Executive Briefings

Keeping Risks Low in Auto Supply Chain

Anyone who works in the automotive business can attest the industry currently is enjoying a period of robust demand. At the same time, there is an enormous amount of risk.

Keeping Risks Low in Auto Supply Chain

The economic crash in 2008, followed by the greatest economic downturn since the Great Depression, had a disproportionately devastating impact on the lower tiers of the automotive supply chain. With the industry's severe financial restructuring, many small, niche suppliers have either left the auto business or simply closed their doors, eliminating their capacity and capability from the supply chain.

Now, five years later, we are faced with an unprecedented number of concurrent new-product launches. An industry of this size and complexity doesn't just snap back to life to pre-2008 build rates without risk of some pain.

The sub-tier supply chain, Tier 2 and below, is a real strategic challenge for the global automotive industry. There are volume constraints for specific parts and components, and we are beginning to see industry segments facing parts shortages, both for new vehicles and for replacement parts for older models.

Many companies are running 24/7/365 to meet demand. While this works effectively in the short term, in the long term we know how this story ends, and it usually doesn't end well.

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The economic crash in 2008, followed by the greatest economic downturn since the Great Depression, had a disproportionately devastating impact on the lower tiers of the automotive supply chain. With the industry's severe financial restructuring, many small, niche suppliers have either left the auto business or simply closed their doors, eliminating their capacity and capability from the supply chain.

Now, five years later, we are faced with an unprecedented number of concurrent new-product launches. An industry of this size and complexity doesn't just snap back to life to pre-2008 build rates without risk of some pain.

The sub-tier supply chain, Tier 2 and below, is a real strategic challenge for the global automotive industry. There are volume constraints for specific parts and components, and we are beginning to see industry segments facing parts shortages, both for new vehicles and for replacement parts for older models.

Many companies are running 24/7/365 to meet demand. While this works effectively in the short term, in the long term we know how this story ends, and it usually doesn't end well.

Read Full Article

Keeping Risks Low in Auto Supply Chain