A looming rail strike and continued disruption in the global supply chain brings new challenges to an already-strained automotive industry. OEMs, the U.S. Congress and rail companies are all eyeing the potential for a large-scale rail strike across the country if a new labor contract is not struck, and if Congress doesn’t intervene, by December 9.
OEMs have already had to endure intermittent plant closures due to safety concerns over the COVID-19 pandemic and shortages of critical parts, most notably semiconductor chips. All of this has resulted in lagging new vehicle production, causing rippling effects to the supply chain and its supporting partners.
With slowing new vehicle production, OEMs cut back their chip orders and the semiconductor industry shifted production to meet demand for other applications. Similarly, lagging new vehicle production forced OEMs to significantly reduce their use of rail for vehicle transport. Echoing moves by the semiconductor industry, the railroad industry prioritized agriculture and housing shipping to keep their business going. Now, OEMs are facing new competition for placements with railcar transports, oftentimes paying premium prices just to keep this inventory moving.
All these challenges have been further compounded by railroad labor shortages, a widespread lack of railcars and unusually high fuel costs. A rail strike would only add further fuel to this supply-chain fire.
These railroad delays and disruptions are creating headaches for OEMs looking to transport inventory as quickly and cost-effectively as possible, with many turning to other modes of transport. Although the vehicle-logistics space is facing similar challenges, the nature of hauling vehicles allows for more flexibility, speed to market and customization than rail – an ideal option for OEMs in dire need of speed.
Rail Strike Threat Further Compounding Supply-Chain Delays
Freight rail, a critical piece of the automotive supply chain, moves nearly 75% of finished new vehicles in North America. For OEMs, this mode of transport is accessible and cost-effective, and it provides the ability to move inventory en masse. However, OEMs have been closely watching recent labor disruptions and contract threats, which have now led to the possibility of a large-scale rail strike. If such a strike occurs, this will seriously harm OEMs’ supply chains, causing delays and potentially leading to extended downtime.
This looming rail strike occurs amid a context of lagging new-vehicle production, which has forced many rail companies to fill their freight by pivoting toward customers from industries like agriculture and housing versus car manufacturing. This shift in railroad prioritization has stretched into late 2022, disrupting normal transport methods for OEMs and forcing them to compete with other industries for valuable railcar placements. In many cases, OEMs are even paying premium prices for the same rail-transport service.
In addition to the potential rail strike and a change in freight prioritization, rail companies are facing a number of other challenges that are causing further delays and complications for OEMs, including weather, labor and railcar shortages. On top of these challenges, a global chassis shortage has meant railroad companies simply do not have enough railcars ready to move.
Because of all these disruptions, OEMs are seeking alternative modes of transport. Many OEMs are choosing to tap automotive-logistics partners who can quickly scale on demand, opening the door for better speed and operational flexibility.
Seeking an Alternative Transport Option
Speed to market is essential for OEMs facing the current critically constrained supply chain and potential rail strike. To keep their inventory moving, circumvent obstacles and scale up or down quickly, OEMs can partner with a non-asset-based provider to handle many of their vehicle-shipping needs. A 3PL can provide flexible, on-demand access to capacity, agility and speed they need to keep their operations moving during this unpredictable time.
While rail will certainly be a part of OEMs’ overall inventory-shipping strategy, car manufacturers must have alternative-transport options to be less susceptible to ongoing challenges that cause delays and disruptions.
It’s especially important that OEMs start making these plans now, ahead of the coming vehicle-inventory wave when the automotive supply chain will likely become even more constrained, and rail shipping even further disrupted. OEMs that choose to invest now in a vehicle-logistics program that makes sense for their unique business model, granting them more speed and efficiency in the short-term, will be in a much better place to navigate strains that arise after the surge in the long-term.
ACERTUS as a Vehicle-Logistics Partner
As the only full-scale, tech-enabled automotive logistics platform that’s designed to move, store, recondition and title and register finished vehicles, ACERTUS is a proven, complete and start-to-finish service. ACERTUS is driven by a transformative combination of technology, people and experience that turns logistics into a competitive advantage for automotive industry players, especially OEMs.
In an industry overwhelmed by small, single-service and siloed providers, ACERTUS stands apart for being able to offer full-service integration ensuring vehicles ship securely and on time, to and from anywhere. Whether an OEM needs to move one vehicle or 1,000, ACERTUS can meet their needs, scaling up or down on demand.
ACERTUS also gives OEMs access to its proprietary technology platform, VINlocity, which delivers speed, efficiency and visibility into every aspect of the journey with a carrier fleet that provides flexible capacity. From quotes and orders to status updates, VINlocity relieves many of the hurdles that inhibit efficient transportation. Beyond this, VINlocity Carrier, ACERTUS’ electronic proof of delivery (ePOD) application, optimizes the supply chain by providing real-time critical data, empowering shippers to make informed business decisions.
During this time of unique industry challenges, OEMs can leverage the benefits of ACERTUS’ experience, infrastructure and technology to gain wide-reaching capacity and on-demand scalability – ensuring they have the speed to market they need to be successful and weather the current industry storms.
Learn more about ACERTUS’ full range of vehicle-transport and logistics services at ACERTUSdelivers.com. To connect with one of our team members or receive a quote, contact us here or call us at 855-ACERTUS (855-347-1370).