Automotive Semiconductor Crisis

The automotive chip crisis was far more than an industry headline for me. That crisis starkly exposed the true role of procurement within the company. Procurement, long viewed primarily as a “cost reduction” and “contract renewal” function, was suddenly thrust into a strategic position when production lines came to a halt because of a chip just a few millimeters in size.

When the pandemic began, like many automotive manufacturers, we revised our demand forecasts downward. We reduced orders, believing we were being flexible. At the same time, demand in the consumer electronics sector surged. At the time, no one could fully foresee how those decisions would corner us months later. Semiconductor manufacturers reallocated their capacity to other industries, and automotive found itself at the very end of the supply chain.

That was the moment we understood something very clearly: the problem was not that the chip was expensive. The problem was that we could not access it.

In vehicle production, you manage millions of components. Yet sometimes the part that stops the entire line is a component costing only a few dollars. From the procurement table, the reality looked like this: contracts existed, but the material did not. Approved suppliers existed, but capacity did not. Alternatives existed, but the processes did not allow for them.

This crisis taught me how vital supply chain visibility truly is. We knew our Tier-1 suppliers, but we did not know their suppliers. Where the chip was produced, in which factory, at what capacity, these were not part of procurement decision-making. In a crisis, however, this information became just as critical as price.

Another painful lesson was single-sourcing strategies. Approaches we had defended for years because of their cost advantages left us exposed in times of crisis. Creating alternative suppliers no longer took weeks, but months. At that point, a very clear realization emerged: for critical components, multi-sourcing is not a luxury, it is a risk management tool.

A similar awakening occurred in demand forecasting. Excel spreadsheets, historical data, and linear forecasts were insufficient to explain or manage this crisis. As procurement, we realized that we had to ask not only “How much will we buy?” but also “What happens if we cannot buy?” Scenario planning, safety stocks, and contractual capacity commitments moved to the center of the agenda.

Perhaps the biggest change was in how procurement was perceived. During the crisis, the companies that stood out were not those that negotiated the toughest prices, but those that built long-term relationships with their suppliers. Firms that engaged early in capacity investments, shared risks, and viewed suppliers as partners rather than merely price providers recovered production much faster. In this context, procurement operated not as an operational function, but as a strategic one.

Looking back today, I see the automotive chip crisis not as a disaster, but as a warning. As electric vehicles, batteries, software licenses, and rare raw materials become more prominent, we will face similar crises again. The question is not, “Will there be another crisis?” The real question is, “How prepared are we, as procurement, for it?”

Because now I know very clearly that procurement is not just a cost management function. When managed effectively, it is a force that protects production, keeps the company standing, and creates true competitive advantage.