Navigating the semiconductor storm with befitting strategies
Jaykumar Chutar, VP, Purchase and Supply Chain, Commercial Vehicles and Hemant Barge, VP, Purchase and Supply Chain, Passenger Vehicles, both Tata Motors, weigh in on dealing with the semiconductor shortage.
In March 2020, as the world grappled with lockdowns, factory closures and standstill in transportation following the Covid-19 outbreak, the automotive industry, like many others, encountered unprecedented challenges. The pandemic cast a pervasive shadow, significantly impacting both daily life and commerce. A grim outlook confronted the auto sector as OEM manufacturers and suppliers shut and scaled back operations. The semiconductor crisis added an extra layer of complexity to an already distraught situation.
Disruption hit the semiconductor industry when several electronics suppliers hastily withdrew their orders in response to the pessimistic outlook, prompting a reassessment of production and supply chain strategies. However, the shift to working remotely caused a sudden spike in consumer demand for electronic devices such as mobile phones, laptops, tablets, and telecom networks. Consequently, production focus shifted from automotive to service the significant demand from consumer electronics.
The huge demand for safe personal transport, as the world gradually opened, resulted in a “V”-shape rebound of the auto sector. This exacerbated the semiconductor supply challenge as the demand from automotive applications soared, yet the availability of supplies remained curtailed.
Unveiling the semiconductor crisis
Historically, the semiconductor supply chains were dominated by Tier I and Tier II suppliers, limiting visibility for OEMs across product lines. The advent of the pandemic intensified the challenges, which persisted for two years, compounded by additional global disruptions. Events like a fire at a Japanese semiconductor factory and natural disasters had adverse effects on manufacturing facilities and supply chains. Geopolitical tensions further strained the already fragile industry, leading to a prolonged crisis.
Given the early signs that the crisis was far from over, Tata Motors took decisive action by forming a dedicated, multidisciplinary cross-functional task force charged with devising and enacting strategies to mitigate risks in both the immediate and distant future. The team embarked on multiple critical initiatives aimed at navigating and overcoming the ongoing challenges.
Mapping semiconductor exposure
We assessed semiconductor exposure across all product lines, including passenger cars and commercial vehicles, allowing us to prioritise efforts to secure semiconductor supply for each category.
We devised innovative methods to accelerate validation, enabling us to implement change content faster, reduce lead times and minimise disruptions.
Supplier collaboration forum
To facilitate early alerts and scheduling, we established a ‘Supplier Collaboration Forum’ to enable semiconductor suppliers to proactively address potential challenges and foster open communication.
Short-term de-risking actions
De-risking our supply chain became priority, leading us to actively seek additional semiconductor supply sources to augment inventory and reduce dependence on a single supplier through open market intervention.
Design intervention and sourcing
De-risking actions involved design intervention and resourcing. We achieved a diversified supply base by collaborating with multiple semiconductor suppliers and exploring alternative semiconductor solutions.
Agility and flexibility
We introduced agility and flexibility into planning and operations to better adapt to supply chain disruptions and changing market dynamics.
Predictive data analysis
To gain an edge in anticipating and mitigating supply chain constraints, we implemented predictive data analytics tools which provided advance warnings of potential disruptions, enabling us to act ahead to minimise bottlenecks.
Customer profile and product alignment
We adjusted production schedules to meet customer requirements, ensuring timely delivery while managing semiconductor constraints.
Reducing chip usage
We examined our vehicle designs to reduce chip usage wherever possible without compromising features and functionality, allowing us to maximise semiconductor resources.
Lessons learned and ongoing initiatives
Collectively, these strategic actions enabled us to gain a comprehensive command over various aspects of the semiconductor supply chain, including technology, obsolescence, cost and alignment with industry trends. We tackled the crisis from a holistic business perspective rather than a mere functional standpoint.
Product mix planning was accordingly made more effective through supplier collaboration, ensuring that suggestions and input were incorporated. This synergy facilitated optimal utilisation of semiconductor inventories throughout the supply chain. Consistent "Leadership Connect" sessions with manufacturers and top-tier suppliers ensured effective communication, aligning production with market demand.
These efforts yielded remarkable results. Tata Motors not only weathered the storm but also minimised the impact of the semiconductor crisis. During a period when many in the industry struggled, we experienced robust market growth for passenger and commercial vehicles.
Many of these initiatives including building strong connect with senior leadership of supplier partners connect and timely sharing of production plans with suppliers continue. Our internal focus on building resilience in the semiconductor supply chain persists. Arranging technology shows and sharing future roadmaps ensures we stay current on trends in the electronics domain.
In conclusion, our ability to adapt, collaborate and think ahead helped us respond effectively. Proactive measures and fostering collaborative relationships with suppliers helped us thrive in the face of adversity, emerging as a shining example of resilience.
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