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Following remarks by Jaguar Land Rover (JLR) chief Dr Ralph Speth
suggesting that the company faces a shortage of key components needed
for its UK car plants, David Leggett, Automotive Editor at GlobalData, a leading data and analytics company, said the fears are pointer to the deepening supply-chains concerns in the auto industry.
“The news from JLR isn’t surprising. It is an inevitable consequence of the economic impact of the COVID-19 outbreak, especially on
manufacturing supply-chains. Even as some Chinese factories restart
production following an extended shutdown for the Chinese New Year
holidays, the effects of output disruption to countless parts suppliers – especially in Hubei province – will now be impacting supply-chains globally after a period of lag when parts shipments were in transit.
“With a typical car containing 20,000 parts, some Chinese sourced
content in every car is a given. Procurement managers at the car
companies will be struggling to get visibility on where the critical
supply-chain pinch points are – both in terms of what they directly
source and also what comes in from Tier 1 suppliers in the form of
sub-assemblies and their sourcing difficulties further down the
supply-chain.
“The car companies will look at options such as switching to
alternative supply sources, but for some critical parts that may be very
difficult to do in the short-term – thus halting production when supply dries up, ” Leggett said.
He added: “All they can do is closely monitor the situation and look at risk mitigation measures where they can. Buffer stocks to ride out supply disruptions will be limited due to the predominance of
‘just-in-time’ lean manufacturing processes that keep inventory
levels low.
“On the upside, automakers across China restarted production this week, after three weeks of shutdowns to help prevent the spread of the COVID-19 virus. Although most are operating in conditions far from normal, the restart of manufacturing operations will boost confidence that the public health crisis – and its economic impact – is at least
showing signs of levelling off.”
Leggett however expressed some optimism, saying, “Some economic forecasters are hoping to see a V-shaped recovery in China emerge later in the year, but February and March will not be good months for China’s economy, with manufacturing especially hard hit.”
