The March 2014 OESA Automotive Supplier Barometer indicates that the Supplier Sentiment Index (SSI) declined to a level of 56 from January’s level of 60. Though the overall index remains positive, there was a modest shift in opinions from “somewhat more optimistic” to “somewhat more pessimistic”. Supplier optimism comes from new model launch activity and the associated new business opportunities along with improving economics in Europe. Some pessimism stems from global political unrest, increasing vehicle inventories and tapering new model programs.
In addition to the SSI, the March OESA Automotive Supplier Barometer surveyed members on internal and supply chain risks, and risk mitigation strategies. Additional survey results showed:
- Suppliers continue to look at five main themes of internal risk identified as concern in meeting production requirements: capacity, customer requirements, manpower, capital and equipment and materials. Supply chain risks were identified as capacity, raw material and component availability, lead-times and deliveries, customer and supplier requirements, tooling and equipment, financials, quality and weather.
- When asked to rate their confidence in preventative actions related to mitigating supply chain shortages in 2014, the respondents had the highest confidence in their ability to access raw materials while understanding of sub-tier supplier financial viability was rated as least confident (as it was in 2013), though this confidence rating is improved over last year. Supplier’s ability to manage inventory levels and understanding of existing bottlenecks both declined slightly in confidence.
- When compared to 2013, 51 percent of suppliers’ average 2014 finished goods inventory levels are increasing to some extent (23 percent indicating a 1-3 percent increase and 17 percent indicating a 4-6 percent increase) while 16 percent of suppliers have lower average finished goods inventory levels. The main driving changes, cited by suppliers that indicated an increase in inventory levels, were higher demand (and on the flip side, lower demand), schedule fluctuations and product launches. Average raw materials inventory levels have increased for 44 percent of suppliers and 18 percent indicated decreased levels of inventory. Cited drivers of increased raw materials inventory were demand, protection against shortages, fluctuating releases and pricing.
- There are four specific strategies that the majority of responding companies are taking to mitigate supply chain risk: increasing inventory or buffer stocks, increasing dual sources of materials, increasing investments in IT systems or technologies and validating alternate materials.
