HomeSpecial ReportsA Crack in the Supply Chain

A Crack in the Supply Chain

Disruptions cause chain reactions that impact school bus OEMs, vendors

Student transportation is just one of the dominoes tilted by aftershocks from several catastrophes during the past year that have caused major hiccups in supply chains that support manufacturing.

COVID-19 and its residual effects are still in play, while ripples continue from unexpected severe winter storms across the South that immobilized the production and transportation of parts and raw materials needed for assembling products. Add fires at two of the world’s largest semiconductor manufacturers that significantly impacted the production of microchips, and the recipe for the current supply chain crisis is complete.

One transportation industry observer noted that the result of this series of events was a shortage of lumber, steel, new cars and trucks, engines, transmissions, axles, sensors, windshields, wiring harnesses, tires, wheels, and resins needed for molded plastic interior trim. News reports indicated that pool supply outlets are rationing chlorine tablets and that ketchup packets are in short supply at fast-food eateries. Supplies of chicken are also down.

The value of used cars has increased due to a decreased availability of new cars because the computer chips needed for the new cars are unavailable.

Meanwhile, The Detroit Free Press reported that Kentucky Derby fans could see thousands of Super Duty pickup trucks, manufactured at Ford’s plant in Louisville, parked in rows awaiting parts because of the impact the semiconductor supply crisis is having on the automotive industry. Gas prices are up and the production of cell phones and home appliances is down.

Earlier this year, the leading producers of printing ink also announced global price increases.

“The printing ink industry in North America is facing unprecedented challenges in raw material feedstocks, supplies and freight. The combination of the COVID-19 pandemic and the recent winter storms that hit the U.S. have crippled the supply chain for the industry,” said John Copeland, executive director of the National Association of Printing Ink Manufacturers (NAPIM), in a March letter. ”In Texas alone, the frozen roads and failing power grid have idled or slowed manufacturing sites and oil production causing spot shortages and jeopardizing ink supplies.”

The supply chain disruption affecting student transportation first manifested itself with a sharp dip in the production of foam for school bus seats, as well as increased fuel costs.

Impact on Student Transportation Vendors

Scott Dahl, vice president and general manager at HSM Transportation Solutions, said the industry-wide shortage of chemicals used by foam suppliers has had a tremendous effect across all industries served. Dahl explained that though the initial disruption in the supply chain was due to the economic effects of COVID-19, unexpected winter storms that occurred in February across Texas and Louisiana further exacerbated the shortages.

“The situation has had the most dramatic effect on the production of our school bus seats,” Dahl said. “While the chemical suppliers are working to increase production, the progress is slower than anyone would like. The ramp-up to normal production levels will take some time.”

Although the school bus market comprises only five percent of Freedman Seating Company’s business, President Dan Cohen commented that the ripple effect caused by supply chain glitches hit his organization like a tidal wave.

“The supply chain is [the most] challenging and complex environment I have seen in my 30-plus years,” he began. “It requires extraordinary efforts to keep things flowing to meet demand. We’ve been successful in doing that, but it takes more effort than normal.”

Cohen continued by noting that the issues are not limited to the decreased availability of some materials, but also include a “never-ending stream of cost increases” for every material.

“It’s unbelievable,” he added. “The price of every raw material or commodity used to make seats has gone up. From steel to foam, to fabric and vinyl, to plywood. Nothing has escaped these increases.”

Cohen said Freedman has sufficient foam on hand and available, but acknowledged the foam price increase reflects similar acute increases throughout the marketplace. He attributed the shortage of chemicals used to produce foam to the fact that suppliers are in the states buried under the winter storms of February and March. He said the increased furniture purchased by families who were forced to spend more time at home because of COVID-19 only added to the ongoing foam crisis.

Cohen also noted that labor shortages created by social distancing mandates slowed the unloading of container ships, which first created a shortage of containers and then an increase in their price.

“We bring in a fair amount of parts from overseas and that’s been impacted because my understanding is that there are a limited number of workers unloading ships,” Cohen said. “The flow of containers is affected because they are not getting back to Asia fast enough, and the cost of a container has virtually doubled. The amount of time it takes to get anything from overseas has increased by 50 percent.”

Daimler Trucks North America wasted no time in assessing the situation and initiating proactive measures to mitigate the impact of the chip shortage. Company spokesman Fred Ligouri said Daimler adjusted M2 medium-duty truck production schedules at its Mt. Holly truck manufacturing plant in North Carolina and its truck manufacturing plant in Santiago Tianguistenco, Mexico.

Stock photo of a Thomas Built Buses manufacturing facility.

“In late March, we notified our customers, dealers and employees that chip shortages had created a situation whereby we were instituting revolving downtime through the end of May at the two production facilities,” Ligouri explained. “We continued to produce M2s during that time, albeit at different levels than originally planned. We continue to provide frequent communication to those customers and dealers whose orders were affected and are working to quickly provide them the vehicles that, as we say in our purpose statement at Daimler Trucks, help them to ‘keep the world moving.’”

Steve Tam, vice president of ACT Research, an Indiana-based company that tracks and forecasts commercial transportation trends, hinted that the entire situation resembles a Catch-22.

“This is the strangest cycle we’ve ever seen,” he commented. “The catalyst is the protagonist as well as the antagonist. COVID-19 sent us all home and we started consuming goods like mad. It was driving the demand side but also keeping us home, so we could not get fully staffed on the labor front.

“The economic growth we are experiencing in the U.S. is happening around the globe and they are all having problems getting people to work because of COVID-19,” Tam continued. “It is a macroeconomic situation because you have really strong demand and supply is struggling to keep up.”

Tam noted that the whole oceangoing transportation network has also been disrupted. “There is a backlog of container ships in the ports of Los Angeles and Long Beach, as well as ships still steaming toward the ports and it will take until at least June to get caught up with that backlog,” he said in May. “The Suez Canal debacle also threw a wrinkle in that problem. It’s hard to get foam for school bus seats, resins for plastics and steel. The list goes on.”

Tam again pointed out the fires at the semiconductor plants in Japan as having a profound global impact.

“In an already tight industry, that was not what anybody wanted to hear,” he recalled. “The semiconductor industry is having a tough go and the automotive industry has been hit the hardest. It’s like a Gordian Knot.”

Tam said when COVID-19 first hit, car manufacturers told chip producers they would not need anticipated orders, so chip producers took their product elsewhere.

“Two months later, the demand increased but the chips had been sold to other industries,” Tam said. “Commercial vehicle manufacturing survived because we didn’t relinquish our chip commitments. We worked through whatever inventory was available and diverted chips from dealerships to keep truck assembly lines working.”

Coping Strategies and Recovery Plans

HSM’s Dahl said chemical suppliers are working to increase production, but their progress is slow, adding that the ramp-up to normal production levels will take some time.

“While we are optimistic that the industry’s supply chain will begin to course-correct in the back half of the year, raw material shortages present challenges for us in the near-term,” Dahl said. “To help mitigate the impact of the shortages, we have implemented several initiatives that will put us in a position to provide as much volume as possible during this unprecedented time and to resume to our normal production volumes as soon as practicable.”

First, he said HSM has been working closely with its vendors, communicating with them and tracking critical updates daily.

“We are also being very transparent with our customers about our production capacity and lead times, to assist them in their own planning and manufacturing,” he added.

Secondly, HSM has implemented several strategies to reduce its reliance on the most volatile raw materials.

“Using foam as an example, our seats use a variety of prime foam as well as rebond,” Dahl explained. “Because of the shortage of prime foam, we have begun several seat re-design exercises with our customers to develop solutions that utilize more rebond to help reduce our dependence on prime foam.”

Dahl concluded by saying that as the supply allocations continue across a variety of industries, HSM is working with its partners to develop “creative and innovative solutions to mitigate these short-term challenges.”


Related: Indiana School Efficiency Law Concerns Associations, Directors
Related: Selling Carbon Credits a Growing Incentive For School Districts
Related: Lion Electric Announces New U.S. Manufacturing Plant Near Chicago
Related: New York City Deploys First Type C Electric School Bus
Related: NASDPTS Decision on Hold as to Location of Fall Annual Meeting


Meanwhile, Trish Reed, vice president and general manager of IC Bus, released a statement acknowledging the shortages and the company’s efforts to navigate through them.

“Many factors are driving supply chain disruption across multiple industries,” she said. “IC Bus is facing similar industry shortages and with the broad support and scale of Navistar, [it] is monitoring the situation very closely with our suppliers. At this point in time, our Tulsa Bus Assembly plant is running and will continue to do so, as we manage the shortages and adjust production schedules accordingly to minimize disruption of deliveries to our customers.”

Julie Cooley, the vice president of marketing and corporate communications for IMMI, said there is no current foam supply issue affecting the SafeGuard line of school bus seats.

“Obviously, the supply chain issue is something we’re managing day by day,” Cooley explained. “In the coming weeks and months, this could change, although we hope it doesn’t. But right now, we thankfully do not have a shortage. There is a supply chain storm on the radar in other areas across the industry, such as steel, wood, and plastic resin. We’ll see where it lands over the next few months.”

Mario DiFoggio, manager of the Center for Education and Marketing for Thomas Built Buses, said Thomas is also monitoring the situation closely.

“Like nearly every industry at the moment, we continue to navigate the effects of pandemic-induced supply chain constraints, but our suppliers and factory continue to manufacture buses for our valued customers,” DiFoggio said. “We have been and will continue to communicate frequently and transparently with both our dealers and our customers to ensure they have the latest information regarding their order deliveries.”

Ligouri added that Daimler Trucks, the parent company of Thomas Built Buses, will do the same.

Cohen was more urgent in his assessment but no less hopeful. He said the market must catch up with demand, adding that the price of steel, which is triple what it was in 2019, will level off.

“The bus business itself has been down and recovery is just starting,” Cohen said. “I would say that given the current dysfunction in the automotive-related supply chain, it’s going to be a difficult summer and third quarter; however, I am extremely optimistic about the future, the demand for product and the ability to satisfy the demand for product after we get through these challenges.”

March 2024

This month's issue highlights the challenges of routing and how technology can help. Read more about the RFP process,...

Buyer’s Guide 2024

Find the latest vehicle production data and budget reports, industry trends, and contact information for state, national and federal...
Advertisement

Poll

Do you utilize ChatGPT to increase personal efficiency during the workday?
65 votes
VoteResults
Advertisement