Omnitracs' Road Ahead blog

Diving into disruption: How the global microchip shortage impacts our world and your fleet

Rula Ifteiha Photo
Rula Ifteiha
Content Specialist

Just as the light at the end of the tunnel of the COVID-19 pandemic started to flicker, ever so slightly, another global disruption is making its way through. A disruption that, coincidentally enough, is tied to the pandemic.

The global microchip shortage is being referred to as the most devastating supply chain event the auto industry has seen in decades. As is the case with so many moving elements in the supply chain, these tiny chips are causing a massive shake-up throughout the globe.

Understanding the microchip shortage

Microchips, also called semiconductors, are built into everything from our cars to our household appliances to our smart devices. These chips are a core component in the infrastructure of the items of which they’re a part.

Throughout the pandemic — and especially during the first few months — demand for in-home entertainment rose in the same breath as factories had to minimize operations for safe measure. This polarizing contrast in supply and demand led to a massive need for microchips and a significantly diminished ability to produce them. Now, over a year later, that juxtaposition of supply and demand is deeply felt in today’s microchip shortage, which some theorize could last until August 2021. The automobile industry remains the most obstructed. However, it is by far not the only sector that is feeling the brunt force of the shortage.

Additionally, global production operations play a pivotal role. Together, Taiwan, South Korea, and China manufactured 87% of the world’s chips in 2020. With the COVID-19 pandemic impacting the global supply chain in a plethora of ways, worldwide manufacturing is incredibly strained and further contributes to our microchip deficiency today.

Ties to transportation and the supply chain

Class 8 trucks require anywhere between 15 to 35 microchips per vehicle, and this is just one real-world example of what the shortage means to our industry. Production levels also dropped 5,000 units from October 2020 to February 2021.

Trucking is also inherently tied to the supply chain. What rises and falls in supply and demand must also remain as harmonious as possible with transportation and distribution. This results in a double-edged sword of sorts for our industry. Carriers must find a way to tread through the shortage while navigating through a limited supply of Original Equipment Manufacturer (OEM) heavy-duty vehicles.

Connecting the dots to your operation

As discussed when exploring the impact of the Suez Canal crisis on global transportation, worldwide events have a considerable domino effect on our economies and the calculated flow of goods and resources. What’s most challenging to grapple with is that there’s, unfortunately, no way to curb the impact of these events. We can’t control natural disasters or unprecedented disruptions.

Prioritizing the customer experience is even more key in circumstances like these. Focusing on the customer — even when delays or shortages are beyond your or your teams’ control — is vital for business credibility. That’s why it’s all the more imperative to have the right applications by your side. You can not only have the competitive edge in terms of fleet intelligence, but you’ll have the means to plan the best routes for even the harshest circumstances and preemptively communicate with your customers. At the end of the day, customers crave communication and autonomy. As unplanned events naturally happen, providing your customers with comprehensive order visibility and proactive alerts is one of the most optimal paths to business success — no matter how rugged the road.

For more on how the COVID-19 pandemic has influenced transportation, check out our blog article on the pandemic’s effect on the last-mile experience.