Executive Briefings

Asian Supply Chain Optimization Improves On-time Delivery, Margin for European OEM Components

Analyst Insight: The automotive industry is an orchestration of marketing, logistics and product development. This orchestration, which leads to higher complexity and demand, requires that many parts be available in manufacturing and services. And this global and complex way of looking at a problem drives the European automotive industry to operate in Asia, as well as localize their supply chains for sales in Asia. However, the logistics for Original Equipment Manufacturers (OEM) between these two continents sometimes become complex. - Thomas Wiedmann, Managing Director, Europe, Tompkins International

China's recent explosive growth has put enormous pressure on supply chains to keep up and respond to slowdowns. There is also ever-increasing pressure to localize supply chains and provide year-on-year reduced costs by suppliers.

OEMs have been and are entering into joint ventures for manufacturing automobiles in China,with the goal to lower overall costs. Today, 50 percent to 60 percent of the components and part assemblies are imported from the OEM's global supply chain.

Market analysis shows four key areas of supply chain focus for European OEMs:

Margin improvements: When possible, identify local suppliers of second and third tier parts that could be sourced locally.

"¢ Optimization of inbound logistics to improve efficiency of production lines and product quality: Work with global parts networks to identify consolidation opportunities for flow of inbound materials to manufacturing.

"¢ Optimization of logistics flow: Adhere to lead time and service level requirements to reduce transportation costs.

"¢ Tax and customs-driven supply chains: Identify steps for implementing Tax and Transfer Pricing programs for lower supply chain costs.

It is important to review how the automotive industry has reached its current "as-is"position. At the same time, companies need to develop the ability to better control logistics and their supply chains.

It will be a challenge to achieve optimized Asia/China solutions that have supply chain systems put in place to actively monitor and control the end-to-end process. But the ownership of the assets that complete the activities in this process remains immaterial. Solutions that offer the ability to run effective and efficient multiple supply chains at any one time are the end goal, whether these supply chains change by geography or by market.

The Outlook

In 2013 and the coming years, the overall challenge for Europe is to develop optimized logistics concepts for Asia delivery. To be successful, European OEMs are prioritizing projects that address the four key areas identified above to improve both their supply chains and margins.


Keywords: international trade, transportation management, supply chain, logistics & supply chain, supply chain planning, 3PL, third party logistics, automotive parts

China's recent explosive growth has put enormous pressure on supply chains to keep up and respond to slowdowns. There is also ever-increasing pressure to localize supply chains and provide year-on-year reduced costs by suppliers.

OEMs have been and are entering into joint ventures for manufacturing automobiles in China,with the goal to lower overall costs. Today, 50 percent to 60 percent of the components and part assemblies are imported from the OEM's global supply chain.

Market analysis shows four key areas of supply chain focus for European OEMs:

Margin improvements: When possible, identify local suppliers of second and third tier parts that could be sourced locally.

"¢ Optimization of inbound logistics to improve efficiency of production lines and product quality: Work with global parts networks to identify consolidation opportunities for flow of inbound materials to manufacturing.

"¢ Optimization of logistics flow: Adhere to lead time and service level requirements to reduce transportation costs.

"¢ Tax and customs-driven supply chains: Identify steps for implementing Tax and Transfer Pricing programs for lower supply chain costs.

It is important to review how the automotive industry has reached its current "as-is"position. At the same time, companies need to develop the ability to better control logistics and their supply chains.

It will be a challenge to achieve optimized Asia/China solutions that have supply chain systems put in place to actively monitor and control the end-to-end process. But the ownership of the assets that complete the activities in this process remains immaterial. Solutions that offer the ability to run effective and efficient multiple supply chains at any one time are the end goal, whether these supply chains change by geography or by market.

The Outlook

In 2013 and the coming years, the overall challenge for Europe is to develop optimized logistics concepts for Asia delivery. To be successful, European OEMs are prioritizing projects that address the four key areas identified above to improve both their supply chains and margins.


Keywords: international trade, transportation management, supply chain, logistics & supply chain, supply chain planning, 3PL, third party logistics, automotive parts