Ask any manufacturer in any industry what issue has been one of the biggest challenges since 2020 and most will say the same thing: supply chain management.
As we all found out during the onset of this decade (the COVID years), supply chains are a fragile thing.
But even without a pandemic, supply chains can make or break a production schedule.
Unfortunately, even in the best of times, there will always be some sort of supply chain challenge to overcome.
In electric vehicle (EV) production, the automotive supply chain issues of 2020, 2021, 2022, and even into 2023, were major stumbling blocks to overcome as the electrification revolution in transportation was just starting to take hold.
While global manufacturing now looks closer to what it did pre-pandemic, the lessons learned from the supply chain meltdown that happened are still very applicable to today.
Perhaps the most important lesson when it comes to sourcing EV components, such as advanced sensor technology is one that's simple:
Meeting the demands of any business climate effectively is aligning with partners – such as an automotive sensor manufacturer – who are agile and established.
Automotive Supply Chain Issues for 2024
As we move through 2024, the automotive industry continues to face supply chain challenges as it always has.
But there’s one major issue that’s behind much of it, and it’s not only affecting the automotive supply chain: Inflation.
As we’re all seeing – in our receipts at the grocery store to the material procurement at work – increased prices driven by inflations are making for a higher cost of doing business. In EV manufacturing and part sourcing, we’re seeing it affect
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Raw Material Costs, such as lithium, cobalt, and nickel, which are crucial for battery production. Prices for these materials have risen sharply due to inflation, impacting the cost of batteries and, consequently, the overall cost of EVs.
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Component and Part Prices, other components such as semiconductors and electronic parts are also becoming more expensive.
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Energy and Labor Costs, rising energy prices increase operational costs, while higher wages needed to keep up with inflation contribute further to increased production costs.
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Logistics and Shipping Costs, higher fuel prices and increased demand for freight services have driven up shipping costs, further straining the automotive supply chain.
What’s more, the shift towards electrification has heightened the need for specialized sensors in EVs, such as those for battery thermal management, driver assistance systems, and vehicle-to-everything (V2X) communication. This demand surge places additional pressure on manufacturers to secure a reliable supply chain. The competition for these specialized components exacerbates the challenge, leading to longer lead times and potential delays in EV production.
Manufacturers with strategic supply chain management – those that have invested in vertical integration or developed strong partnerships – are better positioned to meet these issues. Their ability to adapt to supply fluctuations and ensure material availability is crucial for maintaining steady production lines and meeting the growing demand for EVs.
Avoiding Automotive Supply Chain Issues + an OEM Automotive Sensor Manufacturer
No matter what’s going on in the world, OEM and Tier 1 suppliers must be agile and creative in working through automotive supply chain issues as they present themselves. To that end, automakers must partner with suppliers that can manage supply chain problems effectively.
When sourcing sensors used in electric vehicles under current market conditions, working with an experienced OEM manufacturer is an absolute must.
Why?
They are better positioned to weather the volatility in the automotive supply chain and keep your production on track.
When vetting an EV/automotive sensor company, it’s important to evaluate its:
- Financial stability
- Command over its own supply chain
- Accurate forecasting
- Ability to take on inventory
- Flexibility
- Experience
- Independence
1. Financial Stability
Good credit and financial solvency are the foundation of any successful business.
This principle holds especially true for EV sensor manufacturers, where financial stability is not just about enduring fluctuations in the market but also about leveraging enhanced buying power.
A robust financial standing – characterized by good credit and timely bill payments – empowers a company to:
- Negotiate better terms with suppliers
- Secure bulk purchases at competitive rates
- See prioritization of its orders
Such financial health ensures that the manufacturer can swiftly adapt to changing demand, scale operations efficiently, and meet production deadlines consistently.
Ultimately all this translates to a sensor supplier being better equipped to meet your production deadlines and demands for maintaining a competitive edge in the fast-paced EV industry.
2. Supply Chain Command
The automotive supply chain disruptions of the early 2020s – marked by unprecedented delays, backlogs, and component shortages – underscored the critical importance of robust supply chain management.
For EV sensor manufacturers, having direct control over their supply chains is a game-changer. It enables them to more effectively meet customer demands and navigate the complexities of the global market.
By establishing and maintaining long-term, stable relationships with suppliers, sensor manufacturers gain several advantages:
- They secure a more reliable stream of raw materials, essential for timely order fulfillment.
- They’re better able to communicate and collaborate, allowing for more agile responses to market changes or disruptions.
- They have greater visibility into the sourcing and quality of their materials, enhancing product quality and customer satisfaction.
In essence, command over the supply chain transforms potential vulnerabilities into strategic strengths, ensuring that EV sensor manufacturers can deliver on their promises, even in the most challenging circumstances.
3. Accurate Forecasting
Automotive supply chain issues have led to longer manufacturing times and higher prices. Thus, companies must be able to accurately forecast projects, including the time it takes to:
- Source materials
- Manufacture components
- Deliver orders
While forecasting remains challenging, the best manufacturers have greater control over their suppliers and supply chain to provide better estimates.
4. Ability to Take on Inventory
In a market where suppliers frequently sell to the highest bidder due to scarcity, manufacturers capable of making bulk purchases gain a significant advantage.
This approach not only allows them to better control their supply chain requirements but also leads to more favorable pricing and guaranteed material availability.
For instance, securing a year's worth of materials often results in lower costs and ensures supply continuity, as opposed to the risks associated with monthly procurement. The savings achieved from buying in bulk can be substantial, tipping the scales towards maintaining cost-effectiveness and avoiding budget overruns.
This strategic inventory management is crucial for staying competitive, especially in the face of fluctuating supply and demand dynamics.
5. Flexibility
Navigating the complexities of today's automotive supply chain requires a level of flexibility that wasn’t even thought of even a few short years ago. The best component manufacturers and suppliers understand that disruptions can emerge swiftly and from unexpected directions. The capacity to quickly adapt and creatively resolve issues is what sets leading EV sensor manufacturers apart from their competitors.
Partnering with a manufacturer that relentlessly pursues every avenue to ensure timely order completion is invaluable. Often, it's their willingness to go above and beyond—exploring all options, making necessary adjustments, and sometimes innovating on the fly—that enables projects to meet crucial deadlines.
Sometimes, your suppliers going a few extra miles is what it takes to push a project over the finish line and meet your deadlines.
6. Experience
An established manufacturer with years of experience benefits from deep industry connections, providing an edge in addressing unforeseen challenges. Their seasoned perspective enables them to confront problems directly and devise solutions promptly.
This network and know-how equip them to navigate complexities more efficiently, ensuring they can adapt and respond to the evolving needs of the electric vehicle sensor market.
7. Independence
Sensor manufacturers with a vertically integrated supply chain enjoy a considerable level of independence. By not depending on external suppliers for components, they manage the entire production process internally. This autonomy reduces reliance on outside sources and places control firmly in their hands, allowing them to navigate their own path. Consequently, they can consistently deliver products, even when others face delays due to supply chain shortages.
Another way: A sensor manufacturer with a high level of independence is better able to deliver even when competitors are stuck waiting for materials because of supply chain shortages.
Meeting Automotive Supply Chain Issues Head-On
Though it’s nearly impossible to predict with exact certainty when the global supply chain will take a turn for the worse, conducting business as usual isn’t. Meeting deadlines and completing orders now requires more forethought, flexibility, and sometimes a few creative solutions.
Adding an established EV/automotive sensor manufacturer to your supply chain eases the burden of staying on track and helps your automotive manufacturing operation still deliver.
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