Our client, a major automotive manufacturer, faced exactly this and resulting challenges. The increased demand for semiconductors caused prices to skyrocket, resulting in budget overruns for technology projects. But first and foremost, equipment contractors could not guarantee timely deliveries of equipment due to semiconductor-related production delays.
While existing production lines could be maintained with existing materials, globally planned equipment projects – and with that, new vehicle launches – were at risk. At times when new model launches are mission critical, due to the switch from combustion engines to electric vehicles, moving launch dates were not an option.
Our project was aiming at the following objectives:
- Ensure set up of critical equipment, particularly for EV product launches,
- Develop an information system to be able to make the right decisions,
- Manage Control Center to align decisions amongst all technologies and other stakeholders,
- Manage suppliers and contractors and enable them to secure supply.
Approach and Result
When we started the project, our client was already halfway in crisis mode due to a major phase of line shutdowns in which many technologies were to be upgraded and rebuilt. Therefore, a first step for us was to create transparency and restore control over the process for our client’s decision makers.
Enhancing Data Transparency with a Centralized Database and PowerBI Reporting
As a first step, it was important to create real-time visibility into relevant data and supply chain information. We implemented a robust database system that aggregated data from various sources, including suppliers, contractors, technology projects and available stock. This allowed us to monitor the availability of critical components, track technology project progress, analyze historical consumption patterns, and project future consumption and component needs.
What sounds simple typically represents one of the biggest challenges in big data projects: Bringing together different data from different sources – even different companies – in such a way that they end up in a common report requires a lot of effort in terms of interface management, format adaptation and interpretation of data that at first glance appear identical.
Establishing a Control Center for Coordination
Recognizing the complexity of our supply chain, we established a dedicated Control Center. This center served as the nerve center of operations for the entire supply network, facilitating seamless communication and collaboration among suppliers, contractors, and the client. The Control Center monitored the status of critical components, technology project schedules, and any emerging issues in close to real-time, enabling swift responses to disruptions.
Identifying Alternative Sources
To mitigate the risk associated with overreliance on the existing suppliers, we developed alternative options to act. From changing suppliers to reusing obsolete parts and using maintenance parts to reprioritizing projects, all options were put on the table for discussion. In the end, almost all options were used to a greater or lesser extent. One obvious solution – sourcing components from other suppliers – had proven to be the most impractical. Integrating components into a complex standard setup is not a short-term solution but requires extensive testing and approval processes for which there was no time in our project.
Creating Prioritization Lists for Technology Projects
As a last resort, we prepared an option that no one really wanted: Re-prioritizing projects. Within our cross-functional team, we invited all technology and purchasing representatives, as well as vehicle launch managers, to discuss which projects should be postponed and which should be prioritized. Together, we developed a clear set of prioritization criteria that considered the impact of each project on our core operations. This framework enabled us to allocate our limited semiconductor resources to projects with the highest strategic value.
Luckily, we were able to avoid major re-prioritizations; no vehicle launch had to be postponed and all strategically relevant projects could be implemented.
Setting Up an External Warehouse for Critical Parts
Recognizing the fragility of the supply chain during the semiconductor shortage, we took the proactive step of establishing an external warehouse dedicated to housing critical components. This warehouse served as a buffer against supply disruptions, allowing us to stockpile essential parts whenever they became available. This strategic stockpiling helped us maintain project implementation throughout the period of the semiconductor shortage.
These initiatives collectively helped to manage the semiconductor shortage and to ensure equipment installations to take place so that new vehicles could be launched as planned. By creating transparency through data collection and centralization, establishing a Control Center for coordination amongst the different stakeholders, prioritizing technology projects, diversifying our supplier network, and setting up an external warehouse, we were able to make operations more resilient together with our client. With the help of our neutral moderating role as external consultants, we were able to bring together the various stakeholders and quite strongly divergent interests. These measures enabled us to navigate the semiconductor shortage more effectively, minimize production disruptions, and ensure the continued success of our client’s organization.
As a next step, we are now developing an information system which will help to forecast trends on an operational level in order to avoid efforts and risks of future supply shortages. This is how resilience in the supply chain can be increased.