New technology threatens the automotive spare-parts logistics business

The world is beginning to realise that it is on the edge of a revolution in the car industry. The first steps are now being taken and they will have an immediate effect on certain parts of the logistics sector that serve the automotive sector.

According to the Israeli autonomous car technology company Mobileye, Israel is about to be the first country to insist that all new cars being sold be equipped with some form of automatic collision avoidance system. It may be the first but will not be the last. Many of the more administratively agile medium-sized countries have plans to introduce similar regulations in the near future. Such technology is already an option on many new vehicles and the more-simple systems will not be difficult to phase-in. Yet the effects of the such a technology will be very significant.

Of course, the most important effect will be a dramatic fall in the number of road accidents. It is unclear how much accidents will be reduced by, but it will probably be well over 50% and possibly over 90%.

Yet the implications for the warehousing sector will also be significant. Fewer accidents means a fall in demand for ‘crash-parts’ and the management of spare-parts logistics is a vital aspect of the automotive logistics business. Whilst it is not as large as warehousing provision for retailing automotive spare-parts is an important business for a number of large LSPs who can utilise their more sophisticated shared-user facilities to provide second-tier resources for vehicle manufacturers.

It also threatens the rather shaky model of the car industry, with the sector relying on the huge margins that the spare-parts operations provide to subsidise its production operations.

Of course, so-called crash-parts are only a proportion of spare-parts operations. The provision of ‘service-parts’ is larger. However, a fall in demand volume would threaten the economies of scale as well as upset the balance of supply and demand in the service parts market. No LSP is going to collapse, but a few big companies could face a noticeable dent in their profits.

Source: Transport Intelligence, October 17, 2017

Author: Thomas Cullen


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