Certainty of supply in an industry facing a conglomerate of issues

Published: Thursday, 18 July 2024

The automotive and freight industry has undergone significant changes in the past five years with the ripple effects and new challenges creating several layers of issues that aren’t disappearing anytime soon.

But what has caused this conglomerate of issues and how can business still operate effectively? Andrew Austin, Group Operations Director at Priority Freight, explains:

The answer is very complex. The world was rocked at the beginning of Covid. Pre-covid the goods supply chains were organised and finely balanced. People could get products all over the world, but the pandemic knocked this off its axis and it hasn’t fully rectified itself.

The car industry is wounded by both the collapse of these supply chains and the pressure to be back to capacity quickly with fewer resources and increased costs of transport. Before Covid, a part could be manufactured one day and delivered the next. When any part of that supply chain is fragmented, the cards come tumbling down.

There were significant price rises after the pandemic, fewer air freight carriers were available and there was a reduction in lorries as many drivers didn’t return to the industry or found working in Europe harder following Brexit.

Electrification and climate goals

The other thunderclap which has hit the automotive industry and manufacturers hard is the strive to electrification, with more and more countries setting ambitious climate targets. For the first time in 100 years of history, manufacturers are having to change the propulsion units, those propulsion units are largely electric – even with diesel and petrol combustion engines at their most efficient.

Energy

A financially damaged and destabilised economy was then further exacerbated by the conflict in Ukraine and the pressures on energy prices.

The increased prices have also contributed significantly to a decline in consumer confidence. As a result of rising interest rates, the cost of living, running an electric vehicle with a lack of infrastructure – consumer confidence has taken a knock and predicted levels of demand have not been realised.

This mass spectrum of significant events has all happened within a very close period of time.

Demand and consumer behaviour

But we also need to consider the way that we have changed as humans. Cars in the UK multiplied 4-fold in the last 40 years, there are more of us on the planet valuing mobility, and your average family has gone from one car to three or four.

Cars themselves have also become bigger and more complex. Older cars would have 3,000 parts, they now have 7-8,000 parts, which means more suppliers. If you overlap this fragmented supply chain with rising costs, consumer demand, global suppliers, and climate goals you have a huge bowl of spaghetti with many competing factors.

As a provider who prides themselves on supply chain certainty – it is our job to know the ingredients involved in this spaghetti supply chain, and all the time we can do this, we will have a role to play.

Relationships are important as are reputation and knowledge, but not without proving value for money. It is still a cost-driven environment.

The future

When the future becomes clearer on the mode of propulsion, we think that the car industry will enjoy a resurgence.

The complexity of the supply change, the global nature of it, increasing demand and major changes to electrification will keep this industry a very dynamic place for the next few years.

Our people love the buzz of “what’s next?” It makes every day interesting as they find different solutions, rather than processing the same orders on repeat. We must remain to top of that service, stick to our core values, quality of service and principles.

With a general election on the horizon, another layer will soon be added to the complexity and who knows, there might be more public ownership of businesses. But whatever the next year presents, one thing is for sure, the industry has never been boring and will certainly keep us all on our toes.