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Local purchasing winning out over global in automotive supply chainLocal purchasing winning out over global in automotive supply chain

The March 2012 Original Equipment Suppliers Association’s Suppler Barometer reveals that the outlook remains positive with a Supplier Sentiment Index of 64. However that represents a two-point decrease from the January value, reflecting that while “North American vehicle sales and production schedules are improving, gas prices, the Iran nuclear issues, the European debt concerns and upcoming U.S. presidential election are keeping the sentiment outlook relatively level,” said the report.

Clare Goldsberry

March 19, 2012

3 Min Read
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The March 2012 Original Equipment Suppliers Association’s Suppler Barometer reveals that the outlook remains positive with a Supplier Sentiment Index of 64. However that represents a two-point decrease from the January value, reflecting that while “North American vehicle sales and production schedules are improving, gas prices, the Iran nuclear issues, the European debt concerns and upcoming U.S. presidential election are keeping the sentiment outlook relatively level,” said the report.

Most suppliers remain confident in their internal and sub-tier supply chain strategies and effectiveness to mitigate supply chain shortages in 2012. Complementing these findings, 92% of respondents to the March survey feel confident that their company will be able to meet all customer releases over the next three months.

Some respondent comments included “Schedules are up”; “Volumes have increased”; and “Orders are high but we are cautiously optimistic.” One commented that “OEMs still showing signs of bad behavior relative to capacity.” 

While fewer suppliers (39%) are anticipating increases in production labor premiums and short shipments over the next three months, as happened in 2011, material cost premiums are now the primary concern with 58% of suppliers who do expect increased costs. Supplier risk is falling off the radar and 23% of responding companies indicated they have “no suppliers on their ‘watch list’ from the March 2011 level of 19% of respondents who were watching their suppliers closely. Only 5% of respondent companies had more than 5% of suppliers on the "watch list" in 2012 while in 2011, that watch list level was 42%. 

Suppliers who are on the watch list with the Tier Ones are on that list primarily for quality, though the other factors such as financial metrics, delivery performance, and capacity are all within 12 percentage points. 

When asked about exporting their products by region, it appears to be a mixed bag. Some reported that their exports to Europe were decreasing due to reduced demand, while other respondents will export more to Europe due to increased demand. There were two interesting “general” comments with respect to exports: “Our focus is to produce in the region of demand,” and “We’re evaluating more opportunities to build in North America and export to the ROW (rest of the world).”

When asked to describe their company’s material purchasing direction by region (buying more or buying less) outside of the NAFTA region and what major factors drive that direction, there were dozens of telling answers. Regional responses included “Landed total cost is always the selection criteria. Buys from China are becoming more costly due to their inflation and currency;” and the other side of the coin: “More from China and Asia for cost reductions.” Another respondent said, “Rising costs in China will likely increase purchase from Mexico,” while still another said “Purchasing more outside of NAFTA region overall, although increasing content from Mexico as well. Driving factors are capacity availability and component costs.”

Overall, the answers appeared to lean toward “buying more domestically” and closer to the manufacturing plants to reduce risk and have a more “nimble supply chain.” Purchasing local appeared to win out over global, and apparently the increasing costs and risks of having long-distance suppliers has become a driving factor.

About the Author

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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