One might expect the shortage of nylon 12 -- a material used to coat fuel lines and other components -- to cause the auto industry to abandon just-in-time parts delivery.
After all, wouldn't it be better to fill warehouses with parts or raw materials than to risk a shortage that could shut down an assembly plant?
Well, no. Instead, automakers and suppliers are working to line up multiple producers of key raw materials to avoid the kind of disruption caused by the March 31 explosion that wrecked Evonik Industries AG's nylon factory in Marl, Germany.
Automakers and suppliers also are trying to make it easier to switch to new raw materials if bottlenecks develop. The industry has become acutely aware of the dangers of a supply chain in which one Tier 3 manufacturer might make most of a key raw material such as nylon 12.
But profit margins usually are too thin to permit suppliers to store parts or raw materials.
"Inventory is dead money," says J. Scot Sharland, executive director of the Automotive Industry Action Group, a suburban Detroit trade group that represents 870 automakers and suppliers. "Nobody wants extra inventory."
But there are exceptions. Last year, Freudenberg-NOK stocked up on several months' worth of fluoro-polymers, a key raw material used in a variety of seals. The company wanted to make sure it wasn't blindsided by shortages.
Meanwhile, the industry is striving to make it easier to switch to new raw materials if bottlenecks develop.
AIAG has unveiled a procedure to let suppliers get a customer's approval to switch raw materials within three or four weeks. That would help ease the industry's reliance on nylon 12, which is likely to remain in short supply for the rest of the year.
The takeaway? Sharland says automakers and suppliers must redouble efforts to identify potential bottlenecks among lower tier suppliers.
For instance, automakers had identified at least two major global suppliers of nylon 12, Evonik and Arkema Group. But automakers didn't realize that Arkema bought a key nylon 12 ingredient from Evonik.
Well, they know that now. "If there is a lesson to be learned, maybe it's that we have to take a deeper dive to identify production materials," Sharland says. "This underscores the complexity of the supply chain."