The global automotive industry is coming under increasing pressure from rising incidents of supply chain disruption, according to the latest research from global insurance broker JLT Specialty (JLT).
JLT says the global automotive industry had a significant rise in supply chain disruptions last year, with the number of disruption events – typically factory fires, hurricanes and labour strikes – increasing thirty per cent from 1,306 in 2016 to 1,699 the following year. Taken together, these disruptions affected a total of 5,585 suppliers across 10,809 sites, according to the analysis.
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Factory fires and explosions caused the largest disruption to the automotive supply chain last year, with 318 incidents – compared to 180 in 2016. Merger & Acquisition (M&A) activity – which only appeared in the top five disruptors in 2016 – was the second highest with 247 incidents, followed by hurricane/typhoon activity at 116.
JLT’s Automotive Supply Chain Disruption Report, produced in conjunction with supply chain data analytics specialist Resilinc, provides a picture on the risks suppliers are exposed to in order to help auto manufacturers pinpoint weak links in their supply chain. As well as looking at the number of disruptive events, the report also identified the highest impact events, the prevalence of man-made and natural events, the main emerging risks, geographical spread and sub-tier penetration.
North America tops the table with more disruption events than Asia and Europe combined – 777 disruptions – having suffered Hurricanes Harvey and Irma last year. The latter took an average of 33 weeks in terms of affected sites’ time to recover.
The research reveals that there were nearly as many events in auto manufacturers’ supply chains in Tiers 2 and 3 combined as in in Tier 1. Given the prevalence of events in sub-tier categories, a focus on Tier 1 alone is unlikely to be enough. However this is where there is typically least visibility, says the report.
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By GlobalDataMatthew Grimwade, Head of Automotive at JLT Specialty, said: “Our research shows that automotive manufacturers face some serious challenges – not just in terms of the growing number of disruptive incidents to the supply chain industry, but in the diversity of these events too.
“Being able to gain an insight into the key areas of exposure and supplier vulnerabilities is essential if auto manufacturers are to effectively prioritise risk, prepare a plan and protect their business. Manufacturers might also look to use this valuable insight to provide them with an opportunity to create a competitive edge – it’s a big challenge but certainly not an impossible one.”
Just last month Ford in North America was hit by a fire at a key supplier of magnesium parts to its F-150 pickup, illustrating how vulnerable lean supply chains are to shocks.
