Regarding the global inadequacy of microchips in the automobile industry, Jose Rivero, manager of Infor Mexico, indicated that there is no quick solution in sight.
“There just aren’t enough chips to meet demand. Some short-term strategies can help mitigate losses, but it is known that long-term changes to supply chain strategy and planning are necessary,” Rivero summarized, speaking at Advanced Technologies. The effect of damage can be reduced by having future supply chain disruptions.
He explained that semiconductors have become critical to many automotive applications, from fuel sensors to artificial intelligence (AI) tools that help with parking or oil change alerts, so without such semiconductors the recovery of the automotive industry is delayed. is, and companies are unable to fulfill orders.
As per estimates, the impact on global production volume will be around 7 to 8 million units, and McKinsey Information Major automakers have confirmed their production cuts, with an impact on billings expected of several billion dollars.
What happened to all the chips?
Rivero noted that the microchip shortage began in the first months of the COVID-19 pandemic, when car sales fell by nearly 80% in Europe, 70% in China and nearly 50% in the United States. Factories were closed due to lack of demand for new cars and orders for spare parts and components such as semiconductors were cancelled. Tech Republic Report When auto OEMs go out of business, canceling orders, they leave chip vendors with excess capacity in inventory. At the same time, some sectors needed more semiconductors to meet the demands of remote work, helping to use up existing stocks of chips in PCs, tablets and electronics that continue to be used, according to Jose Rivero.
Who is affected by the chip shortage?
The impact is widespread, going far beyond car buyers. When factories close, jobs are lost, which hurts the family economy. industry week Reports the political impact: “Chip shortage hits manufacturing, wreaks havoc on US economy, slows car production and drives up prices.”
According to UK FleetNews, Changes are being made: “The sector is navigating a disruption. Car manufacturers, due to chip shortages, are forced to learn from the current situation in order to adapt and prepare for the future in a more efficient way.
Rivero noted that some OEMs are trying to develop their own microprocessors and even their own software, something they consider economically impractical, as automotive chips are of low value, but whose Development is a high cost activity that will take years to become profitable. ,
The one exception is Tesla, dice industry week, They have designed a microchip for their “Full Self-Drive” system, which produces everything under the chip itself. Investment can be profitable. In the second quarter, the automaker had a record number of vehicles reaching $1 billion in net profit for the first time.
For its part, the European Union (EU) wants to participate in the chip business, so it was announced It intends to address this issue through legislation, seeking to source 20% of the world’s semiconductor production by the end of the decade.
Short-term strategies to solve chip shortages
Gartner suggests That automotive companies remain vigilant, as well as continue negotiations with suppliers of chips. “The current chip shortage is a dynamic situation, so it is essential to understand that it will constantly change. Tracking key metrics such as semiconductor industry capital investment, inventory ratios and revenue growth is an early indicator of inventory status, which can help organizations address the issue. It can help to stay on top and see how the overall industry is growing,” said Gaurav Gupta, vice president of research at Gartner.
Infor suggests that the technology could help address complex challenges such as chip shortages:
– data visibility, Manufacturing companies can find help in technology to access data and interpret economic indicators. Data analytics is the armor in this battle, but it must be applied strategically, projecting potential outcomes as well as understanding historical implications.
Extended supply chain visibility. Such visibility should extend beyond Tier 1 suppliers, reaching the entire network of the chain. However using secondary options, such as smaller cargo ships, adds some reliability concerns, complicating issues on another front. This should be a long term effort with trial and error. Getting as many details as possible is the only way to get the right view of the potential risks and constraints.
Maintaining supply chain flexibility and mitigating risk. Not enough to see potential problems, Companies should be able to trigger, reassign, or redirect shipping routes as needed to keep inventory moving, routing to the most appropriate location. Platforms that connect trading partners through common processes and shared data can provide streamlined functionality while significantly reducing risk.
Collaborative innovation. Changes in product design specifications may help reduce some of the inventory gap. The search for high-capacity (high-cost) consumer chips can turn low-priority auto accounts into the accounts that attract the most attention from semiconductor producers.
technology to manage complexity
For example, SEG Automotive, an automotive company, has an ERP solution in the cloud to meet market challenges. “We can not only improve workflow management, but also use modern methods in digital manufacturing and machine learning,” said Tim Zimmerman, the company’s director of ERP. “This allows us to take both production optimization and automated monitoring of our production to a whole new level.”
SEG Automotive has launched a number of 4.0 technologies to optimize the use of data, connectivity and robotics. The solution enables standardization of digital business processes, improves visibility and helps the organization implement unified planning, AI-driven visibility, especially important during semiconductor shortages, the developer said.
He added that digital networks and centralized data provision enable efficient decision making as well as easier reporting, and that a centralized view of company data means Industry 4.0 and machine learning are applied strategically.
In the event of chip shortages, and other challenges, a business using a cloud solution will be better equipped to respond with agility and intelligence. Infor concluded that while modern tools don’t solve every challenge, they have proven to better position companies to move forward.