![]() The sudden frenzy of activity, especially in the United States, as people ordered more goods and companies rushed to replenish their depleted stocks, led to major jams at US and European ports and an uneven distribution of shipping containers globally.It has been hard to find empty containers, as it takes weeks to unload the filled ones.Ĭontainer prices have soared to record highs as companies race to get their goods on ships. He added that even air freight, used to carry goods such as semiconductors, has struggled to keep up with demand due to travel restrictions. The problem is that the strong recovery in demand has been "bumping up against physical constraints of ports," Coleman Nee, senior economist at the World Trade Organization (WTO), told DW. Waiting periods have become painstakingly long. This has meant that people and businesses around the world are having to contend with shortages of just about everything from bikes to cars, toys to smartphones, and reinforced concrete to computer chips. The Ever Given container ship blocked the Suez Canal for days in March, adding to global shipping problems Image: 2021 Maxar Technologies/AFP The unprecedented uptick in demand coincided with fresh lockdowns at some of the biggest Chinese ports and export hubs in Southeast Asia, exacerbating the imbalance between supply and demand for goods. Sitting on piles of forced savings, homebound people, unable to travel, eat out or go to the movies, splurged on buying goods, taking the recession-battered businesses by surprise. Global growth did roar back, but soon lost its momentum. A sudden demand for goods coupled with chaos in the shipping industry threw global supply chains off track, taking the steam off the recovery. The global economy was expected to boom with the arrival of effective vaccines and the subsequent easing of restrictions. It is not enough to call your suppliers partners - you have to treat them that way.įorbes Business Council is the foremost growth and networking organization for business owners and leaders.There were a lot of hopes for this year, following the utter economic carnage unleashed by the COVID-19 pandemic and ensuing lockdowns in 2020. In order for this enormous global supply chain to continue to function effectively, and to deal with the challenges of electrification and autonomy, we must see a new level of collaboration and risk-sharing. They need to get to know their suppliers much better and establish broad-based interaction and visibility. I believe that the OEMs and large Tier 1 vendors have to become much more proactive about supplier development and cooperation. They genuinely want those vehicles to be successful in the market, as well as safe and reliable. In my experience, most automotive suppliers are financially and emotionally invested in the success of their customers. These companies need to find a way to cooperate on design, procurement, logistics, manufacturing processes and quality throughout the duration of the contract. Unfortunately, once the contract is awarded, and prices are established, the relationship becomes much more transactional and commercial. In pre-award situations, I often see customer and supplier engineers working cooperatively to improve designs and processes. The prevailing “arms-length” procurement relationship means that customers do not know their suppliers very well and they do not invest in developing them and are not able to capitalize on their expertise. It is probably not realistic to expect North American or European OEMs or Tier 1s to adopt a keiretsu model of supply chain cooperation, but there is a great deal they can do to improve their interaction with their suppliers. Even when the OEMs do step in to help drive lower prices on commodities like steel or aluminum, they typically insist on taking all of the cost savings. ![]() What they rarely do is share that bargaining power with their supply base. The large, established auto OEMs have enormous market power that they regularly use to negotiate lower costs and better delivery terms. By not providing any level of risk-sharing or flexibility on commodity prices, they are encouraging suppliers to build in additional levels of cost protection in new bids. ![]() Automobile manufacturers are raising prices and dramatically reducing incentives on new vehicles, but in most cases, they are not willing to give any relief to their suppliers. Particularly in a time of widespread material and labor shortages and price volatility, there needs to be much better bidirectional visibility and cooperation. Unfortunately, many Tier 1 suppliers complain about the OEMs but are guilty of the same practices with their own suppliers. I think the problem really begins with the OEMs who have set a pattern of collaborating with suppliers on design issues but being totally demanding and inflexible on schedules and commercial terms.
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