Like the rest of the world’s industries, the automotive landscape is changing.
Due to supply chain issues, new cars are harder to get, and labor challenges are compounding the problem. Consumers are keeping their cars longer and there’s a rising demand for auto parts — whether new or refurbished.
Added to that are the influences of growing trends such as electric cars, automation, and the demand for sustainability. All of this has put the importance of the supply chain in the spotlight, and created a need and an opportunity for companies to reassess their supply chain management strategies to create greater efficiencies.
Let’s Dive Into the Shortage Debacle
We’re looking at the perfect storm of supply chain issues — semiconductor chip shortages, rising freight costs, labor shortages, logistics issues and port delays.
According to SEMA (The Specialty Equipment Market Association) research, over 80% of companies in the specialty equipment industry have been severely or moderately impacted by supply chain disruptions. Vehicle manufacturers have been hit the hardest by the disruption with 92% reporting a severe or moderate impact on their business. Parts and product manufacturers (86%) are also feeling this impact. Automotive aftermarket distributors are likely feeling double the impact of it in terms of both sourcing product and getting it to customers.
This current state of unpredictability creates challenges, but also provides opportunities for growth.
High Demand for Parts
With fewer new cars being produced, there is a significant increase in the number and age of older vehicles on the road. This means that repairs are up and, along with it, the need for specific replacement parts from a vast range of vehicle types, models and years.
In addition, the lack of new cars is driving up the cost of used cars. Consumers are hanging on to existing vehicles and investing in repairs that they may not have paid for otherwise.
Additionally, the trend of driving older cars longer doesn’t seem to be slowing down. According to IHS Markit research, the average vehicle age was 11.9 years in 2020, 12.1 years in 2021 and is expected to be 12.6 by 2025. Electric vehicle registrations also continue to increase. As they begin to become more prominent in the used-vehicle market, the aftermarket will begin to see repair opportunities shift in response to the increased EV market share.
Why You Need the Right Kind of Protection
Today’s auto parts are more complex than ever. Rather than being commodities common to most vehicles, parts are now often closer to minicomputers, each with highly differentiated features and functions. Digital trends are leading toward more electronics, more sensors, more screens and therefore, more fragility and harder to replace parts.
In its “Automotive Software and Electronics 2030” report, McKinsey looks to the future of this sector, stating that ACES trends (autonomous driving connected vehicles, electrification of the powertrain, and shared mobility) is a significant driver of an expected 7% compound annual growth rate (CAGR) in the automotive software (SW) and electrical and electronic components (E/E) market between 2020 and 2030.
At this rate, the SW and E/E market is expected to vastly outpace growth in the overall automotive market, which is estimated to grow at 3% CAGR in the same time span.
Additionally, as the cost and complexity of parts increases it creates more incentive to refurbish or remanufacture those parts. According to a Technavio report, the remanufactured automotive parts market has the potential to grow by 10.55 billion USD during 2021-2025, and the market’s growth momentum will accelerate at a CAGR of 3.92%.
Along with the software and electronics evolution, the requirements for packaging to protect these complex components becomes even more critical, not to mention the cost of customer dissatisfaction if the part is damaged and has to be re-made and re-ordered.
All these are good reasons why the cost of shipping damage has more impact than ever and why the packaging you choose can make all the difference in protecting your product and your reputation.
Product Protection for the Most Fragile and Expensive Parts
On the surface, it may seem problematic for the aftermarket industry that electric vehicles (EV) and smart cars have significantly fewer parts than internal combustion engine vehicles.
However, while they are fewer, they may be lighter, more fragile and more expensive, so it’s critically important to provide consistent, precise protection for these parts, like the protection you’d find from a custom-engineered packaging solution.
It’s also important to note that the packaging you use for mechanical parts is not the same packaging you’ll need for high-value electronics parts, which require specially designed packaging to protect against shock, vibration, and electrostatic discharges.
In addition, as OEMs compete for EV battery charge range, lightweighting of assembly parts is a common strategy to reduce overall car weight. These lighter body panels, windshields, and even tires are more delicate and thus require more specialized protection in transit.
Optimizing Distribution Cost
When it comes to shipping, size and weight make all the difference. Whether your packaging is small and light or large and heavy, optimizing packaging can reduce freight costs.
Everything from right-sizing and package design to eliminating boxes and reducing weight can make a huge difference in cost along the supply chain.
Assessing manufacturing, shipping and storage needs, and defining the fragility of the product will help in selecting the right packaging materials.
Reducing Waste — It’s Good for the Planet and Good for Business
One of the biggest factors in sustainability is recyclability. The pursuit of packaging that reduces shipping and storage volume and weight should naturally include recyclability as all of these factors are aimed at creating greater efficiency.
However, recyclability can’t come at the cost of protection and performance. Damaged shipments and products will have an even greater negative environmental impact. You’ll want to consider all these points when considering your packaging:
- Material sourcing — with a shift toward recycled, renewable, reduced plastic
- Reduced waste — through rightsizing and automation
- Performance — for damage resistance and reduced weight
- Reusability — so that secondary packaging can be used more than once
Think of the sustainability of your packaging choices not just in terms of environmental impact but also in terms of creating a more efficient business.
Packaging for Omni-Channel Fulfillment
The rise of DIY auto maintenance and repair adds yet another consideration to what kind of packaging solutions you’ll need. The options for DIYers on how they purchase their products is as varied as the packaging that goes with it.
Now, consumers have multiple options for how they purchase and receive their auto parts and accessories. They can have products shipped to their repair center of choice, pick up in store, request home delivery, or schedule a mobile installation.
They can also order everything from a spark plug to an engine block from large global e-tailers and have any items delivered to their home in a matter of days.
Packaging is a Critical Component of Your Supply Chain Strategy
As you consider ways to build a stronger supply chain, remember that automotive parts packaging is not a one-size-fits-all proposition, in fact it’s quite the opposite.
Whether you’re packaging for e-commerce, OEMs, suppliers or dealers, choosing the right packaging materials for each application not only will protect your product and help reduce damage, it can also help optimize pack size, reduce freight cost, reduce labor and improve fulfillment velocity.
The bottom line is: Don’t let packaging be an after-thought in any part of your strategy. Versatility and flexibility are key to successfully navigate the unprecedented challenges the automotive industry faces today.
The right packaging solutions are critical to unlocking efficiencies, reducing waste and answering the needs for the myriad products you’ll be shipping and customers you’ll be reaching now and in the future.
Dan Healey, is marketing director, transportation & manufacturing, at Sealed Air