North American auto supply chain performance: challenges and opportunities for OEMs and suppliers

According to a recent analyst note by PwC Autofacts, global auto production growth forecast at 4.1% (CAGR) for the next seven years means parts suppliers may begin to face growing gaps between installed capacity and demand.

The notes pinpoints a "constant need to assess the current risks of supplier capacity constraints and resulting bottlenecks throughout the supply chain." Compounding this challenge is the ever-changing product portfolio of automobile OEMs, which in turn highlights the need for customization and flexibility from suppliers. "Such dexterity in production requires cooperative supply chain management with both up and downstream suppliers, from Tier 1 to raw materials suppliers," says PwC Maintaining operational continuity with sufficient planning capacity for growth is an expectation and not just a best practice according to PwC.

So how well do parts makers think they're performing in terms of supply chain management? Quite well it would seem based on PwC's most recent survey of the top 50 suppliers to North American OEMs ranked by part sales to these OEMs. Supply chains are viewed as a means of achieving strategic objectives and differentiating oneself from competitors by the majority of respondents, for example.

Supply chain improvements and investments are also viewed on an equal footing with product development and sales and marketing initiatives. The majority of suppliers also feel that they are well positioned to adapt to market conditions and well situated to meet cost, quality and delivery objectives.

These views no doubt assume that the auto industry will continue to grow. One wonders what would happen if the auto sector suffers a downturn like it did in 2009. Back then, it was the smaller suppliers who were up against the wall as larger companies reduced capacity and consolidated.

The full report can be downloaded here.

Tier 1 supply chains are adaptive, and geared for growth.






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