Despite the warnings, carmakers made the same mistake again

Severe shortages of raw materials and components have brought automotive industry supply chains to a standstill. The same suppliers who had nothing to do a year ago can now no longer handle the workload. “We warned about this bullwhip,” say consultants Alfons Willemsen and Robert Peels. “A similar thing happened during the credit crisis.” So why did they make the same mistake again?

When Alfons Willemsen, a partner at consultancy firm Involvation, hears of car manufacturers complaining about chip shortages or suppliers who feel overwhelmed by the enormous demand they are facing, he feels frustrated and even angry. After all, he and his business partner Robert Peels had held numerous seminars to warn emphatically against precisely such consequences. “What bothers me the most are the people who suddenly start talking about ‘reshoring’ and who, out of a kind of populism, state that automotive supply chains have become too complex. That’s pure symptom control. The fact of the matter is that the wrong decisions were made from the start,” he says.

So what’s going on? When the COVID-19 crisis hit Europe in March 2020, demand for cars initially fell and original equipment manufacturers (OEMs) decided to significantly reduce production temporarily. This, combined with the risk of infection and the interruption of deliveries from China, led to complete factories being shut down, purchase orders being cancelled and supply chains being largely put on hold. There was a state of panic. Suppliers – or at least those who were completely dependent on the automotive industry – quickly scaled down their production and got rid of as much stock as possible. Snap! That was the first crack of the bullwhip. This reduction in local stocks intensified the dip that had started at the OEMs as it was passed on to the upstream links in the chain. … … …

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