Original equipment manufacturers were already getting nervous about part delivery, but since the knock-on effects of the Japanese tsunami and earthquake disaster, and to a lesser extent last year’s volcanic eruption on Iceland, the potential for disruption to the parts supply chain has been brought to the forefront.
Specifically, OEMs want suppliers to be located within a reasonable distance of their production plants. Some, such as Sick (see article, page 40), which already has six production facilities dotted around the world, can fulfil orders for sensors and other safety-related technology to customers, together with local support from an existing network of plants and offices.
Suppliers that don’t already have such an extended presence are struggling to match OEM demands. While the soft recovery continues in North America, carmakers are starting to demand that as part of any contract renewal, the supplier company must set up shop near the plant taking delivery of the given part(s). Of course, most suppliers are already close to a manufacturing facility, but as OEMs look to cut costs, they are continuing to relocate to areas of low-cost manufacturing that could leave suppliers thousands of miles from the new factory.
While many suppliers could be considered a success by simply being in operation after the recession, their bank accounts are still far from full, meaning that such relocation demands are out of the question. Further complicating the situation, many suppliers survive based on the renewal of one or two large contracts. Lose any of these and they too could become a statistic of these uncertain times.
An alternative is to find a company in the area where the OEMs are relocating to produce parts under contract, yet this is not always possible. The capacity may not be there and final part quality could ultimately suffer. A case in point is US-based Antaya (see article, page 53) that claims to have developed a like-for-like replacement for the leaded solder now used to mount connectors to windows. Although the company has offered to license the technology to local part manufacturers, it believes that its North American supply base could be one of the reasons European OEMs are les than enthusiastic about using the parts, despite all the positives associated with the removall of any and all lead from the automotive equation.
The eventual winner in this mini stand-off will be the OEMs, which should they not get their way, will ultimately convince part suppliers in the vicinity of their new plants to deliver what is needed, possibly at a reduced price. The loss will be felt by the towns where the original suppliers were based, which will see jobs and skills lost to outsourcing. While OEMs might have the power to leverage suppliers, it should be clear that – beyond a sunny week in Cancun - not everyone wants to go to Mexico. In spite of recent events, long-standing companies that have based their businesses around delivering to automotive assembly lines should be given a chance, as not every supplier is located next to a tectonic fault line.