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Risks for the Ontario Auto Parts Supply Chain in Canada Research Paper

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Updated: Jun 20th, 2022

Ontario Auto Parts

Companies in the Auto Parts manufacturing industry in Ontario deal in rebuilding and manufacturing a wide variety of motor vehicle parts and accessories. The auto parts sector is a huge economic driver for Ontario and is highly competitive globally. Some of the biggest companies in Auto Parts Manufacturing in Ontario include Magna International Inc., Denso Corporation, Multimatic Inc., and UltraFit Manufacturing Inc. these companies hold the largest market share in the industry. Woodbeck Auto Parts in Southern Ontario is also known for supplying used car parts and shipping them across Canada daily (Lewandowski & Asgary, 2018). Given that the supply chain deals with traditional automotive, there are high chances that EV automotive adoption will pose a more significant challenge. Some of the risks that the Ontario auto parts supply chain is likely to face in adopting Electric Vehicle production include; shortage of raw materials, climate change risk, and disruption of the supply chain of raw materials and pricing.

Shortage of Raw Materials

Even though adopting the EV will help handle air pollution, other problems are associated with the innovation, given that it is a new technology in the market. Automobiles’ electrification has altered the designs and manufacturing process, which interferes with the supply of raw materials. It poses a significant burden to electronic manufacturers in Ontario since many electric vehicle factories require thousands of tiny electrical parts that raw material suppliers may not be able to deliver. Additionally, manufacturers prefer shipping the raw materials to China and Europe instead of Canada. This is because they have a bigger market in China and Europe and a more advanced supply chain than Canada. Ontario is in its infancy on auto parts supply, and its supply chain is not developed as the one in countries like China. Therefore, raw materials’ demand is low due to small market availability (Goracinova, Warrian & Wolfe, 2017). In turn, the Ontario supply chain is likely to face a more significant challenge in obtaining the needed raw materials for such vehicles. At the same time, it will be expensive to import the raw materials since there are fewer dealerships in Canada.

Risk of Climate Change

Climate is often an unpredictable factor when it comes to supply chain management. Canada is located at the peak of North America and borders the North Atlantic, North Pacific, and Arctic Oceans. Therefore, it experiences adverse climate change conditions like increased storm intensity, rise in sea levels, storm surges, and even flooding. These climatic conditions may cause the Ontario supply chain to experience shipment delays, thus reducing delivery speed to clients. Climate change also causes an increase in operational costs since the market prices of labor, energy, and engineering spike after a disaster. The impact of climate change on the supply chain may also inhibit suppliers from producing and supplying materials to Ontario due to disrupted infrastructure services like roads and power systems.

Disruption of the Supply Chain and Pricing

Electric Vehicles’ supply chain is at risk of both supply chain disruption and critical material price volatility due to the geographical concentration of raw material suppliers of lithium and neodymium (Wong & Ngai, 2019). This instance is of specific interest because electric vehicles are being investigated as a potential storage technology for the electric grid. Fluctuations in electric vehicle availability may occur as a result of the risk in the critical material supply chain. These fluctuations could potentially affect the cost of electricity and cause significant implications for consumers and the economy in Ontario and Canada as a whole.

Apart from the risks mentioned above, other associated risks are linked with the adoption of the EV. Like any other chain store willing to stock new merchandise in the market, the Ontario chain supply also faces challenges in disparity in parts due to different financial incentives intended to increase consumer interest in EVs. Since the number of consumers who are willing to purchase the EV is still low, it would be hard for the Ontario chain supply to stock its stores. Reluctance on the part of dealership shops to add electric vehicles to their showrooms will likely lead to fewer customers willing to buy such cars. Therefore, it will force the supply chain to spend most of its financial resources on marketing to create awareness about the EV auto parts in the market.

Regarding adopting new technologies in the market, the supply chain stores are prone to facing risks, especially when introducing the new technology in the market. With the adoption of EVs in Canada, the above mentioned are some of the major risks that the Ontario auto part supply chain is likely to face: the shortage of raw materials, climate change, and disruption of the supply chain of raw materials and pricing. The risks, therefore, can be reduced by making the EV popular in the Canadian market by focusing on proper marketing strategies for EVs. At the same time, Canada’s government will play a significant role by providing subsidies to the Ontario chain stores that import EV parts from other countries.

References

Goracinova, E., Warrian, P., & Wolfe, D. A. (2017). Challenges of coordination: automotive innovation in the Ontario supply chain in comparative context. Canadian Public Policy, 43(S1), S90-S102. Web.

Lewandowski, M., & Asgary, A. (2018). Risk assessment of the timber supply chain in southern Ontario using agent-based simulation. Innovative Solutions for Sustainable Supply Chains (pp. 317-332). Springer, Cham. Web.

Wong, D. T., & Ngai, E. W. (2019). Critical review of supply chain innovation research (1999–2016). Industrial Marketing Management, 82, 158-187. Web.

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IvyPanda. (2022, June 20). Risks for the Ontario Auto Parts Supply Chain in Canada. https://ivypanda.com/essays/risks-for-the-ontario-auto-parts-supply-chain-in-canada/

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"Risks for the Ontario Auto Parts Supply Chain in Canada." IvyPanda, 20 June 2022, ivypanda.com/essays/risks-for-the-ontario-auto-parts-supply-chain-in-canada/.

1. IvyPanda. "Risks for the Ontario Auto Parts Supply Chain in Canada." June 20, 2022. https://ivypanda.com/essays/risks-for-the-ontario-auto-parts-supply-chain-in-canada/.


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IvyPanda. "Risks for the Ontario Auto Parts Supply Chain in Canada." June 20, 2022. https://ivypanda.com/essays/risks-for-the-ontario-auto-parts-supply-chain-in-canada/.

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IvyPanda. 2022. "Risks for the Ontario Auto Parts Supply Chain in Canada." June 20, 2022. https://ivypanda.com/essays/risks-for-the-ontario-auto-parts-supply-chain-in-canada/.

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IvyPanda. (2022) 'Risks for the Ontario Auto Parts Supply Chain in Canada'. 20 June.

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