Oliver Wyman automotive and manufacturing Partner Tushar Narsana spoke with Newton Investment Management’s Double Take Podcast on the supply chain challenge. 

On the persistent semiconductor shortage in the automotive sector:

“When we talk about chips, broadly we’re talking about 200 millimeter and 300 millimeter … and where the shortage right now is the 200 millimeter. The applications that you see in the car displays and power supplies. … Demand for it was taking off even before COVID hit, so what happened once COVID hit was a double whammy. … which now we’re recovering from not just a COVID effect but trying to get it back from an already elevated demand level. … Our hypothesis is, [the shortage] is not going away any time soon. It’s still going to take a while to get there.”

On recruiting and retaining labor:

“[In the] short-term, bonuses as you’ve seen, companies giving free education incentives, signing bonuses, extra money per hour. Those things are a little helpful. …

You take that to the next level — you have to look at how you optimize your processes. … Can you cross-train people or can you make the process more smooth or can you prioritize your high-velocity products within a certain section of a warehouse. … You have to do some level of process optimization today to reduce your reliance on labor. … And you must consider some type of automation.”

On the aerospace industry:

“[When demand returns,] they will also face the same labor issues as you’re seeing now. … How many thousands of flights have been canceled … because they don’t have the crew? … This labor issue is going to impact them too. Again, I think the whole baggage handling can be automated. … You’ll see autonomous vehicles on runways. … That’s also coming. That should be the solution. There has to be some level of automation.”