Challenge accepted: How the auto industry shifted gears to take an alternate route

By Karen Naylor

Jul. 26, 2022

Supply chain disruptions. Manufacturing delays. Labor shortages. These are usually topics of discussion in the boardroom.

But when the pandemic hit and consumers couldn’t get their goods, those conversations spilled out into America’s streets and driveways where something was missing: new cars.

The pandemic has posed a challenge for the entire automotive industry, including Subaru, which distributes its vehicles, parts and accessories through a network of more than 630 retailers across the U.S.

Headquartered in nearby Camden, N.J., the automaker reported its 2021 sales of new vehicles were down 4.6% with much of the blame resting on the worldwide shortage of semiconductors. 

“The entire automotive industry is affected,” Subaru product sourcing specialist Sandeep Gupta, MBA ’19, MS ’20, says. “The whole equation of supply and demand is out of equilibrium. We are all reeling under the pressure of so many new issues and we have to come up with innovative solutions to the problems in front of us.”

Gupta’s interest in the automotive industry has grown throughout his career. 

After earning his mechanical engineering degree and working in the auto industry in India and Japan, he headed to Temple University to advance his studies and find a job where he could use all of his knowledge.

While moving through his MBA coursework at the Fox School, Gupta had the opportunity to study automobile safety and participated in a group project focusing on Subaru.

“We made a presentation about how Subaru covered safety and the peace of mind it brings with its technology and customer service,” he says. “I think from that point in time I was very much attracted to Subaru as an employer.”

Gupta began his career with Subaru as an intern. In May 2020, while finishing his MS in business analytics, Gupta joined the accessories team. The group sources, negotiates pricing and puts together purchasing agreements and contracts for accessory supplies such as floor mats and seat covers.

“When I joined the (accessories team) role, we were just going into the pandemic and not seeing the implications in terms of the supply chain getting affected much during that time. Everyone was in the wait-and-watch mode.”

It wasn’t long before things started to take a dramatic turn.

“By 2021, we were able to see the effects of the pandemic,” he says. “There were no shipping containers, ships were getting stranded in the middle of the sea and nothing was coming.

“Our supply chain was really impacted. Products and components that were coming and being assembled here were all stuck. Everything was stuck.”

The accessories team became very busy finding ways to gather what was needed to keep supplies in check and production moving forward.

“We also handle supply chain issues, capacity constraints to be specific,” he says. “We connect with suppliers on the availability of accessories, but we also want to see whether, in five years, they’ll be able to meet our demands or not.”

That’s where those discussions got even more complicated.

“Some of our star performing suppliers were great before the pandemic,” Gupta says.”They never missed a deadline or delivery date, but the past one or two years have impacted their performance.

“We see the differences between many suppliers. Some are handling it really well; others are struggling under the pressure. There’s also been a mass movement of people leaving their jobs. How do you handle that?”

It’s a question that extends itself to many areas to keep business operations running. Recognizing the need for diversification in almost every area could be a good plan for the future.

“For example, if we were once getting one component from one supplier, that has to change,” Gupta says. “We need a minimum of one or two more suppliers for that part and really hedge our risk.

“There are a lot of changes coming in setting ourselves up to be more risk-free.”

Pricing is another concern in the industry. There is a struggle to keep pricing manageable for manufacturers who are buying from a supplier and, in turn, trying to avoid passing those higher costs onto vehicle buyers.

“We are all reeling under the pressure knowing that we have to come up with innovative ways to either suppress the price or absorb the price.”

And if that’s not possible, he reluctantly adds, those costs likely have to be passed on to customers.

“You can’t just raise the prices for every single thing because that affects your comparison. The auto industry is a very sensitive industry in terms of price. You have to see whether or not increasing the price is going to make sense or not and whether you will be in comparison to your competitors.

“We have to be in everybody’s shoes to see how one decision we make trickles down and what sort of effect that will make.”

Those decisions are often made after looking at what’s available in the market, gathering feedback from both internal and external stakeholders and analyzing how all of this affects profitability.

“You have to ask if this is going to us as an outlier or will we still be in the range where everyone has a win-win,” he says. “We have to see about the stakeholders, particularly whether or not the dealers are still able to make their margin. We don’t want anyone to be at a loss as well.”

Gupta and his colleagues on the accessories team continue to find ways to adjust to the challenges that are facing nearly all businesses. He believes that business as usual is no longer possible.

“We all really need to learn to pivot,” he says. “We have to envision and plan for scenarios now more than what any of us were doing before.”

It’s a way of thinking that is likely to become part of the post-pandemic business model.

“Thinking about all the implications is going to be really important moving forward,” he says. “We have to come up with scenarios that answer the ‘what if this happens, then what do you do’ question more than we have in the past.

“We don’t want to keep changing things every three months. Whatever we do in the future, we have to keep those disruptions in mind.”

By preplanning more for disruptions and pivoting when needed, he believes businesses like the auto industry can eventually get things moving in the right direction again.

“Everything is being challenged. I think with this kind of experience that we are going through with the pandemic, we have to learn to be more resilient in general, both personally and professionally.”