recovery and ultimately see more freight trucks enter the supply chain network.
4. Shippers Are Using Data to Know When to Pause production
Forced to make hard decisions, car manufacturers have prioritized particular makes and models to meet the most critical demands. According to Supply Chain Dive, Ford Motor Company reported that production in Q1 this year may drop up to 10% to 20% in the coming year. Fiat Chrysler, Jeep, and even the Ford F150 lines have seen temporary pauses and reductions in production due to these shortages. Some automotive shipping companies, using shipping technology and transportation analytics, remain focused on only the most profitable models. But that’s not always possible, seeing how these vehicles often require more specialized materials and parts. Using real-time data and analytics, particularly to gain business intelligence as it relates to transportation spend management, allows manufacturing companies to see what trends they should prepare for and where their resources need to get allocated.
5. The Semiconductor Shortage Re-Invigorates the Need for Just-In-Time Inventory Management and Shipping
The just-in-time (JIT) inventory strategy has become the primary focus of automotive shipping companies struggling to keep up with the shortage. JIT is important to the network as it involves keeping only enough inventory on hand to fill current orders and virtually eliminating the need to carry additional or excessive inventory levels. During times of market instability and uncertainty, the renewed interest and focus on JIT inventory management makes sense and can help automotive companies accelerate recovery rates across the board. Preparing to meet consumer expectations and to fulfill demands is critical for overcoming the semiconductor shortage.
Reduce Stress Over Automotive Shipping Constraints by Tracking a Full View of Your Transportation and Manufacturing Capacity
As recovery processes continue to affect global supply chains throughout the automotive industry, automotive shipping and production continue to operate at less than full capacity. The unexpected shortage in semiconductors and other supply chain disruptions and exceptions has caused many vehicle manufacturing companies to scale back and adjust production levels for a time.
While temporary, these adjustments can be stressful and challenging to manage, so implementing smart tacking and predictive planning processes can make it easier to manage manufacturing and logistics costs. Visit Intelligent Audit to learn more today.