Next week on the Transmission podcast and FreightWavesTV show, I’ll be speaking with Dionis Teshler, the CTO and co-founder of GuardKnox. There are two things we recommend doing in preparation for that discussion. First, finish reading this email, in which we will take a look at the company blog post Teshler recently wrote about a dramatic rethinking of the automotive supply chain in light of the worldwide semiconductor chip shortage. Second, go subscribe to the show on your favorite podcast app or on the FreightWaves site here.
With that out of the way — and thanks for subscribing, by the way — let’s dig into Teshler’s argument.
Teshler: More flexibility required in the automotive supply chain
There are two big and related ideas in Teshler’s post. First, the auto industry needs a new way to arrange its supply chain. Second, this new setup will mean that the time has come “to abandon the ‘just-in-time’ model, which clearly is no longer sufficient,” he wrote.
Let’s start with the second point as that leads into the first. When everything is running smooth like butter, a just-in-time system works wonderfully. The factory is ready to use up a box of parts just after that box of parts has been delivered and production can continue without a hiccup. But when there’s, say, a pandemic, this system reveals its drawbacks, and now an auto plant without semiconductors has to pause production because it can’t complete the task at hand.
Some automakers are stopping production, others have decided to build their vehicles without the needed components, parking them on lots until more components with chips arrive from suppliers and then running these vehicles through the plant again. Both of these solutions are a hassle and neither is a good long-term solution.
The long-term solution is to not build the supply chain in such a linear way, Teshler believes. Instead, it’s worth restructuring the industry to be more flexible and less reliant on what Teshler calls kings. As the automakers are deciding who they will purchase a particular widget from, they are the kings. Once a supplier has been selected, it then becomes the new king. Today, the relationships and processes are interlocked in such a way that it’s difficult to adjust the chain when problems arise, like a chip shortage.
If the system were more flexible, if a widget from Supplier A could just as easily be purchased from Supplier B — or C or D — then there would be more players and, Teshler believes, fewer problems. It’s not just that there would be more suppliers, but also the components themselves would be more interoperable. Teshler doesn’t suggest that a system like this could have avoided the chip issue, but it’s one way to at least mitigate some of the damage.
You can read Teshler’s post on the GuardKnox website and stay tuned for our discussion, which will arrive in your just-subscribed podcast feed Tuesday.
Electrify America spends another $200 million on EV charging infrastructure
In the EV space, one of the big news items this week was another investment from Electrify America (EA) in electric vehicle charging stations. EA, the independent company Volkswagen was forced to create in the wake of its diesel emissions scandal, said this week it would spend $200 million on charging infrastructure and education in California.
The $200 million is just a quarter of the $800 million that EA will spend in California over a decade. The first $400 million has already been spent or at least allocated, and $25 million of the new tranche will be used to build chargers in Long Beach and Wilmington for electric transit buses and medium- and heavy-duty trucks. A portion of the new $200 million will be used for education about zero-emission vehicle education and awareness efforts, and it will be spent through the first half of 2024.
