As COVID-19 marched around the globe in early 2020, Accurate Machine and Tool rushed to lock in contracts for steel to feed the giant presses at its plants in Ontario and Michigan.
That quick action has allowed the company to produce an uninterrupted stream of parts for the Tier 1 auto suppliers that are its long-term customers, said Stephen Bodi, vice-president of the four-generation family stamping company based in Toronto.
But a year into the pandemic, finding steel for new orders has become a struggle.
“Price has completely taken a back seat to just availability,” he said.
Shortages have become frustrating realities across the Canadian auto sector as the virus continues to strain supply chains. Solutions are similarly scarce, but for many manufacturers, the pandemic has become a signal to seek new sources of parts and materials and take other steps to reduce vulnerabilities.
“If you’re not now taking a hard look at your supply chain, I think that presents a real risk,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association, which represents the Detroit Three automakers in Canada.
Microchips might be the most publicized pandemic shortage. Numerous automakers have had to idle plants because of a lack of semiconductors for today’s tech-heavy vehicles, but metals and chemicals have also become sought-after commodities as manufacturers broaden their hunt for materials.
In a February conference call with financial analysts, General Motors CEO Mary Barra said averting disruptions as it ramps up production of electric vehicles is a key reason the automaker is investing in battery plants in North America.
“We’re working to make sure we have adequate supply all the way from the mines,” she said. “So we want to be in control of our own destiny, not only from making sure we have the ability to have the cells that we need but also to work on cost improvements and technology improvements.”
LOCAL SUPPLY IS ‘NOT NECESSARILY BULLETPROOF’
Fifty per cent of small and medium-sized businesses surveyed by the Conference Board of Canada in the early months of the pandemic said they will source more goods from domestic suppliers, a shift the board said “could permanently change how supply chains are managed in this country.”
Yet while most supply problems have originated outside North America, survey respondents also cited issues sourcing from Canada and the United States, said Julie Adès, senior economist at the Conference Board.
This suggests shifting supply chains closer to home “is not necessarily bulletproofing” a manufacturer’s access to materials, said Adès.
“Having a diversified network of suppliers and developing close ties with trusted suppliers may be potential approaches businesses could explore to improve their resiliency in the face of future shocks,” she added.
Exacting standards can limit producers’ options, however.
“You can’t just step out and start changing materials willy-nilly,” said Accurate’s Bodi. “You have to stay within the boundaries that you’ve got agreements with.”
For vehicle makers, the pandemic has exposed a need for better transportation links within Canada and smoother access across the North American trade zone.
Although the Canada-U.S. border has remained open to auto-industry shipments, wait times and confusion over changing rules are hampering an industry built around just-in-time delivery, said Kingston.
“Finding a way to safely reopen borders and allow that movement to occur and return to what it was pre-pandemic is going to be absolutely critical.”
The pandemic can offer an opportunity to review border operations and put in place new technology to ensure they are as efficient as possible, Kingston said.
Governments appear to be getting that message. Prime Minister Justin Trudeau and U.S. President Joe Biden pledged in their Feb. 23 summit to work together on speeding the flow of critical minerals — key to fostering electric-car production — and Biden has ordered a review aimed at strengthening U.S. supply lines.
Within Canada, the pandemic has put added pressure on “a relatively thin” transportation structure, Kingston said. Halifax and Montreal, for example, are the only eastern ports that can handle shipping containers, and a strike at Montreal last August stalled deliveries and sent ripples through the economy.
“I think this leads to a bigger discussion around Canada’s transportation network,” said Kingston. “Do we have enough resilience there? Do we have enough capacity in the event that one element goes down?”
The federal government said it is monitoring supply chains and believes parts maker have been able to avoid major disruptions beyond the global microchip crunch.
It acknowledged that the sector, with complex supplier-customer relationships, has limited room to manoeuvre.
“Given the nature of the automotive sector, shifting supply strategies will be more challenging than other sectors,” the Innovation, Science and Economic Development Department said in a statement.
Adding to the challenge are new rules-of-origin provisions in the United States-Mexico-Canada Agreement that are spurring some producers to adjust their supply chains, the department said.
To Martin Mazza, however, such obstacles can be a fact of life for the fast-moving auto industry. The chair of the Automotive Parts Manufacturers’ Association (APMA) said COVID19 is having a financial impact on many companies, but Canadian producers have lived through earlier struggles such as the global disruptions that followed the 2011 tsunami in Japan.
“It’s rarely that the automotive industry has clear skies for any length of time,” said Mazza, a vice-president at the Mississauga, Ont.-based Woodbridge Group, a Tier One supplier.
“There’s always some challenge that seems to pop up that’s unforeseen, and most suppliers are resilient to be able to handle the challenges.”