Over the past three years, automakers were among the worst affected by supply disruptions of vital raw materials and components.  

The early months of the COVID-19 pandemic forced a parts manufacturing shutdown, resulting in an overflow of new semiconductors bought up by manufacturers of retail electronics. Later that same year, when vehicle demand increased unexpectedly, OEMs found themselves without the necessary microprocessors, further delaying manufacturing. 

Now, the auto industry supply chain is suffering through significant disruption. It continues to be a difficult and expensive issue for automobile manufacturers as they strive to make essential adjustments and improvements to their processes. 

This article discusses three ongoing challenges manufacturers face and three solutions they are considering. 

3 Auto Industry Supply Chain Challenges 

1. The (Still) Lingering Effects of the 2020 Shutdown 

In 2020, several manufacturing facilities shut down or experienced considerable disruption. The automotive supply chain had production issues that halted operations completely. OEMs shut down when major suppliers ran out of parts, abruptly stopping the whole automotive supply chain. 

The industry was then in a precarious situation due to this stoppage, which still negatively impacts the supply chain today. Automakers are currently building up material stockpiles, as developing a backup plan, particularly one with room for assurance, has become essential. 

2. The Industry’s Uncertain Future because of the Shutdown 

The greatest challenge facing OEMs and suppliers is the industry’s extreme unpredictability. After the pandemic, manufacturers found managing an uncertain manufacturing volume challenging because they needed to figure out when people would resume vehicle buying.  

This productivity decline and the disruption to the supply chain affect new vehicle demand and the supply of original equipment. OEMs must become nimbler due to supply and demand imbalances caused by production delays and rekindled consumer interest now that they have reopened facilities.  

Recent disruptions like the lack of semiconductor chips and global geopolitical crises have increased unrest even more. As a result, manufacturers and suppliers are putting more effort into creating and implementing backup plans, as mentioned above. 

3. Offshoring Costs 

Many businesses still offshore their manufacturing needs. However, due to inflated shipping costs, prolonged delays, and ongoing geopolitical challenges, many companies are reconsidering the locations of their operations. 

Many analysts now believe that these organizations should explore domestic options and find that over half of manufacturers are likely to bring manufacturing output and sourcing back to North America. 

3 Auto Industry Supply Chain Solutions 

1. Find an Equilibrium 

Striking a cost-effective balance amid all these disturbances and changes is complex. Businesses must develop a means to produce the required parts while keeping employees safe. OEMs often need to increase the number of their suppliers and operational sites to sustain profitability while ensuring a consistent supply of raw materials and products. 

Ultimately, it comes down to striking a balance between knowing where the automobile industry stands financially and physically and making choices that support the company’s operations without jeopardizing the health and safety of the employees who keep the machinery running. 

2. Leverage Local Third-Party Logistics (3PL)  

One of the more affordable solutions to the issues now plaguing the automotive supply chain is third-party logistics. Automakers can cut costs on logistics and reallocate resources to more urgent demands by contracting out a part of operations to outside parties. As a result, many businesses outsource their operations to third-party logistics providers to increase operational effectiveness and reduce costs. 

A supplier can increase the number of finished parts in that region at a more affordable rate by using the “last mile” knowledge of a local 3PL, creating a more robust backup plan in case a supply chain disruption occurs. 

3. Learn from Recent Events 

The auto industry supply chain needs to remain as adaptable as possible, as recent disruptions have shown. However, it can only accomplish that if the businesses that make up the supply chain pay attention and learn from current events.  

An increasing focus on innovation, a collaboration founded on trust (with both internal teams and external partners), and technology will be critical to addressing these difficulties and upcoming ones. Manufacturers may create a supply chain that is more transparent, accountable, and resilient by implementing digitally focused procedures and integrating supply chain technologies.  

Due to increased visibility, businesses will be better able to exchange pertinent data in real-time notifications, educate decision-makers when a product doesn’t arrive on time, and alert the appropriate parties when a plant is having issues. 

Stay Prepared with the Best Digital Solutions 

The automobile industry is rebounding, but parts shortages, inflation, and a lack of real-time visibility hamper a proper recovery and make meeting a growing demand challenging. However, OEMs can preserve their supply chains if they act now. Securing success means remaining prepared for the dangers and challenges of ongoing (and upcoming) global events as we return to a thriving automotive sector. 

Although these and related issues with the auto industry supply chain are primarily outside dealers’ control, awareness is essential to selling your inventory and getting the service parts you need when you need them. And doing this well requires the industry’s top digital sales and service management solutions. 

Contact us today and discover how Affinitiv’s innovative solutions can help your dealership prepare for a rebound of the auto industry supply chain.