Supply chain disruption due to COVID-19 is creating major issues with automotive parts availability within Australia at present and impacts on repairers, service centres and restorers.
The primary problem involves getting specialised parts in from overseas such as Germany, United States, United Kingdom, Japan, and France. Countries affected by COVID-19 responded early by shutting their borders and restricting movements on the docks and at the airports. Additionally, the forced shutdowns saw companies strip back their staff to bare essential services within their organisations, which in turn affected the capacity for operations and logistics.
Not only did this impact domestic vendors and their workforces, but also the future survival of many niche suppliers. The larger ones switched to digitised platforms and mapped their entire tiers of supply chains identifying vulnerabilities and building up their resilience. Smaller businesses could not adapt so readily and could not outlay financial investment for similar systems. This resulted in failures to recognise delays, pivot to source alternate suppliers including identifying locally manufactured products and materials, predict shipment arrivals, and to notify the customers.
Locally, the impacts have been experienced across the entire spectrum of automotive parts supply and distribution. Many existing models dependent on ecommerce relied heavily on ‘just-in-time’ supply from China and distribution spawned from Melbourne warehouses under the alias of many third-party online advertising vendors who were completely caught unprepared by the prevailing conditions COVID-19 restrictions were to impose on their business models.
Products pre-purchased online were then not available in country, and orders were piling up at the warehouses and subsequently China. Shipments were heavily delayed and customers experience wait times of three months or longer. Some orders were never fulfilled, and refunds were a nightmare process resulting in arguments and loss of business.
Distribution via aviation was heavily impacted as was the situation at the docks and international shipping. The immediate impact for many companies was a significant delay in parts supply into Australia due to the route taken by shipping, via China in many cases. These delays could be measured from expected arrival at the receiver within 10 business days, to, currently, exceeding 3 months.
Three issues in particular stand out.
First, many companies in the UK and the US were forced to shut down during lockdowns, up to three months or longer, causing delays in manufacturing and leading to the accumulation a huge backlog in orders. The second issue involved a backlog of parts in shipping containers awaiting customs processing at international shipping departures as containers sat idle on the wharves.
Finally, adding to further disruptions, there was a shortage of available shipping containers globally, with many remaining in holding patterns at sea or dockside.
The automotive parts industry is extremely competitive, and many companies focus on their supply chains for better value and competitive edge. Research into the supply chain management processes reveal an extremely complex set of relationships between players.
Incumbents are motivated to take advantage of lower labour costs in many poorer nations, taxation havens to lower taxes, parts components sourced from Mexico via China, and the obfuscation of risk and liability throughout the supply chain. This creates risks in all areas of the supply chain, from parts availability, quality, billing, taxation, workforce attendance, insurance, human rights, occupational health and safety, shipping, rail, and road transport.
Adding COVID-19 to this already precarious set of practices exacerbated many problems that previously remained hidden.
When you fly with the crows you get shot with the crows and the industry’s vulnerability is now clearly exposed. Antiquated practices too often relied on human intelligence and strong personal relationships. These were put to the test as companies discovered their existing systems and processes were not resilient enough nor could they keep track of the vulnerabilities generated along the entire tier of suppliers to manufacturers.
Smart and well resourced operators recognised early warnings and pivoted, investing in automated and digitised processes and inventory tracking whilst examining and mapping their entire supplier distribution and supplier networks. This enabled them to develop alternative response plans to highly likely shipping diversions or delays.
Those businesses that have chosen to adapt and invest in vital technology and system upgrades to enhance their ability to monitor all tiers of their supply chain and shipping will benefit in the long term as the capability and capacity to respond to future natural disasters, war, and pandemics will be stronger.
The delays for automotive parts and components remain today with no immediate likelihood of a return to normal. That return to normality will likely include are range of new practices including:
- Switching from single source suppliers or types of suppliers;
- Sourcing of alternate locally manufactured materials and global suppliers;
- Pivoting to new technology;
- Redesign of systems and processes; and
- Ensuring access to the workforce.
Additionally, a range of complex new laws and regulations will remain post-pandemic, adding to costs. Delays will continue to be experienced in shipping and air freight movements.
Local and domestic automotive businesses, together with their suppliers, should review their current service agreements with particular attention to roles and responsibilities, risk and liabilities.
They will need to liaise with suppliers at all levels vertically and horizontally throughout the supply chain and refine critical lines of communications and accountabilities. By monitoring and communicating early warning and indications of disruptions along a well-mapped supply chain businesses can remain up-to-date and respond to changes.
The local automotive industry needs to relay this back along the entire supply chain and ensure their customers are informed and to ensure they retail customer loyalty and brand protection.
Simon Robinson is a which-50 contributor who writes about risk management and cybersecurity