Disruption is the new dynamic
The lessons learned in the first wave of the Covid-19 pandemic, which have prioritised resilience and flexibility in the automotive supply chain, are being put to the test again by the European lockdowns introduced in November.
At the same time, the inbound supply chain is faced with the double whammy of securing enough capacity to cope with the rush to replenish parts and materials depleted during the coronavirus, as well as a seasonal peak in consumer retail demand. Taken together, that has led to congestion in the container sector, with high rates continuing into November and possibly next year. This situation is affecting suppliers in particular, and the clear implication for most automotive manufacturers is that the cost of inbound parts logistics and transport has become unavoidably higher.
As many manufacturers face the prospect of supply chain disruption, or the high costs of flying in parts to avoid shutdowns, some logistics managers might have wished they were carrying higher inventory levels rather than working to just-in-time (JIT) delivery principles.
At this year’s Automotive Logistics and Supply Chain Live Conference (ALSC), delegates discussed in detail how they dealt with the impact of the Covid-19 pandemic on supply, manufacturing and sales. The adoption of digital tools to provide greater visibility and a more flexible workforce were combined with a reliance on what Volvo’s Martin Corner described as “legacy systems and brute force”.
The rebound from the Covid crisis depends on the resilience and flexibility of top tier suppliers. One of those is Yazaki, and this edition features an in-depth interview with its top executive in the Americas and EMEA, Bo Andersson. As he explains, the company is taking a more strategic and coordinated approach to supply as it continues to stabilise production in the wake of the coronavirus crisis. Yazaki took a proactive, risk-averse approach to the crisis which has helped it recover quickly. However, Andersson sees the supply chain as a particularly critical area to improve visibility, costs and to add greater value.
Strong collaboration in the supply chain and the huge efforts made through 2020 to gain visibility of inventory and its location, using tools both old and new, have put it in a strong position to move on but in doing so Yazaki will be looking to regionally localise as much of its supply as possible.
This effort to build up resilience and reduce complexity comes at time when carmakers are moving into the manufacture of fully electric vehicles, which have simpler powertrains but more complex logistics considerations for battery supply. Volvo is in the launch phase for its electric XC40 Recharge model, which is being made alongside the hybrid and ICE-powered versions at its plant in Ghent. As Magnus Ödling explains in this edition, managing the logistics to support a successful EV launch has in many ways posed more of a challenge than Covid-19 did because of the introduction of the lithium-ion battery, which the carmaker is assembling in-house in Ghent.
EV start-up Lucid Motors has also been working to a tight planning schedule during the Covid disruption on the launch of its first luxury sedan from a new plant in Arizona, not a traditional hub of vehicle making. Working with its outbound logistics provider Glovis America from a very early stage has enabled it to build volumes into an established distribution network in the most cost-effective way possible, while also helping to develop that outbound network for the future of EV production in the region.
On the sales side the Covid-19 crisis has forced dealers faced with closure to adopt online sales and subscription models, but that disruption is something rival start-up (and Geely subsidiary) Lynk & Co, has built its strategy on from the start. Lynk & Co is doing away with traditional dealerships, instead establishing clubs, where customers can see the car they want but actually buy or subscribe to it online.
One of the lessons learned through the disruption to supply, manufacturing and sales caused in 2020, and the ingenuity and collaboration used to deal with it, is that greater flexibility in the supply chain is required as consumer habits change along with vehicle architectures. Cars are changing as a result of greater platform sharing, the increase in electrification and through the latest digital technology in connected cars. This is changing the dynamic in the supply base and the sector may need to be more strategically disruptive itself as global output recovers and the number of electric vehicles increases over the next decade.
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