Is time up for just-in-time car manufacturing?

Car manufacturing in Britain and the rest of the world is reeling from a series of shocks: Brexit, Covid-19, the semiconductor shortage and now the war in Ukraine. During a recent Autocar Business webinar with Stephen Norman (former boss of Vauxhall), David Bailey (business economics professor at Birmingham Business School) and Mark Brickhill (CEO of parts maker Klarius), it became clear that just-in-time manufacturing remains the only real option for a business model for building cars but changes are definitely needed. The full discussion is available to view on-demand or listen to as a podcast. What are the discussions in boardrooms at the moment? SN “In terms of getting around the bottlenecks, I would’ve thought that there were two main discussions. One of them is: how do we bring in the components in a quicker way? How do we avoid the bottlenecks, whether it be by the Channel ports or flying components around the world? “But there are also discussions taking place about how we solve this in the medium term. It’s quite likely, with climate change, that the medium- to long-term cost of shipping won’t be as low as it has been in the past. So there may very well be production relocation, making [suppliers] closer to manufacturing sites to ensure just-in-time works.” MB “We’re a manufacturer that has to sell internationally and in Europe. The disruption and time that has come as a result of Brexit has hurt British business. We’re in the process of setting up a new third-party logistics base very close to the Benelux- French border so we can get products to customers the next day or within 48 hours.” Is there an alternative to just-in-time manufacturing? MB “My team and I don’t spend any time on [thinking] what the alternatives are to having the leanest process profitable, working daily with suppliers and having the lowest inventory we can.” DB “I think we’re seeing an element of ‘just in case’ on the OEM side, simply because they have the risk of running short of things and therefore disrupting production. But there are things that can be done. These long supply chains expose companies to vulnerability. I also think a degree of reshoring is going to be inevitable, so you source closer to where production takes place.” What benefits can reshoring bring to suppliers? MB “We supply a couple of OEM aftermarket programmes, and there’s a definite opportunity, both in the UK and EU, to take a greater share of that business. With products like exhausts, it’s not economically viable to ship large volumes over large distances. So that’s an opportunity. We probably had to increase purchasing here and our own manufacturing to produce more, which means investing in capital expenditure [capex] so you’re less reliant on other people. Get that right and it can improve your profitability.” DB “Before Brexit, about one in six manufacturers were reshoring activities to the UK. What was driving that was increases in costs, overseas issues around quality and supply-chain vulnerabilities. But also there was the need to be closer to the consumer and respond quickly to demand changes. “But there are barriers to it. In the UK, it’s things like skills availability, access to finance for capex or even the availability of land. The government needs to do much more through an industrial policy to support reshoring. “It’s going to be important for electric cars. They’re going to need a much closer relationship with strategic partners, particularly on things like batteries, [motors] and semiconductors.”