How the chip crisis is driving carmakers to rethink supply chain tactics

Chip shortage is rippling through sectors, delaying shipments of automobiles, gaming consoles and consumer electronics. According to estimates, about 3% of commercial vehicle production will likely be lost in North America and Europe due to the semiconductor shortage. Insufficient chips for everything from touchscreens to transmissions forced manufacturers to shut down for months and furloughed workers temporarily. It is not clear when this problem will be resolved. But the show must go on, and automakers are now looking for short- and long-term strategies to deal with the current imbalance in supply and demand.

Key takeaways:

• The global automotive industry is projected to lose billions of dollars due to a shortage of semiconductor chips. The shortage has forced many automakers to halt production and temporarily lay off employees.
• To be better prepared for disruption, manufacturers could have diversified supply chains, identified choke points, avoided overreliance on specific geographies and moved away from just-in-time sourcing strategies.
• Automakers need to adopt more efficient strategies to secure their supply chains. Some of these strategies include shutting down production for short durations, purchasing directly from manufacturers and establishing trade agreements with governments to source chips securely.