Microchips and semiconductors have dominated news headlines, but what is really going on behind the scenes?
In our tech-driven world, vehicles are powered by microchips just as much as they are traditional engines, brakes, and tires. You can’t have one without the other, as the microchips in our vehicles power the parts that keep us moving. The same goes for microchips and semiconductors, or the material within a chip that conducts electricity, making that tiny piece of metal a powerhouse that is driving our world.
Just like any supply chain, when one link in the process is broken, everything suffers. When the COVID-19 pandemic hit one year ago, electronic use surged, as people found themselves stuck at home and in need of new communications technology, upgraded laptops, or even new video games or entertainment resources.
Meanwhile, the automotive industry found itself cancelling production orders in mid-2020, simply because there was not much driving happening globally. But as restrictions lifted and people started venturing out, there was a surge in new vehicle needs: US stimulus checks, combined with the need for personal vehicles to maintain social distance, put the market into overdrive.
These spikes led to a serious shortage in semiconductors specifically, as production could not keep up with the unexpected and rapid demand. The shortage of semiconductors has impacted microchips, and vehicles as a whole, leading to a shortage in parts as people scramble to keep their current vehicles in operation.
So what does it mean?
Looking forward, you can continue to expect to see delays around new car production, leading to reduced supply on the market in the future. Because of this, current vehicles are a hotter commodity than ever before, so current vehicle purchases are also feeling the strain and prices of new vehicles are rising.
Across the fleet and automotive market, you may have seen OEM order schedules pushed back weeks or months. All over the world, OEMs like GM have full inventories of built-out vehicles sans-microchips. Once those chips are available, they’ll be ready to install and get moving quickly. But as of now, it doesn’t seem like those delays are expected to stop; in fact, there is the potential for cancellations into the next year. This will also result in increased prices on parts and vehicles across the retail and fleet market.
Your team at ARI has been studying the supply chain timeline, building resilient solutions that can help you mitigate the risk around these chip and semiconductor shortages. And there are options out there to help keep your fleet moving and manageable despite delays or cancellations.
Building a resilient supply chain starts with risk mitigation. By uncovering and addressing hidden risks that could affect your long-term fleet strategy you can avoid problems before they arise. Use your telematics tools and data to identify vulnerabilities, designating high, medium, and low risks to address. Then contact ARI to build a risk strategy for the future.
By expanding your supplier base, you’re able to reduce risky links in your supply chain and build a more expansive group of connections across your industry. ARI’s supply chain review process is a strategic approach to risk mitigation, which gives you the resources to develop actionable and interchangeable objectives that ebb and flow as the delivery and ordering processes change. That means you can dodge potential roadblocks that come up and better control costs in vehicles that are kept in service longer than planned.
Consider safety stock
While over-ordering can hurt the market, it’s a good time to think about a personal inventory. Again, this is where your trusty data comes into play. Review your maintenance and replacement schedules to understand where your greatest need is, then consider an investment in an immediate inventory to protect your fleet should delay projections continue.
We’re facing a challenge in the world of fleet and automotive management, but with the right tools and team on your side you can get through this time with ease. Check out this recap of our supply chain webinar to learn more, then subscribe to our weekly Morning Brake emails to stay informed. For more information around automation, check out our podcast, MOTIVE powered by Holman.