Across the country, people are shopping for new cars. However, supply chain challenges have made it difficult to get these cars to the people who want them. Understanding the current automotive supply chain challenges, and their potential solutions, can improve your resiliency and help you satisfy your customers.
Current Challenges in the Automotive Supply Chain
The automotive supply chain is complex. It involves coordinating multiple suppliers and manufacturers with their own processes and potential disruptions. Automotive companies must be flexible to manage these global supply chain challenges and roll out a finished product.
Inflation and Raw Material Shortages
Almost every industry has been impacted by the inflation and supply chain disruptions resulting from the COVID-19 pandemic. Although some areas in the automotive supply chain ecosystem have rebounded, you’re still seeing rising material costs — aluminum and other raw materials remain in short supply.
This is due, in part, to a rising demand for electric vehicles (EVs), along with limited production capacity and trade restrictions. The process of producing aluminum for cars also requires a lot of energy. When energy costs rise, the expense is passed on to automotive companies like yours.
Semiconductor Shortages
Semiconductors are a crucial component of modern cars, controlling everything from performance to safety features. COVID-19 impacted semiconductor production in multiple ways, including factory shutdowns and an increase in demand for computers and gaming systems.
Emerging technology, including AI and cryptocurrency, is also increasing the demand for semiconductors. Additionally, many of the raw materials used to make these semiconductors are found in Ukraine and other regions experiencing war and instability.
Geopolitical Tensions
The war in Ukraine isn’t the only geopolitical factor impacting automotive manufacturers. Areas in eastern Europe and the South China Sea are also experiencing political tensions. Trade wars between the U.S., China, Mexico, and Canada are also disrupting the global automotive supply chain ecosystem.
Labor Turnover and Aging Workforce
Young people aren’t interested in joining the automotive manufacturing industry in large enough numbers to replace an aging workforce. According to the Bureau of Labor Statistics, the majority of automotive manufacturing workers fall between the ages of 35 and 54 years old.
As a large percentage of workers reach retirement age, they’re taking their knowledge and skills with them. Your company may be struggling to recruit new workers to maintain your existing production levels.
Overstocked Inventories
Customer preferences are shifting, which makes it harder for companies to predict their stock levels. A lot of dealers are dealing with overstock and the associated carrying costs.
As car quality has improved, more people are hanging on to their vehicles for longer. The average American keeps their car for about 12 years. However, demand is expected to pick up in 2025, so many dealerships might be able to unload their excess inventory in the coming year.
Quality Control Issues
Because modern cars contain parts assembled by multiple suppliers, it’s harder to control their quality. Each of your suppliers follows their own processes, which includes quality control. Many of the components in your cars are coming from different countries with varying regulations.
If you’re assembling cars with parts from hundreds of suppliers, it can be complicated and time-consuming to investigate their quality control procedures.
Sustainability Concerns
The automotive industry poses more social and environmental sustainability risks than other fields. As you manufacture cars, you’re using raw materials such as cobalt, lithium, and rubber. Extracting these raw materials poses risks such as hazardous chemical spills. Some countries that produce these resources also have relaxed labor laws, which brings the risk of exploitation.
Sustainability concerns exist across the entire supply chain. Converting raw materials into car parts uses a lot of energy, and shipping parts from one factory to another contributes to global carbon emissions.
Innovative Solutions to Supply Chain Challenges
These challenges don’t have to disrupt your automotive manufacturing business. Use these supply chain strategies to mitigate them.
Embrace Technology in Supply Chain Management
Technology improves your supply chain visibility, makes it easier to collaborate with your suppliers, and helps you optimize your inventory. Tracking systems that use the Internet of Things (IoT) to monitor shipments can help you stick to your production schedules.
These platforms let you share data across the entire supply chain so you can quickly identify delays, share quality control procedures, and optimize production at each stage of the chain. This supply chain visibility lets you anticipate your challenges and manage them before they become disruptive.
Building Strong Supplier Relationships
Your supplier relationships are the engine that drives the manufacturing process. When you have strong supplier relationships, you can navigate potential customers’ social and environmental sustainability concerns.
Work with suppliers who meet your quality control and ethical standards. Diversify your supply chain so you can quickly pivot after natural disasters and other supply chain disruptions.
Use technology to communicate and collaborate as you work with new suppliers. Being transparent and communicative helps improve your relationships and allows you to build a strong network of suppliers. It can also help you control your supply chain costs as you diversify your network.
Reshoring and Diversifying the Supplier Base
Reshoring involves bringing manufacturing processes back to your home country while sourcing components from a wide range of suppliers. This helps you mitigate the supply chain risks that come from geopolitical tensions and helps boost your country’s economy. It also reduces your carbon footprint, because you don’t have to ship as many large components over long distances.
Adopting Agile Operations
IoT sensors and other technologies can make your operations more agile. These systems give you real-time data for better inventory forecasting and optimization. They can also monitor your machines and alert you to potential breakdowns. Instead of waiting for a major disruption, you can perform predictive maintenance on your machines and reduce your downtime. This allows you to stay on schedule and meet your customer demand.
Agile operations also include warehouse automation, such as inventory management systems that automatically reorder your inventory when it drops below a set level. These practices build resilient supply chains that can easily adapt to any challenges that arise.
Overcoming Automotive Supply Chain Disruptions
Surgere offers supply chain visibility solutions that enhance your ability to respond to any challenges that come your way. We provide package specification management, asset management, production control, and other solutions that give you real-time visibility into every stage of your supply chain. Contact us today to learn how we can help you rise above your automotive supply chain challenges.
