Although 2020 is behind us, challenges from the pandemic are still lingering in the auto industry.
The latest struggle is that now a microchip shortage is forcing automakers to adjust production schedules and, in some cases, pause production once again.
Keep reading to see what this means for the global supply chain.
Why is a microchip so important?
A microchip, smaller than your fingernail, is packed with electronics and conducts electricity from one platform to another. Over time as our cars have become “smarter” and more microchips are required, some vehicles have thousands.
Microchips are used for infotainment systems, as well as other functions of the vehicle. They are even more crucial to the emerging market of electric vehicles.
Without microchips, our vehicles simply don’t work. This absence of microchips can shut down production entirely.
What caused the shortage?
It’s a case of supply and demand.
There was a decrease in car sales, in response car manufacturers ordered fewer microchips. At the same time, the demand for personal electronics (laptops, PlayStations, iPhones, iPads) was on the rise as more and more people were bored of being stuck in their homes.
Many businesses around the world also made infrastructure changes to make working from home easier. All of these factors have led to a shortage of microchips.
As car demands have increased, microchip manufacturers are attempting to right-side their production, but it takes time. The current lead time is six to nine months in the microchip industry, which will continue to lead to bottlenecks for the auto industry well into 2021.
How is this impacting logistics solutions?
As production shuts down, there will be a surge in warehousing needs.
Automakers are feeling the supply crunch, and currently, not all have had to adjust production schedules to properly allocate the supply of microchips. In addition to rushing production schedules, delivery schedules will also change.
How ICAT Logistics Detroit can help.
Let ICAT Logistics keep production rolling no matter how complex, how many international borders, or how large your shipment is.