The automotive supply chain is a complicated and intertwined web of businesses that need to deliver products and components on time if the entire system is to work like a well-oiled machine. If any recent event has highlighted the havoc that disruptions can play, it’s the global pandemic. Shutdowns, layoffs, transport delays and financial cuts all wreaked havoc on the automotive industry; not just in South Africa but worldwide too.

As a result, numerous vehicle brands have formed new supply chain strategies to establish a more resilient sector and plan for future growth. In conjunction with the establishment of crisis teams and remote working capabilities, an advanced strategy for risk management and multi-tier supplier collaboration has been set up for many automotive companies and their suppliers.

This has led to recent growth in manufacturing output and a more transparent and resilient supply chain. Formex Industries is a direct supplier of automotive assemblies and components to brands such as Volkswagen, Ford and Mercedes-Benz. We also manufacture parts for indirect customers, including Jaguar, Land Rover, Volvo, Peugeot, Renault and Suzuki, to name a few. 

We have developed working strategies in line with the industry that allow us to meet the growing demands of automotive brands. Formex is an industry leader when it comes to metal pressing, tubing, tube welding, manipulation and welded assemblies. We are proud of the role we play in the automotive industry and will continue to be a reliable and confident supplier in the vehicle manufacturing chain.

Formex factory export terminal

New challenges to the supply chain

While many businesses are finding their feet after the pandemic, a new disruption has arisen – the semiconductor chip shortage. Modern vehicles make use of thousands of semiconductors, so this crisis is highlighting another element of supply chain risk and the urgent need for greater industry collaboration across the globe. What caused this chip shortage?

When automotive demand dipped in 2020 due to the slowed vehicle sales, chip manufacturers started producing semiconductors for other sectors, such as home appliances. However, automotive demand bounced back sooner than expected and the limited supply of chips for vehicles was made painfully apparent.

The semiconductor industry has a diamond-shaped supply chain where only a few manufacturers are vertically integrated and self-reliant. Most of the manufacturing is outsourced to sub-tier suppliers that cannot meet the massive demands and time constraints. Any disruption at this level will impact the tiers above and indirectly affect original equipment manufacturers (OEMs) and their other suppliers.

OEMs that have visibility into sub-tier supply chains are better able to identify disruptions and manage the shortage more effectively. This has shown other vehicle manufacturers that supply chain visibility and complete supplier collaboration are absolutely critical. It can make the difference between being competitive or falling far behind. Supply chain visibility and confidence is the key to resilience.

How to improve confidence across the automotive supply chain

How to encourage collaboration and transparency

Meaningful multi-tier collaboration is only possible when transparency and trust are established between businesses within the supply chain. If automotive manufacturers and their partners can see where orders and goods are in the network, then better synchronisation can take place between suppliers and OEMs.

Networking events, expos and industry forums can help business leaders to meet, communicate and coordinate their efforts for the good of the entire supply chain. After all, this network is a mutually beneficial relationship between various businesses with a single goal of driving automotive growth and expansion. However, creating this culture of visibility and collaboration can be difficult.

Many business owners are unwilling to share information as they believe that it will reduce their competitive edge and open a gap for another company to swoop in. When a fully transparent and trusted relationship is established between companies in the supply chain, then these risks are mitigated.

In addition, industry bodies such as the African Association of Automotive Manufacturers (AAAM) have set out guidelines for collaboration and boundaries for competition between member companies. OEMs and their suppliers need to work closely with one another in order to maintain trust and set up a resilient network. The end result will be a more responsive and agile supply chain.

Formex Industries is a metal forming and assembly company that supplies a variety of complex products to the local automotive industry and the export market. The company is based in the Nelson Mandela Bay metropole, South Africa’s foremost region for automotive manufacturing and export.

Formex is a supplier with 69% black ownership, of which 37% are black women. The company is owned by Deneb Investments Limited – a subsidiary of Hosken Consolidated Investments Limited (HCI) – one of South Africa’s biggest true B-BBEE companies listed on the Johannesburg Stock Exchange (JSE).

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