Coronavirus and the automotive supply chain
Speaking to Automotive Purchasing and Supply Chain on the importance of China to the automotive supply chain, Professor Richard Wilding OBE, Professor of Supply Chain Strategy at Cranfield School of Management, said: “This is a major disruptive event with global implications for supply chains. Companies need to urgently review their supply chain to find out how exposed they are.
AUTOMOTIVE Purchasing and Supply Chain
Coronavirus and the automotive supply chain
Feb 3, 2020
With the news breaking that seven employees at German supplier Webasto have tested positive for the virus, and some European car plants having to halt production due to shortages of parts made in China, at suppliers that are on shutdown, the effects of the virus are starting to be felt in the global automotive supply chain.
The Coronavirus outbreak is a medical crisis with responses focusing on how to prevent new infections and treat those who are already infected. It is a testament to the agility of China’s supply chains that new hospitals are being built and commissioned within a week. However, the Coronavirus is also a supply chain emergency and preventing the next outbreak will require fundamental changes to supply chains, said Dr Geoffrey Clifton of the University of Sydney.
Webasto’s infected employees have been diagnosed in what is one of the first cases of person-to-person transmission outside China and all seven; five Germans and two Chinese, had taken part in various long meetings at Webasto headquarters in Stockdorf, Bavaria. The company has said that it has reviewed its travel and health and safety policies but has not yet implemented extensive quarantining measures although travel to and from its China facilities is certain to be severely restricted.
Commenting on the effect of the Coronavirus outbreak on the global supply chain, Professor Richard Wilding OBE, Professor of Supply Chain Strategy at Cranfield School of Management, said: “This is a major disruptive event with global implications for supply chains. Air freight is already down 50% and we are seeing a backlog of shipping on the Yangtze River. The consequences are already taking effect, as we are hearing that a car plant factory in Germany has had to close because it does not have the raw materials. This is a trend that is likely to continue in the short-term.”
Risk in the Wuhan region
Speaking of the importance of the region to the automotive supply chain, Professor Wilding said: “Many global companies rely on suppliers in the region. For example, Apple has 290 of its 800 suppliers based in China and the region is responsible for 9% of global TV production. According to DHL’s Resilience 360, 50% of all manufacturing in Wuhan is related to the automotive industry and 25% technology supplies from the region.
“The one mitigating factor is that this has happened over Chinese New Year where production is typically down 20% anyway, so companies are already prepared for some fall in output. Chinese New Year is a known disruption to global supply chains with employees leaving factories in mid-January, with operations halted between 24th and 30th January, employees return from the New Year break and operations usually return to normal by mid-February at the latest. The impact of the Coronavirus is that operations have been halted until the 9th February in many facilities.
A call for action and further automation
“Companies need to urgently review their supply chain to find out how exposed they are,” said Professor Wilding, adding: “They need to ask the question as to where their suppliers and suppliers’ suppliers are located and review other sourcing locations, which although often more expensive can protect from disruptive events such as this. We may also see a greater drive towards automation, as clearly with less people working side-by-side in factories, the lower the risk of an occurrence such as this.”