What's Happening with the Supply Chain?

A supply chain is the network between a company and its suppliers to produce and distribute a specific product or service. In the automotive industry, the supply chain runs very deep due to the overall complexity of the product. With the supply chain continuing to dominate headlines, we connected with IAC Group’s Chief Supply Chain Officer Kelly Bysouth to understand what happened and why this topic continues to be the talk of the town.

The average car has upwards of 30,000 separate components.? The total ecosystem is complex and needs to be run like a well-oiled machine. If one of the component suppliers fails to deliver according to requirements, for whatever reason, then suddenly there’s a bottleneck.?

“The semiconductor chip shortage is probably the greatest example in recent history,” said Bysouth. “Vehicles use chips in the various electronics systems you find in today’s vehicles. At the start of the pandemic, demand for vehicles decreased - forcing OEMs to slow and in some cases halt their orders, but semiconductor chips were in high demand in other industries – specifically for laptops, smartphones and other personal electronic devices. When demand for vehicles picked up, the pendulum in other industries didn’t suddenly swing to redistribute those chips to the auto industry.”?

Other factors were and are still at play. Chips are manufactured globally – and various unexpected events place additional pressures on supply. The domino effect certainly stacked up and now vehicle prices – both new and used – as well as availability of those vehicles are a problem for the end consumers.?

“In the last two years, you’ve probably had to select a second or third preferred option at the grocery store versus your brand preference,” Bysouth noted. “An effective management of the supply chain from beginning to end is the difference between choosing the car, brand, color and trim levels you want or simply settling for what’s available. And when the supply chain is in a tailspin, it could mean you spend more money for less value. Supply chain management is essential not only to the success of a business or an industry, but for the success of the economy as a whole.”