Dusseldorf The devastating shortage of semiconductors in the automotive industry is giving rise to plans in logistics to set up an early warning system that works worldwide. “We are working on making delivery backlogs and bottlenecks for individual items globally visible with our control tower,” reports Marc Schmitt, co-founder of the Schwerin-based logistics software company Evertracker.
The start-up has been pursuing global container deliveries for customers such as Airbus, Daimler and Mitsubishi Fuso for seven years, supported by the venture capitalist Genius Venture Capital. According to its own information, Evertracker uses GPS transmitters, the data flow of the transporters and sensors to locate containers in real time. On the basis of artificial intelligence (AI) and self-learning algorithms, the Schwerin-based company then calculates when the expected goods will reach their addressees.
So far, the system has only worked at the container level. “We do know the numbers of the parts transported in it,” explains Schmitt. “We do not find out whether microchips or gears are hidden behind it.”
In the case of the currently urgently sought-after semiconductors, such additional information would have allowed the impending bottleneck to be recognized at an early stage and possibly prevented it. Because it came about through a lack of transparency and an unfortunate chain reaction.
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A sharp drop in demand right at the beginning of the corona pandemic led automobile manufacturers worldwide to cancel their orders from chip manufacturers on a large scale. The semiconductor suppliers then started looking for new customers and found them with the PC manufacturers. The reason: The flight of many office workers to the home office caused the demand for computers for home use to skyrocket.
This has long since ebbed, but due to panic of further delivery bottlenecks, chip buyers are no longer releasing their production capacities.
Out of panic, more is being ordered than needed
Logisticians call this phenomenon “sandbagging”. “We see that chip customers are currently placing their orders with several manufacturers at the same time in order to secure their supply,” reports Gabriel Werner, Germany governor of the logistics service provider JDA / Blue Yonder, who, like Evertracker, calculates the arrival of goods deliveries. That leads to the fact that the market is swept empty.
“Now what happened to toilet paper in spring 2020 is happening,” observes Christian Kille, Professor of Applied Logistics at the University of Würzburg-Schweinfurt: “The car manufacturers need the chips faster than expected, a bottleneck arises, and it is therefore fear more demand than is needed. “
Already with the flight ban after the Icelandic volcanic eruption in 2010 and the nuclear reactor disaster in Fukushima in 2011, there were first attempts by logistics companies to increase transparency in global supply chains. “Back then it was just a flash in the pan,” recalls Christian Kille, who works as a market analyst for the Bundesvereinigung Logistik (BVL). “But the chip crisis is now bringing the subject back to the table with power.”
The suffering in the automotive industry is enormous. Alix Partners estimates the lost industry turnover due to the chip crisis at 179 billion euros. The costs saved with the order stop in spring 2020 were negligible in comparison.
Ambrose Conroy of the supply chain consultancy Seraph Consulting estimates that 30 million dollars would have been consumed by storing the chips, which are regarded as superfluous. The capital tied up would have increased by a mere $ 300 to 450 million in the global industry.
Companies do not share supply chain data
A more transparent look at the chip market would probably have prevented most car manufacturers from so drastically reducing the semiconductor supply in spring 2020. It might even have been possible to agree on emergency plans with other chip buyers, for example from the IT industry.
“From a technical point of view, it is not a problem for us to create an industry-wide overall picture of the global delivery situation,” says Thomas Spieker, Germany head of the Shippeo supply chain observer. The specialist, active in 72 countries, is already determining import data for a pet food retailer so precisely that they can predict delivery times for their own online customers even if the goods are still by sea.
Blue Yonder claims that it even uses cross-industry location information to provide real-time transparency. “With the use of machine learning, future delays can also be estimated,” reports Gabriel Werner. One of the customers is Electrolux.
But when it comes to evasive maneuvers with which the companies concerned react to such delays, corporate customers have not yet played along. “Everyone is talking about the need for greater transparency,” reports Christian Kille, who will publish a study at the beginning of 2022 that quantifies the economic benefits of such an early warning system. “On the other hand, many companies shy away from disclosing their own data.” Everyone is now waiting for the other.
That’s what customers like Continental and VW say
All that Continental says is that transparent supply chains play an essential role in business success. But: “The extent to which we make any sensitive information about our supply chain available to third parties is subject to regular checks, which in particular take into account the protection of data and our competitive position,” said the supplier.
Volkswagen has at least gone one step further and is already carrying out pilot projects with Evertracker. One of the goals is to be able to determine the arrival dates of containers even more precisely.
The prerequisite for this, however, is that the link between the ordered products and containers takes place in VW’s logistics systems. “This is the only way to ensure full transparency for the Volkswagen Group’s logistics,” the car manufacturer announced.
In addition, the “relevant information on the contents of the container” would be communicated with the service providers. What this “relevant information” contains and whether this also applies to information on semiconductor orders is not disclosed by the group. Just this much: Information is provided “if this information is required to transport the goods”.
Evertracker founder Schmitt also observes such reluctance among many of his customers. “They often see the delivery data as information relevant to competition and are reluctant to leave them to others,” he reports.
With the chip deliveries, however, everyone would probably have benefited. “Manufacturers such as BMW, Mercedes and VW should get together,” advises Shippeo manager Spieker, “and initiate a joint industry solution.”
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