The pandemic and the shortage of micro components have seriously affected the Latin American automotive industry. The current situation has transformed the logistics chain, making it increasingly urgent for the automotive sector to migrate from a ‘just-in-time’ model to that of industry 4.0. In this shifting scenario, having an integrated and resilient logistics operation is essential to succeed in a sector that is so relevant for the Latin American market.
A global event, rarely seen in contemporary history, has led the world to change its daily habits. The Covid-19 pandemic continues to have a significant impact on our daily lives, on how we consume, how we work and interact. It is also driving increased demand for technological items and digital platforms to be able to face these challenges and sustain local and regional economies.
This has compelled electronic equipment companies to increase stock, affecting the production and supply capacity of semiconductor manufacturers. The situation has profoundly impacted car manufacturers, as electronics can represent up to 47% of a car’s cost and total composition.
Context of the Latin American automotive industry
According to the Argentine-German Chamber of Industry and Commerce, more than 80% of the world's automotive supply chain is connected to China. As such, the closure of the automotive components market in that country is impacting cargo import capacity from the Asia-Pacific region to Latin America, causing a significant supply chain disruption for the automotive industry.
Likewise, the maritime market is seeing a contraction of spaces, affecting the reliability of itineraries and transit times. In turn, this causes instability in planning, and higher demand for expedited services, resulting in a destabilisation of the logistics budget and production times.
In parallel, another challenge that light vehicle manufacturers have faced as a consequence of the pandemic is the shortage of semiconductors. This shortage since the end of last year has been impacting production lines while also taking over port capacity in the United States. This has altered component supply chains accustomed to just-in-time logistics, where parts are delivered to factories according to their production and inventory needs.
These changes are leading companies in the automotive industry to seek new supply chain solutions, whether to accelerate or decelerate supply. They are also looking for alternatives anywhere from intermodal transport to warehousing services, thus diversifying options according to their requirements. With so many actors and changing market conditions, predictability and operational reliability become fundamental, and as such, it is necessary to have a more global view of logistics.
The automotive sector, in a great example of the pandemic driving transformation, today faces the enormous challenge of implementing innovative solutions and strategies that allow it to intelligently and efficiently integrate the various points along its supply chain.
Challenges of sector reactivation
An average car has between 60,000 and 90,000 parts, of which some are produced directly by the manufacturer while others are shipped by direct suppliers who, in turn, may have other suppliers.
Thus, in the last decade, automotive sector companies have extended their supply chains around the world, making them increasingly complex and with wider geographical coverage, which affects the visibility, transparency, and effectiveness of logistics.
In such a scenario, considering the best way to reactivate the sector, the challenge is to integrate a resilient logistics system, which adjusts to the automotive industry’s supply chain complexities and allows Tier 1 and 2 OEMs to anticipate disruptive events, minimise economic impacts, and become more competitive.
In this sense, a comprehensive logistics system allows companies to offer tailor-made solutions, responding with a service that addresses immediate supply according to stock, product and supply storage and transportation, and integrated software for inventory monitoring and control. With this, they solidify their relationship with strategic partners and simplify transparency in the supply chain.
Road to supply chain integration
Achieving the integration of multiple suppliers in a logistics chain is a significant challenge for the Latin American automotive industry, considering both the distances between producers and the particularities of the global pandemic.
As such, integrating all processes in a single logistics operator can optimise times, inventories, and resources. Maersk’s 4PL solutions are adjusted to the needs of the automotive industry, managing inventories and parts stock with a sequential online supply strategy capable of speeding up or slowing down inventory delivery depending on the needs of each OEM.
This 4PL solution, built with E2open capabilities, is designed to transform raw information throughout the supply chain into actionable insights for agile decision making. This means that even if logistical disruptions arise, alternative intermodal options such as rail or air transport are designed to increase resilience. All to ensure that components reach your global markets on time and as planned.
To learn how an end-to-end integrated supply chain can help you make strategic decisions that streamline your processes and make your operations more profitable, contact our automotive industry logistics expert.