Clark Hill 2022 Automotive & Manufacturing Industry Outlook: Supply Chain
All signs indicate the automotive and manufacturing industry will continue to face supply chain challenges in 2022 and beyond. Each challenge alone and in the aggregate has been exacerbated by several factors, including the prolonged pandemic, the lean-style production system long in place, the sluggish adoption of diversity, and historically slow investment in technology. For the most part, there are no short-term solutions and many of the efforts to address this new normal will require collaboration between OEMs, suppliers, unions, state and federal governments, countries, and the like. Fortunately, there is a sufficient supply of optimism in the industry and hopefully a continued strong economy to aid these efforts.
While much is not in the immediate control of any one supplier, like immigration policy or the shrinking population of workers, there are measures suppliers can take to ensure greater resiliency in their own supply chain. One example that’s within the means of many suppliers would be investing in technology and software to assist with the purchase, transportation, warehousing, and inventory of raw materials and parts. It’s likely some customers are already requiring this investment by their suppliers in updated terms and conditions that govern supply chain relationships. Dual sourcing is another measure for suppliers particularly when the purchase of raw materials or parts are from global regions that are subject to logistical, geo-political or climate-based challenges. Thorough due diligence by suppliers of their sub-suppliers and vendors provides yet another opportunity to build resilience into operations. Further, revisiting and improving contractual terms that govern a suppliers’ relationships with its supply base is critical. Indeed, many suppliers are still using form agreements, standards, policies, guidelines, and terms and conditions that are extremely outdated and fail to provide any level of protection for the disruption and challenges that exist today. Taking the time to update these important documents will help ensure more predictability and resiliency in day-to-day operations. Of course, with labor and talent shortages, suppliers should be creative in the way they treat and attract people, such as building an inclusive people-first culture for factory jobs and developing career paths to attract a newer generation of diverse workers. Otherwise, it will prove difficult to compete by solely paying signing bonuses or offering higher compensation when the competition is doing the same.
If suppliers focus on the items they can control, there are many opportunities to improve performance despite the challenges faced by the industry. We will be addressing these opportunities, including the ones above, in more detail in articles, panel discussions, podcasts, and webinars throughout 2022. If you would like more information or assistance with any of these opportunities, please contact us.