- Ford is leveraging expedited shipping lanes to speed up supply and mitigate COVID-19 disruptions in China, Chairman and CEO Jim Farley said during the automaker’s first-quarter earnings call automobile.
- The company provided fast ocean shipments as well as “airlift capability to protect our suppliers,” Hau Thai-Tang, industrial platform manager, said on the call.
- Accelerating shipments and other measures to secure supply have come at a cost. “We obviously spend a lot of money on premium freight and other things to get around covid escalations in China,” Farley said.
Overview of the dive:
Ford, which has 50 Tier 1 suppliers in China, is working to restart production in the country as manufacturing in major cities such as Shanghai remains stalled by covid-19 blockages. Chinese authorities are “just starting to have a whitelist process to allow suppliers to resume production,” Thai- saidThang.
Shanghai’s “whitelist” is its system of prioritizing which companies can receive approval from local authorities to resume production. Authorities initially prioritized approving many auto companies, which must prove their factory campuses can comply with the city’s strict virus control measures.
The company’s suppliers in Shanghai face limited capacity due to lockdown restrictions. To “protect” its suppliers, the automaker has “secured fast sea shipments,” Thai-Tang said. “So we’re working with our teams on the ground in China to help those vendors become partially operational,” he said on the April 27 call. Ford could not be reached for up-to-date information on the status of operations from their suppliers.
Ford isn’t the first to use faster trade lanes to ensure on-time delivery. The use of expedited shipping lanes has gained momentum among some shippers as a way to secure shipments and gain reliability and stability. Speeding up freight can give companies an advantage because they can get products to market much faster, said Craig Grossgart, senior vice president of global ocean products at SEKO Logistics.
Supply constraints slowed Ford’s vehicle assembly during the second quarter, with more than 50,000 vehicles awaiting component installation, Lawler said. Semiconductor-related commodities have “crippled” us, Farley noted.
Ford expected the semiconductor shortage to “get worse before supply levels improve,” Farley said on last year’s first-quarter earnings call.