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Tuesday, 21 April 2020 17:17

Carmakers Need to Get Cross-Functional After Coronavirus Pandemic

Written by Marcus Williams, Automotive Logistics

Index

The COVID-19 pandemic has swept the world and closed car plants from east to west.

Production has begun again in China, where the virus originated, and that recovery is also likely to sweep the globe in the coming months.

 

However, like other industries, automotive relies on global supply chains, and logistics constraints such as border delays and safety checks are going to be more difficult to solve. This problem is compounded by the likely "demand shock" on those supply chains as consumers return to the forecourts.

 

At the second of Ultima Media’s new Livestream webinars held last week, editor-in-chief Christopher Ludwig was joined by Kristin Dziczek, vice president of the U.S. Center for Automotive Research (CAR), to talk about a range of issues facing the global automotive manufacturing and supply chain, and what it means for the U.S. market.

 

While China gets back into the production swing, the U.S. is very much in a containment phase, but there are signs that, when quarantine measures are eventually relaxed, restrictions will remain on the sourcing of parts and their delivery, which could significantly hamper the restart.

 

In a poll conducted as part of the Livestream event last week, the majority of participants put that recovery at over a month, with 43% going so far as to forecast it taking eight weeks or longer.

 

That delay is likely to be lengthened by the misalignment in supply and demand.

 

“Demand here in the U.S. was down 40% in March and that tracks pretty closely with the demand fall off in China in February,” said Dziczek. “What does that look like on the other side? Demand and supply have to be aligned and we’ve got some significant inventory out there, so even if demand comes back strongly how does that pull production?”

 

Supplier disruption and the ability to deliver parts could mean shutdowns in different regions of the U.S. (and the world), which could undermine the ability to even restart production on a low scale, said Dziczek.

 

In another poll conducted during the Livestream hour, 34% of subscribers said component and inventory shortages from affected regions was the biggest risk to resuming production at scale, while 28% said that insolvency or supplier closures were the bigger threat.

 

Ludwig also pointed to the potential crisis of misalignment in terms of inventory and equipment. To deal with that, automotive manufacturers need to take on a more cross-functional approach with teams working across departments, and further, across industry.


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