Emergency logistics specialists are doing all they can to limit or prevent imminent production slowdowns or shutdowns among European automotive manufacturers whose supply chains are experiencing major challenges due to the coronavirus outbreak in China.

While various sectors have experienced disruptions to their supply chains from the impact of production closures and delays in China, automotive manufacturers are particularly affected – in part due to the pivotal role within China’s automotive sector of Wuhan. One logistics source told Lloyd’s Loading List that some automotive OEMs (original equipment manufacturers) had multiple ‘Tier 1’ suppliers producing at less than 50% of capacity, meaning that there will be production issues soon.

Emergency logistics specialists are talking with the OEMs about emergency uplift from China, but some believe the lack of parts will require manufacturers to identify other Tier 1 suppliers in Europe or the US to support continued production.

Stuart Stobie, director of UK-based emergency logistics specialist Priority Freight, said one issue was that “supply chains are now much more global than a few years ago with much more interchange in parts intercontinentally. The coronavirus will interrupt production from Tier 1s – which is slowing car production by the manufacturers, and many OEMs have only limited stock left before they have stoppages.”

He said production had already been hit by shutdowns, “and therefore OEMs are being forced to review their supply chains and, where necessary, invoke contingency plans to speed up supply chains”, noting: “The biggest issue will be a lack of components in the first place, followed by a need to catch up when the pandemic starts to recede.”

Graham Little, managing director of emergency logistics specialist Evolution Time Critical, told Lloyd’s Loading List: “After the initial disruption and uncertainty, we have been able to get increasingly detailed information about availability of parts and have started arranging airfreights to keep plants running; identifying the most critical parts first.  In order to try and reduce the spread of the virus, airlines have made the decision to dramatically reduce flight numbers, which has reduced the available cargo capacity

However, with supply being dramatically reduced, manufacturers will have to consider supply chain balancing – ensuring each stage of the supply chain works in synergy to avoid over- or under-production.”

Alongside difficulties for customers getting parts in and around China, another challenge for automotive firms has been “a significant reduction in consumer demand for cars domestically within China; so returning to a balanced supply chain will take time and a lot of planning”, Little observed.  

“In practical terms, we have been making urgent shipments by air freight from China for goods that would normally have been moved by sea freight. Our role is to balance urgency and risk and to propose the most appropriate solution for our customers.

“Our customers are identifying their most critical parts, working hard with their local teams in China to ensure that the parts are available and correctly packed, and then coming to Evolution to ensure that an appropriate transport method is selected. Due to local travel restrictions and quarantine procedures, the main challenge is getting information and parts from suppliers.” 

From a transport perspective he said he said the issues were “not just about emergency logistics, as some parts are not required for immediate production – but ensuring that you get the right transport mode at the best cost. We are having daily calls with our local team on the ground in China to assess the changes in the market and ensure our customers have the most up to date information.” 

He added: “Many suppliers are still using their safety stocks and stocks that were in transit, but these are getting very low now. As production in China starts to ramp-up again, we are seeing an increased requirement to move parts in and out of the region; this has predominantly been via air freight. When the disruption was in its very early stages, we saw some manufacturers moving significant amounts of stock as sea freight out of China pre-emptively.”

Little said the situation was “still extremely fluid and changing daily; but the intelligence we are getting from our people on the ground in China is that production is starting to resume, and distribution lines are re-opening. It is difficult to predict what will happen next, but we are working with our customers planning for shortages of parts, managing reduced demand within China and the impact of labour issues within affected regions due to quarantine procedures.

“Things are improving steadily and we are working with our customers to prepare for the point at which local production and demand increases, which will create a drain on the limited transport resources currently available.”

Source:lloydsloadinglist

The opinions expressed herein are the author's and not necessarily those of The OLO News.