Early Supplier Involvement

Topics: Supply chain management, Automotive industry, Supply chain Pages: 6 (1889 words) Published: August 30, 2011
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The basic economics are changing for the American automobile industry at an alarming rate. Only a few years ago, decisions on product lines, engine platforms, style platforms, safety improvements, marketing development, and fashion were made for consumer demand out five to seven years. This year, we are shocked to find original equipment manufacturers (OEMs) implementing dramatic production and model changes to be made in only one to two years for simple survival. Driven by consumer demand for fuel efficiency and alternative fuel vehicles, the automotive supply chain has been deeply affected by the cuts in production of SUVs and trucks, plant closures, and shifts in production location. The industry is adapting through consolidations, mergers and acquisitions, relocations, and expansions. Automotive suppliers are in the throes of shifting production to meet the needs of original equipment manufacturers (OEMs). With the spotlight on the changes in the automotive industry, incentives often factor into the decision-making process. 1.) Globalisation: Recent emphasis on global climate change is increasing pressure on automotive executives to make the right decisions in many areas, including R&D and manufacturing. In fact, emission-level targets, currently in question, threaten to alter the entire structure of the auto industry. 2.) These challenges hit an industry already plagued with high costs, low profit margins, and accelerating competition. New entrants from China (such as Chery Automobile) and India (such as Tata Motors) are working aggressively to capture their share of the global market, following the path taken by the Japanese in the 1980s and the Koreans in the 1990s—both of whom went beyond their domestic markets by focusing on the United States first, and on Europe later. 3.) In this dynamic business environment, a superior supply chain is one critical element to helping automakers differentiate themselves from the competition. In fact, many of trends in the auto industry are reinforcing the need to redefine supply chain strategies, layouts, and operations. Challenges in Automotive Industry

There are eight major trends that affect the automotive supply chain.These are: 1.Uneven growth:
The demand for cars is growing, stemming in large part from China, India, and Eastern Europe. Established automotive markets in the United States, Western Europe, and Japan, however, are flat to declining. This uneven growth raises implications for the supply chain. For one, OEMs and their tier-1 suppliers must establish a local presence to benefit from these new growth opportunities in emerging economies. They must also tap into the local supply base to take advantage of cost levels and to fulfill local content requirements. At the same time, they must integrate local operations into their global supply chain management systems and programs. For example, sourcing processes from local suppliers must be aligned with global quality-assurance guidelines and procedures.

Traditional car segments such as sedans, vans, hatchbacks, and pick-up trucks are fragmenting more and more into niches. Derivative car segments, on the other hand—such as coupes, roadsters, minivans, and two-seaters, as well as cross-over vehicles such as four-door coupes, SUV coupes, “soft”1 SUVs, and sport vans—are growing. A combination of customer demand for personalization—the right product for their...
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