Logistic networks fight the uncertainties to reduce the impact of unwanted disruptions. Let’s understand how various industries are coping up with the supply chain disruptions.
Supply chains are battling through testing times amid the growing logistics problems. Several issues related to the impact of COVID-19, port congestion, the microchip shortage, and severe winter weather have posed serious problems to supply chains across sectors over the past several months.Â
The purchasing, manufacturing, and supplying teams of various companies are working to limit the impact of this situation and are trying to acclimatize to the new normal. Major companies are optimizing their production lines, processes, and supply chains to meet customer needs. Let’s see how.
Automotive Industry
Automotive companies like Honda and Toyota heavily depend on Los Angeles (LA) as an import gateway. However, the LA port is one of the most impacted ones due to the port congestion in recent months. Citing these supply chain issues, Honda and Toyota have taken steps to limit production at their U.S. factories.Â
Honda is expected to suspend production at “most†of its U.S. plants in the week of March 22. Toyota, on the other hand, faces a shortage of petrochemicals. It is introducing several non-production days or non-production shifts at factories in Kentucky, West Virginia, and Mexico. However, the exact day and shift will vary based on location.
Similarly, other automakers are also grappling with supply chain difficulties. General Motors announced that it would have to build some of its trucks without a fuel management module due to the continued semiconductor shortage. The newly-built, light-duty, full-size pickup trucks are expected to have lower fuel efficiency.
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Plastic Industry
A massive winter storm hit Texas last month. This resulted in another supply shock for the manufacturing industry, specifically the plastics sector. About 60% of PVC production in the U.S. went offline due to the weather last month in Texas and Louisiana.
However, PVC is just the tip of the iceberg. The prices of polypropylene used for packaging consumer goods have soared like never before. The prices stand at more than double the 2019-2020 average. The cost of high-density polyethylene, used for shampoo bottles and grocery bags, is at the highest since 2008.
Referring to polyethylene, Bob Patel, chief executive officer of chemicals giant LyondellBasell Industries NV, saidOpens a new window , “Today, we don’t have enough volume to even meet the needs of the domestic customers.â€
Semiconductor Industry
Texas suffered widespread power disruptions in the past few months amid a severe winter storm. As a result, Samsung, one of the world’s largest chipmakers, was forced to idle two chip factories in Austin. The facilities represent about 28% of Samsung’s total production.
Koh Dong-jin, Samsung’s Co-CEO, opined that managing the imbalance between supply and demand for chips has become a top priority for staff and executives heading overseas, despite restrictions over discussing the matter with trading partners.Â
On the other hand, NXP Semiconductors NV scaled back its work in February 2021 at two facilities in Austin to conserve energy. NXP makes chips for the automotive industry. Similarly, Infineon had to shut down its Austin plant after authorities said that the power supply would be interrupted at the beginning of 2021.
Semiconductors are a key component of cars, medical devices, appliances, phones and computers, defense technologies, and many other products. Owing to its importance, foreign producers of semiconductors, electric car batteries, and pharmaceuticals are continuing to squeeze U.S. manufacturing. Companies like Intel and Ford are seeking tax benefits and more incentives from Congress for their domestic production.
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Delivery Services
Despite strong demand, FedEx Express, the delivery services company, still had difficulties in the last quarter as a winter storm disrupted supply chains across the U.S. The storm resulted in an estimated gross impact of about $350 million. Out of these, $240 million is attributed to Express, $85 million to Ground, and $25 million to Freight.
Energy Sector
According to the 2020 Annual Cargo Theft Report from logistics insurance company TT Club and supply chain intelligence firm BSI, global supply chains faced one of the largest threats to security, continuity, and resiliency with the COVID-19. Losses from warehouses and other storage facilities increased to 25%, while thefts of cargo in transit remained the highest proportion of the total, at 71%. Besides, cyber risks in supply chains have also grown exponentially.
Considering these supply chain risks, Shell, a global energy and petrochemical company, has roped in Accenture and Ripjar to transform its risk screening by utilizing AI across its global supply chain. The collaboration is expected to provide accuracy and efficiency in screening for risks across Shell’s third-party supply chain transactions. The embedded AI technology could also reduce data reporting errors by over 80% compared to conventional third-party systems.
In Conclusion
As multiple forces come together to tighten global supply chains, the disruptions expose the fragility of these chains. The pandemic triggered a surge in consumer demand for tech products, while a backlog of imports clogged the ports and severe weather problems forced U.S. plant outages. Such events increased costs and delays for many industries.Â
This, in turn, affected profit margins and the prices that businesses and consumers ultimately pay for. While supply chains across industries have adjusted well to various unsettling situations, they need to be more agile to ensure they are immune to any such disturbance going forward.
Do you think global supply chains will be resilient enough to handle a series of disruptions? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!