The COVID-19 pandemic is an unprecedented public health and economic crisis, that dramatically impacted different industries, and presented an unforeseen challenge to the automotive industry and its supply chain.
Researchers modeled a system dynamics simulation to demonstrate the behavior of a multi-echelon supply chain responding to different end market scenarios.
The supply chain model in this study includes five echelons: silicon supplier, semiconductor manufacturer, Tier-2 supplier, Tier-1 supplier, and the OEM.
Supply chain setup
The order signal to the most downstream echelon - the OEM - is the historic end market demand signal for global light vehicle sales, hence, an exogenous factor to the simulation model in this study. This demand signal then propagates through the supply chain from the OEM to the Tier-1 supplier, the Tier-2 supplier, and eventually up to the semiconductor manufacturer. The semiconductor echelon receives the material from the silicon supplier. This most upstream echelon, i.e., the silicon supplier, is assumed to have infinite supply. The semiconductor echelon manufactures the products, e.g., chips, and ships it to the Tier-2 supplier, which further processes the chips to more aggregated components. The Tier-1 supplier receives these and delivers their finalized components to the OEM. At each of these echelons, the demand is aggregated on a global level.
The model results highlight challenges that arise for a semiconductor automotive SC not only during, but also after a disruption like the COVID-19 pandemic: strong demand dynamics which cause substantial operational consequences. The model evaluates how upstream companies in the automotive supply chain suffer from the disruption in terms of amplitude and duration. In order to mitigate these challenges, a close collaboration among players in the supply chain can increase robustness of the overall SC during unforeseen events like the pandemic.