Auto Industry Starting Up Adds to Overburdened Supply Chains

Throughout the COVID-19 pandemic, global and regional supply chains have been forced to adapt to maintain stock of critical supplies.

Now freight movers have another item on their plate, as Michigan’s auto industry returns to work.

“We saw the air freight market at the beginning of this spike to the highest mark, I think, it’s ever been in history.” — Charles Klein, OEC Group Detroit

Charles Klein is station manager at OEC Group Detroit, a company that works with trans-Atlantic trade.  He tells WDET’s Alex McLenon, when the coronavirus outbreak began there wasn’t much of a plan for supply chains, as they raced to deliver personal protective equipment and stock store shelves.

Click on the player above to hear OEC Group Detroit station manager Charles Klein on how supply chains are functioning during the COVID-19 pandemic, and read a transcript, edited for length and clarity, below.

Alex McLenon, 101.9 WDET:  What kind of prioritizing has gone on within supply chains? With some of the big box stores opened and resources being scattered around, how has that been managed?

Charles Klein, OEC Group Detroit:  The main thing that happened early on was that there was a big focus on [personal protective equipment] shipments – for a few reasons.  A lot of the PPE shipments were for the states, but a lot of them were for companies as well, trying to make sure their workers were safe. So they were prioritizing things like that.

You had a lot of companies shipping things by air freight. We saw the air freight market at the beginning of this spike to the highest mark, I think, it’s ever been in history. So the cost for air freight and things like that were really expensive. Now we’re seeing it on the back end, where people are trying to order again and are looking at air freight because it’s a little quicker and they want to get things in the stores, and it’s still at a really high place.

We are starting to see things like auto parts starting to be shipped more as auto lines are reopening.

This was the first week that the auto industry is back to work in Detroit. What kind of impact has that had on the supply chain? Could that have a regional impact with as much business that goes through that industry?

Yes, of course. This region is very dependent on the auto market and we are seeing people go back to work, which is good. It means the assembly lines are opening up.  As all of us know, the components that go into the car parts come from many different places. Some are domestically sourced; some are sourced from overseas.

We’ll see, depending on the companies, how they’re going to need to get their stuff in. One component can shut down an auto line. So if there’s a component that a company is short on, if it’s something that comes from overseas the lead time could be 30 days at minimum.

I’m curious to see how these auto manufacturing lines are going to start. If they’re going to be working at full capacity? Half capacity? It’s dependent on the supplies that come over and how quickly they can get them. It’s also dependent on what they had already in stock.

With the supply chains themselves, how are they doing from a financial stand point? Do they have the money they need to keep operating, or has there been a financial impact that changes anything for the supply chains?

Well the international supply chain has been affected for the last two years.  The first thing we had to deal with was the “China Trade War,” right?  Freight moves with a number of different steamship companies. What the steamship lines have been able to do is they’ve been able to park boats and cancel sailing loops, which has made the price fairly stable, shockingly, over the last few months.

But if you have to air freight goods, that’s where customers have “suffered.” If there is a component you’ve had to air freight in, it’s costing you two to four times as much.