Supply Chain Dive: John Taylor on automotive supply chain
Automotive supply chains have had a turbulent couple of years, from the General Motors strike at the end of 2019 to the factory shutdowns in the early days of the coronavirus pandemic. Now, a semiconductor shortage with no quick fix is shutting down production lines around the world. Some experts expect the shortage to stretch into Q3 2021. General Motors extended factory shutdowns into March as a result of the shortage. Ford said production in Q1 this year could fall by as much as 10% to 20% from the original plan. Overall, global automotive manufacturers could produce 672,000 fewer light vehicles in Q1, according to an estimate from IHS Markit. Still, neither the 2011 earthquake nor any other disruption has been able to shake the automotive industry of its single sourcing and just-in-time operations. The financial benefits are just too good, said John C. Taylor, chair of the Department of Marketing and Supply Chain Management in the Mike Ilitch School of Business. With additional suppliers, fixed unit costs could increase 50% to 100%, depending on what it takes for new and added suppliers to ramp up, Taylor said. "Every time there's a crisis ... we've said, 'Maybe we should look at going to dual suppliers,'" Taylor said. "But everybody's always backed off of those things immediately after the crisis. Same thing for keeping inventory low, having lean inventories." Part of what makes lean inventory hard to shake in the work of automotive is how customizable the cars are to the customer. Each car coming down a line could be slightly different. Keeping extra inventory of every available option would be hard for manufacturers, he said.