Search Copying and distributing are prohibited without permission of the publisher
Email a friend
  • To include more than one recipient, please separate each email address with a semi-colon ';', to a maximum of 5

  • By submitting this article to a friend we reserve the right to contact them regarding AMM subscriptions. Please ensure you have their consent before giving us their details.

Risk drives change in auto parts sourcing: OESA

Keywords: Tags  Original Equipment Suppliers Association, automotive, supply chain, Dave Andrea, supply chain risks, domestic content, regional sourcing, integration Corinna Petry

CHICAGO — Spurred by freight costs, currency exchange rates and lead times, the global automotive industry is realigning its supply base by geography, according to research by the Original Equipment Suppliers Association (OESA).

A full 63 percent of respondents to OESA’s May survey said that they plan to increase their value-added capabilities in North America over the next five years, while 42 percent said they plan to increase North American sourcing as part of their total expenditures over the next five years.

"With our new product line, we will be sourcing new components in North America," one respondent to the survey said.

"(Our) target is to purchase all components locally," said another. A third company said it intends to localize parts from Japan to North America, both by adding in-house capacity and outsourcing processes domestically.

Other respondents in the automotive parts industry indicated plans to build new plants or form joint ventures as they look to realign their supply chains. For example, one respondent reported plans to create new forging and machining capacity, which some OESA members said is constrained.

"We will have a deepening of the supply chains in each geographic market: the Americas, Asia/Pacific, Europe, etc.," said Dave Andrea, OESA’s senior vice president of industry analysis and economics.

"Supply-chain risk management is one of the biggest drivers, coming from (suppliers’) experience with the (2011) earthquake and tsunami in Japan," he said. The industry discovered "a funnel where the supply chains converged into a few companies (making) integrated chips, microprocessors, electronics. Unless we entered that crisis," he said, that choke point "would not have been exposed."

Today, the key challenge is to diversify sourcing without adding redundant costs. The industry is analyzing how many suppliers they have, how much business is given to any one supplier and how to plan for contingencies, he said.

"The worst case for critical long-lead components is a plant becomes decommissioned," Andrea said. "How long will it take to ramp up alternative sources? That is driving a whole set of decisions of seeking different materials and validating them and the suppliers."

The new domestics now purchase parts in dollars and sell vehicles in dollars, he said. "When talking about domestic content, they are moving one tier down to see how much content those suppliers are sourcing within North America, alleviating supply-chain risk," Andrea said.

That, in turn, drives the domestic content discussion down an additional level or two. "That is what I mean by deepening of supply chain," he added.

Have your say
  • All comments are subject to editorial review.
    All fields are compulsory.

Latest Pricing Trends