In August, my ten-year-old car gave up the ghost. But I wasn’t too worried; I knew—or should I say I thought I knew—how to get a deal on a car.
Then I tried to buy a new car.
At first everything seemed normal. At the first dealer, I sat down with the sales agent. The conversation began as I had remembered. Cup of coffee, a basic sales qualification interview, out for a test drive, then back to the agent’s desk, where we continued the conversation. I laid out the vehicle options I wanted that were in my budget.
The agent smiled, “You don’t understand, Steve. That vehicle you drove is the only vehicle we have in the model you want. We’re expecting our next allocation in a couple of weeks, but right now that car is what we have. If you want to buy that model, that’s what I have.”
Sigh. Guessing that specific brand had a global supply chain problem, I sat down outside to regroup. I used my phone to find an alternative automaker with an SUV that might work for me. After a few minutes of research, I found a dealer that had over a dozen of a model in the class I needed.
I went there. After test driving that car, I understood why that dealer had so much inventory. Scratch that brand from my candidate list.
I moved on to the third brand. Drove a car that I liked but found the same problem as I had at the first dealership. No inventory. The only car they had was the one I test drove. It had every option possible, but even at list price, it was thousands of dollars above my budget.
I felt like Dorothy in “The Wizard of Oz” realizing she wasn’t in Kansas anymore. Those might have looked like traditional car dealerships, but they were operating in a market that was far from traditional. We were in a whole new reality.
As The New York Times reported in April, “Around the world, auto assembly lines are going quiet, workers are idle, and dealership parking lots are looking bare. A shortage of semiconductors, the tiny but critical chips used to calibrate cars’ fuel injection, run infotainment systems, or provide the brains for cruise control, has upended automaking.”
Do you remember the old advertising campaign with the tagline, “This is not your father’s Oldsmobile?” Well, today’s automotive supply chain isn’t your father’s distribution network either. There is a new dynamic in play.
The great mismatch
It was at this point that I finally realized that my challenge wasn’t a negotiation problem. It was a supply-and-demand mismatch problem.
The auto industry isn’t the only one dealing with this issue. We are all facing a version of the supply-and-demand mismatch problem.
Consider what is happening with the transportation market. Currently hundreds of container ships are lining up for access to overloaded ports. Meanwhile on dry land, truck driver shortages have made it hard to transport the products from those ships to their destinations. Even finding available shipping containers where you need them can be daunting.
Each of these problems is a supply-and-demand mismatch.
In the October 1 issue of The Guardian, Matt Stoller describes this dynamic as “a quiet panic happening in the U.S. economy.” “Medical labs are running out of supplies like pipettes and petri dishes,” he writes, “summer camps and restaurants are having trouble getting food, and automobile, paint, and electronics firms are curtailing production because they can’t get semiconductors. One man told me he couldn’t get a Whopper meal at a Burger King in Florida, as there was a sign saying ‘Sorry, no french fries with any order. We have no potatoes.’”
Those are all supply-and-demand mismatches.
Change the problem
My faculty advisor in graduate school was a wise man of few words. He once told me, “If you can’t solve the problem, change the problem.”
I needed a car. I couldn’t change that. Dealers were short of new cars in inventory, I couldn’t change that either. Furthermore, the price of used cars has spiked, as consumers turn to the secondhand market in response to the shortage.
Then I remembered visiting Baltimore Harbor not long ago and seeing a massive roll-on/roll-off ship delivering cars. New cars destined for dealers, rolled off into a parking lot. That memory held the answer to my new car buying dilemma. Rather than buying a car out of inventory, I should shop the inbound vehicles.
And that’s what happened. The dealer reviewed the inbound inventory with me, I found the car I wanted, and signed the deal. Five days later the car showed up at my home, with plates, registration, and insurance.
In the wake of recent global events—the pandemic, Brexit, the Suez Canal, container shortages, driver shortages—supply chain professionals can feel like they are playing a continuous game of whack-a-mole. Market dynamics are going to continue to ripple for the near future, if not longer. When this happens, it helps to step back, think about the flow, and find the point of leverage.
Even in chaos, there is opportunity. Be the supply chain leader who can adapt, improvise, and overcome.