A major OEM’s announcement that it will double its use of common parts on the next generation of vehicles reflects a growing trend in the automotive industry towards the sharing of components and systems across global platforms.
Such component and system sharing can lead to improved competitiveness by providing a cost-effective route-to-market for a wider range of vehicles, optimised for ever smaller market segments. However, it also increases the OEM’s reliance on an increasingly lean supply chain.
The events following last year’s tsunami taught some vehicle manufacturers a tough lesson about the vulnerability of their extended supply chains. Over-reliance on one geographic area heightens the risk of severe disruption in the event of a natural disaster or serious supply chain failure. Even where the OEM does not rely on a single source of supply, there may be unseen risks where a single Tier Two or Tier Three supplier provides the same critical component to all the Tier Ones.
The events following last year’s tsunami taught some vehicle manufacturers a tough lesson about the vulnerability of their extended supply chains.
With greater manufacturing volume dependent on the same components and assemblies, the financial impact of any disruption to the supply chain is substantial and rising rapidly. The risk to continuity of supply is also increased by the economic pressures that have driven the car makers to use suppliers in newly developing regions. These locations may bring significantly lower labour costs, but also create new logistics challenges.
The problems can be solved by rigorous analysis of the supply chain constraints to ensure optimum distribution of scarce components between plants during times of crisis, to satisfy the needs of greatest urgency. This is typically carried out by a logistics specialist in partnership with the OEM, and is an extremely powerful technique as it allows the location of components to be changed quickly to support the demands of the work flow.
The benefits of global platforms and low-cost manufacturing are too compelling to be abandoned.
Because of the increased risk inherent in the global platform strategy, vehicle manufacturers are now taking an increased interest in the lower levels of the supply chain. Where regional assembly of vehicles on a global platform uses a market-specific component, this may be provided by a smaller, local supplier with less experience of the demands of the modern automotive supply chain or the skills needed to address a supply chain failure. Through analysis, training and contingency planning, the robustness of a local supply chain can be greatly increased.
The benefits of global platforms and low-cost manufacturing are too compelling to be abandoned. With sufficiently rigorous analysis of the supply chain, and the planning expertise that is now a critical part of the profession, the industry can unlock the promised benefits of platform sharing while keeping the risks under control.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Graham Little is European Sales Manager, Evolution Time Critical
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