For a few years now, the automotive industry has accelerated towards the adoption of new technologies; like electrification and autonomous mobility. This has led automotive manufacturers to compete with other industry sectors; like smartphones, video games consoles, and computers for the supply of key technological components.
After the emergence of Covid-19, businesses and warehouses had quite a journey from reacting to the situation and navigating operational changes through the lockdown. Measures such as social distancing, and preparing the road for reopening helped in conjunction with global vaccine campaigns that began to raise hopes for the end of the pandemic. However, the post-pandemic period does not mean life is “back to normal”? And it is now time to measure the initial impacts on different sectors.
During the pandemic, interest in smartphones, video game consoles, computers, and smart TVs skyrocketed the demand for electronic components, creating a global chip shortage. In the post-pandemic phase, the automotive sector restarted production lines. Electronic components contract foundries could then no longer adequately address the demand for automotive parts.
The Origins of the Shortage
The adoption of the new technologies, the components plants shutdown due to Covid, and competition among industry sectors generated today’s semiconductor shortages. For example, China has partly shuttered the world’s third-busiest port, Ningbo-Zhoushan, after a single worker tested positive for COVID-19 in August.
Firstly, automakers considered supply chain overhaul visibility to optimize production targets, and sometimes they were forced to plan total or partial plant shutdowns due to the global chip crunch.
Then Tier 1 automotive suppliers were asked by automakers to increase electronic components; finished products inventory to avoid plant shutdowns. For example, Toyota required suppliers of critical modules to maintain up to six months worth of inventory.
New Business Processes Due to Component Disruptions
Due to the electronic components shortages, businesses had to adapt the way they typically operated; which resulted in finding new processes to overcome these challenges.
Suppliers now ship a limited number of components compared to the initial demand. This quantity has to be allocated to manufacturing plants and prioritized according to customers priorities.
Suppliers must adapt the Enterprise Resources Planning (ERP) processes by deploying warehousing capabilities. It will help them store more critical components and finished products.
When automotive suppliers receive components at the plant, the ERP generates task and business rules-driven warehouse operations, to optimize the warehouse space and measure material handlers performance.
For example, companies could put components away directly to the production line or store in a Storage Retrieval System. At the same time, the new storage system has to be compliant with First In First Out (FIFO) pickup logic and expiration dates rules required by automakers.
Warehousing ties ERP, shop floor data and processes in real time to improve material handling speed, accuracy, and inventory management.
When automakers require suppliers to increase inventory, these new ERP-warehousing tools provide to entire enterprise logistic operational visibility. But also control and accuracy across the internal supply chain, spanning inbound, production, and outbound processes.
The adoption of new Warehousing tools
The automotive industry expects to be dealing with these disruptions for quite a while. So it is now time to have stronger inventory and adopt new ERP-warehousing tools to handle the new logistic challenges.
Tesla is the leading company for self-driving cars. Their software and hardware driving of an autonomous vehicle is much further ahead of the competition. It also pulls the demand for latest chip technologies that are now challenging global foundry capacities.