COVID-19 Impact on the Automotive Logistics in Semiconductors and Electronics Industry

COVID-19 Impact on the Automotive Logistics in Semiconductors and Electronics Industry

  • Semiconductors and Electronics
  • Nov 19, 2020

COVID-19 Impact on the Automotive Logistics in Semiconductors and Electronics Industry

COVID-19 is a pandemic disease that has triggered a severe worldwide epidemic, beginning in China and almost every region. Almost all, including the global economy, human life, manufacturing sector, automotive sector and others has a significant effect as a consequence of lowering demand and consumption rates. The inaccessibility of the vaccine to cure or prevent the spread of the disease is a big factor why the lockdown was introduced in preparation and to reduce the spread of COVID-19. Lockdown is too far away to monitor the spread of the disease and is known to be the superior arrangement watched within the different nations but it also has an adverse impact on the economy. As all facilities are closed, which is a reason for the sluggish growth of the sector, the lockdown has affected the manufacturing industry, distribution industry, operating plants, ports and other locations.

Logistics market have become complex in the global reach. According to a report, more than 75% of the automotive logistics is linked to the country China for components and raw materials for the vehicle or finished vehicle, directly or indirectly. And due to COVID-19 pandemic, original equipment manufacturers have realized that where the linkage of supply chain has been adversely disrupted for automotive industry. This pandemic has severely affected the demand and supply of the automotive parts at a global level and for uncertain time. There has become shortage of materials for the production of vehicles due to the disruption of automotive logistics in all over the world. Although, permission provided by the government to start transportation goods and raw materials from one nation to other with certain safety measures will surely help the automotive logistics industry to get back on track slowly. The first shock that world felt was when China’s manufacturing units came to standstill as COVID-19 exploded started from the vitally important city of China namely Wuhan. Due to stoppage of all automotive manufacturing and travel restrictions in all over the world, many logistics company were facing severe risks of getting bankrupt. Many OEMs have taken important decisions to overcome from the serious crisis.

For instance,

  • The companies such as Ford and GM have suspended their automobile manufacturing units in the U.S. for the production of medical devices.
  • Nissan had suspended the U.K. based manufacturing operations of automotive due to the declined demand and supply chain disruption.
  • Daimler had also suspended their European production plant due to disruption of automotive logistics services.
  • Honda has closed its four vehicle plants in the U.S. owing to reduction of market and disruption of logistics service.

It has been predicted that the global sales of vehicle will get reduced up to 20% post COVID-19 which will directly hit the logistics companies of automotive. For overcoming this crisis and to face any other type of crisis in future, automotive OEMs and logistics companies need to endeavor quickly by developing and implementing a robust logistics management strategy, for instance, implementing the inventory systems to reduce against logistics disruption. A modern car comprises thousands of parts which are assembled to make the finished product. And as per the report, about 65 percent of parts come from suppliers which need logistics services. The automotive logistics industry are taking number of steps to put the brakes on transit damage, strengthen the flow of vehicles and its components and enhance information visibility.

For instance,

  • A logistics company DHL is using smart glasses which are equipped with augmented reality to strengthen operations in warehouses. The devices allowed for hand-free picking and enabling workers to locate and sort the product quickly.

AFTERMATH OF THE NETWORK INDUSTRY AND GOVERNMENT ROLE

The pandemic situation created by the coronavirus spread imposed the lockdown in the various countries to initiate physical distancing to lower the spread. Now the lockdowns initiated by the government are getting relieved as its creating major impact on the economy. Relieving some restrictions from the businesses to restart their operation and meet the production capabilities, transporting and warehousing of the automotive components, the government is providing permission with certain condition and support. Governments of the various countries such as the U.S., U.K. and others are allowing the businesses to start their facility and logistics services with around 50 of staff persons. The logistic companies are now adopting digital technologies and virtual platforms for measuring, monitoring and analyzing supply chain performance and then improve it accordingly.

STRATEGIC DECISIONS FOR MARKET PLAYERS AFTER COVID-19 TO GAIN COMPETITIVE MARKET SHARE      

There is negative impact of the COVID-19 disease on the market as it has lowered the market of automotive logistics market during lockdown but after relieving the lockdown, it has created major demand for the market as the production of vehicles has increased which has directly created demand for logistics services as well. There are several strategies which can help the market players to increase their presence and market share in the global automotive logistics market. The strategic decisions include more investments to strengthen their logistics capacity, partnerships and business expansions.   

For instance,

  • In October 2020, XPO Logistics Company, a leading transport and logistics company has made investment in buying 10 additional eco-friendly mega-trucks and 280 semi-trailers in Spain for strengthening their supply chain capacity.
  • In October 2020, DHL supply chain has partnered with Manheim’s Auction logistics company for managing its order management and also route planning and loading and dispatching of vehicles. This partnership has made the presence of DHL company in North America region. 

IMPACT ON DEMAND AND SUPPLY CHAIN

The COVID-19 pandemic has been posing measurable impacts on the global economy. Owing to quarantines situation, social distancing measures and traveling constraints on a broad-scale drives a steep decline in business and consumer spending. The demand for logistics services of automotive parts and raw materials purpose is expected to improve gradually due to the plants in China resumed their production from March. The companies that need materials and components to start their manufacturing of vehicles to meet the demand is now likely to help the automotive logistics market to get back on track gradually. The companies are adopting digital technologies to monitor their inventories in inbound logistics and to track the flow of secured and efficient transportation of their fleets carrying either parts or finished vehicles for delivering services. So the above reasons are directly impacting the demand for automotive logistics market in positive way.  

COVID-19 is the unusual occasion that at long last powers, numerous businesses and companies to re-think and change their supply chain models. The leading manufacturing companies are now striving to keep the supply and production of spare and repair parts going. The leading manufacturing companies and logistics companies are now investing in several innovative solutions for gaining real-time visibility of the inventory and fleets and reduce paperwork rein in supply chain costs.

For instance,

  • Skoda is using drones and artificial intelligence based 3-D mapping solution to detect and track empty containers and fleets carrying vehicles or parts that it gets transport without any damage from the air.
  • Koopman has incorporated blockchain technology to gain end-to-end visibility of the supply chain.

Due to the lockdown, the companies are facing serious issues for raw materials and finished products transport, this can be straightforwardly affecting the development of the company. To overcome this circumstance, the companies must closely screen long-term and short-term request and maintain stock to diminish generation misfortune within the financial slowdown situation.

CONCLUSION

The pandemic situation created by COVID-19 has major impact on the automotive logistics market as it has declined the production of vehicles, created shortage of inventory and transportation of vehicles owing to the lockdown initiated by various governments of different countries. Abrupt closure of production units of automotive in China has caused widespread chaos among global OEMs and logistics companies in the world. Strategic decisions on the other hand, include more investment to improve their logistics capabilities, alliances and business expansion by key players in the automotive logistics industry, opening up lucrative opportunities for the market. After reducing the lockdown and granting permission to operate the operating market for the production facilities, strong growth is anticipated in the future.

 

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