Charles Klein, the Station Manager for OEC Group’s Detroit office, shares his expertise regarding the state of automotive logistics, and offers advice on how shippers can give themselves the best chance of getting products imported during difficult market conditions.
Can you give us a quick snapshot from a thousand feet up of the automotive logistics landscape?
Supply chains in both the new build and aftermarket automotive sectors are still experiencing a lot of the same difficulties that emerged just after the initial impact of COVID-19. For example, the chip shortage persists, and, in some cases, completely manufactured cars are on hold waiting for them. As a result, many people turned to used cars and demand for aftermarket parts increased. Simultaneously, container capacity was swept up in major backlogs at U.S. ports. Now, ports like L.A.-Long Beach and New York-New Jersey remain jammed. Also, we’ve been seeing equipment shortages and rail delays on shipments coming from the West Coast and the Pacific Northwest to automotive hubs in the Midwest.
Have most automakers switched from just-in-time to just-in-case?
While there have been media reports of companies like Toyota and Nissan, early adopters of the just-in-time system, transitioning to just-in-case to keep assembly lines moving, the reality is, a lot of manufacturers are doing their best to hold on to the efficiency of just-in-time, especially with the difficulty of finding warehouse space. This makes supply chain planning even more critical because delayed or otherwise poorly planned shipments can temporarily halt an entire assembly line. We recently saw this when Volkswagen and BMW stopped European production when Ukraine could no longer supply automotive wire harnesses.
Do supply chain roadblocks have a more severe impact with aftermarket parts or fully manufactured new builds?
Supply chain disruptions impact new builds more than aftermarket parts because with new builds, if just one part is held up, then the entire operation can be paused. With aftermarket parts, retailers and mechanics rely on building inventories. As a result, brick-and-mortar retailers like Advanced Auto Parts do not necessarily lose substantial business because of shipping delays. However, if certain parts are delayed during the importing process, like brakes, then it could impact whether or not people around the country can maintain and fix their vehicles.
Any ideas on short-term or long-term developments in either sector?
For fully manufactured new builds, supply chain issues and the global chip shortage are likely to continue causing problems at least in the short-term. Aftermarket parts have a better outlook as they have stocked traditional inventory for years. However, many critical parts, such as brakes and wipers, stay in short supply. Current market conditions make it difficult to offer any concrete long-term predictions for either sector.
What is your advice for shippers in the automotive sector trying to operate in this historically tight market?
Whether you’re a shipper building your inventory of aftermarket parts or a shipper trying to keep assembly lines functioning, diversification is key. We’ve been proactive in helping our clients develop strategies that do not rely on just one trade lane, route, or port pairing. To simplify our strategy, we’re spreading shipments amongst several destination ports in different regions of the US and sometimes Canada, specifically looking for routes with the most reliable transit times or those that are consistent and predictable. As a result, our clients can now plan more effectively, keep supply chains flowing, and minimize any effects to their bottom line.