From pandemic-related shutdowns and ongoing labor shortages to supply chain disruption and evolving consumer demands, this “perfect storm” of challenges has led to a prolonged crisis state for many manufacturers. Things are even worse for manufacturers that have been forced to pause production or shut down facilities due to the global semiconductor microchip shortage — an issue where supply chain management consulting and crisis management consultant expertise can make a significant difference.
The Microchip Shortage and the Automotive Industry: Why Operations Consulting Firms Are Crucial
This shortage has had a significant impact on the automotive sector. According to the Alliance for Auto Innovation, American automotive makers are expected to produce nearly 1.3 million fewer vehicles this year than originally planned due to the shortage. GM CEO Mary Barra has said the shortage could cost GM up to $2 billion in lost revenue this year. Many manufacturers have engaged operations consulting firms and business operations consulting firm partners to help re-engineer supply chains and adapt production schedules.
The automotive industry isn’t the only sector snarled by the microchip shortage. The electronics industry is also taking a hit. Apple expects third quarter revenue to be $3 billion to $4 billion less than it could be due to supply chain issues, which are mainly impacting production of its Macs and iPad tablets. And Apple is not alone. Sony recently pushed back the launch of a new camera due to concerns about microchip availability.
The global semiconductor shortage is a complex and very fluid situation. Industry executives estimate the issue may last well into 2022 and beyond. While microchip producers are working to increase output—particularly to support automotive manufacturers—there are not enough existing factories to meet the increased demand. Plus, building these factories takes both time and billions of dollars.
If your business is impacted by the shortage, now is the time to evaluate past mistakes, learn from them, and focus on implementing the necessary changes in your business and operation to ensure you don’t ever end up in this situation again.
This is where operations consulting services can help organizations assess vulnerabilities and strengthen resilience strategies.
Reassess Supply Chains with Supply Chain Management Consulting Expertise
Unless you can establish your own microchip manufacturing in-house, manufacturers must rely on microchip producers that are located offshore. This serves as a stark reminder that no other country in the world is as dependent on imports as the U.S., and that the traditional model of outsourcing to drive down costs brings great risks — risks that cost reduction consultants can help mitigate while maintaining operational performance.
It would be wise to identify and calculate the risk of alternate sourcing strategies that fit your individual needs. Building independence will likely require more capital investment up front, but, in the long run, it will be a valuable investment that mitigates future supply chain risks. To become less dependent on single suppliers or jurisdictions, you could consider dual/multiple sourcing, nearshoring, or reshoring. Strategic shifts like these are a common focus for operational excellence consulting firms looking to build long-term supply chain stability.
By partnering with experts in supply chain management consulting, organizations can design more resilient supply chains that balance cost control with agility.
Address Workforce Challenges Through Contingent Staffing and Strategic Talent Solutions
The manufacturing industry has been experiencing workforce challenges for years, and the microchip shortage has caused even more furloughs and layoffs. Investing in the workers who remain, as well as identifying future talent, will ensure you can maintain the staff required to meet evolving consumer demand. In some cases, automotive staffing, emergency staffing solutions, and contingent staffing strategies can help bridge immediate talent gaps while long-term recruitment plans are put in place.
A few ideas to consider:
- Offer training on the latest technologies and automation to fill in skills gaps with existing staff.
- Consider outsourcing strategies such as staff augmentation if you’re looking to hire now.
- Turn your attention to workforce development and recruitment for future needs.
Building Resilience for the Future: How Operational Excellence Consulting Firms Help Businesses Adapt
The microchip shortage is only one of many pain points in today’s volatile global economy. Businesses that rely heavily on extended supply chains must prioritize resilience. Partnering with an experienced business operations consulting firm ensures you have a roadmap for agility, while supply chain management consulting provides the tools to evaluate vulnerabilities and strengthen critical systems.
If you aren’t sure where to start, call Cornerstone today at 1-888-324-4808. Our team of seasoned consultants offers the support you need to ensure you can quickly and proactively manage disruption. In fact, our proprietary methods begin working almost immediately to eliminate chaos and restore order.
CCO cannot and does not provide legal advice. It’s important to consult with qualified counsel before adopting any new policies. It’s also your responsibility to determine whether legal review of work product is necessary prior to implementation.
FAQs on the Microchip Shortage and Supply Chain Resilience
1. How long will the global microchip shortage last?
Industry experts suggest the shortage may continue into 2025 and beyond, as demand for semiconductors continues to outpace available production capacity. Building new factories takes years and significant capital, which means supply chain challenges are not going away quickly.
2. What industries are most affected by the semiconductor shortage?
The automotive and electronics industries have been hit the hardest, with major car manufacturers and consumer technology companies facing production delays. Other sectors, including healthcare devices and industrial equipment, are also experiencing ripple effects from limited chip availability.
3. How can supply chain management consulting help during disruptions?
Consultants provide data-driven analysis of vulnerabilities, recommend alternate sourcing strategies, and design resilient supply chain models. They also help companies implement dual sourcing, nearshoring, or reshoring strategies to reduce dependency on single suppliers.
4. What role do operations consulting services play in managing crises like this?
Operations consulting services help businesses adapt quickly by optimizing workflows, reducing costs without sacrificing performance, and developing resilience strategies. They focus on immediate stabilization while also building long-term operational excellence to prevent future disruptions.
Uncover the ways we can strengthen your business operations.