Few in the auto industry have rested easy since the initial coronavirus outbreak in China. But if we are honest about it, at least some of the pain is self-inflicted.
Over the past several decades, the auto industry, like other industries, pursued a global efficiency play. Immediate piece price, single tooling and other cost considerations have been paramount. This, in turn, fueled the big push to single sourcing suppliers in low-cost countries. Many automakers even issued top-down quotas to their purchasing departments to source a certain percentage of parts from China, regardless of the holistic business case. Such priorities helped China to become a major automotive manufacturing hub and have elongated supply chains to a web of multinational interdependencies.
There is much to admire in all that's been accomplished. Modern automotive supply chains are monuments to human capacity to reap rising efficiency from increased global complexity. Yet shortly after the calendar flipped to 2020, events revealed a costly gap in this magnificent enterprise: Agility.
We are not suggesting that the COVID-19 crisis caused the industry to panic and freeze. To the contrary, auto leaders have responded rapidly and decisivelyscraping inventory where possible by going into idle plants to collect parts, for example; adjusting product mix to avoid part shortages on select options; ramping up alternative suppliers; and driving transparency into the Tier 1 and Tier 2 supply base, to gain more visibility into exactly what parts and materials will be available in the weeks ahead. Similarly, savvy dealers are syncing closely with automakers to track supply risksparticularly in aftermarket parts, as new vehicle parts will be prioritized.