Striking a Balance: Market Shock & Responses in Automotive Components Manufacturing

This thesis examines the effects of extreme market shocks on supply chain dynamics within the automotive industry. Through an analysis of demand data from an automotive manufacturer to its component suppliers (January 2018 to May 2024), the study investigates the relationship between market shocks and supply chain responses, providing insights into how auto components inventory management handles downstream responses to market shocks. With supporting public data—from FRED, BLS, and the U.S. Census Bureau resources—we explore two primary relationships: the impact of market shocks on the Average Standard Deviation of Demand (SDO) and the effect of demand variability on expedited pricing for finished goods. We first examine trends in Total Demand and SDO, revealing significant seasonal patterns and the influence of the COVID-19 pandemic on demand fluctuations. An ARIMA (0,1,1) forecasting model of SDO values with market event indicators—which include Auto Inventory to Sales Ratio (AISRSA), Semiconductor Import Price Index, auto worker employment data, and CIF Imports of automotive components—reveals significant relationships between the average standard deviation of orders and the CIF Import Price, indicating that higher import costs correlate with decreased variability in order changes. Furthermore, a Generalized Least Squares (GLS) model assesses the relationship between expedited pricing for finished goods and SDO demand variability. The analysis indicates that each additional unit increase in the average standard deviation of orders corresponds to a $24.73 increase in the total price of expedited finished goods, implying high costs corresponding with high fluctuations in orders. Notably, higher semiconductor import prices inversely affect the total price of finished goods, suggesting complex interdependencies within the supply chain. Although concrete relationships could not be established—due to the variability in the data—the combined graphical and regression findings suggest that market events do influence the confidence of forecasted demand from downstream automotive firms and that the resulting fluctuations in ordered amounts of finished goods does generate costs to the components supplier.