Automotive Industry Response to Obsolescence

Written by: Warren Shore

Before the shortage market, the automotive sector had not faced the challenges that other industries were experiencing, including supply chain disruptions, obsolescence, and allocations. The auto industry rarely went to the open market. The just-in-time methodology worked for decades and kept manufacturing lean; however, when severe disruptions are in play, the supply chain becomes extremely fragile.

Today, the shortage market is resulting in obsolescence across the board— fab capacity is changing, new fabs being brought online may only include the latest node technology, EV is being prioritized over internal combustion engines (ICEs), and older node technology is going obsolete.

As the shortage market rages on, automotive companies have become aware of their supply chains even down to the component model, whereas prior to this they relied on EMS partners to delegate sourcing and supply chain management of their finished goods. Now, their EMS partners are unable to fulfill these orders, and the automotive industry must shift to understanding all aspects of their supply chain from top to bottom. For example, normally they would have just collected pre-made parts (Brake Systems, GPS, Tyre Sensors, heated seats, etc.), and then the final manufacturer would assemble these pieces into a car. In the current market, this is not possible, so automotive companies are learning more about the individual components that go into the larger sections of a car.

As a result, the automotive industry has focused on shortages, but now with obsolescence posing a threat across the board, the automotive sector is feeling the labor pains of this change. For example, ELM, a major manufacturer and supplier of circuits and devices, recently closed its doors, forcing automotive manufacturers to find an alternative part for ELM327, a part that communicates with any vehicle using Onboard Diagnostics II (OBD-II).

Something else to keep in mind is that repairs have become significantly more strenuous, as parts for the ICEs are difficult to locate. It is vital that we consider how well we will globally maintain our ICEs for the next few decades as the systems need repairs.

Acknowledging each of these complexities, we are seeing a number of manufacturers taking control of lead-level components to ensure they have the most crucial parts. Many companies are also investing in more labor to manage obsolescence and partnering with Converge to consultatively build a line of defense to manage immediate risks and strains in building a robust plan for the future.

To build a customized program for your needs, or to discuss how ELM closing impacts your supply chain contact us today.

Read more about how ELM closing impacts your supply chain:

ELM Electronics, OBD-II Chip Maker, Shuts Doors

Warren Shore

About the Author

As the Regional Business Development Manager of Northern Europe, Warren has built successful & dynamic Business Development strategies globally, and has a demonstrated history of working in the electronic components industry. With experience in Supply Chain Management, Sales, and Business Development & Relationship Management, he has worked closely with key leaders globally to help them achieve goals.

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