Automotive OEMs and suppliers must become "fast fish" to survive
By Staff -- Manufacturing Business Technology, 12/1/2005 12:00:00 AM
Not only is the American automotive industry facing systemic problems—e.g., overcapacity, high legacy labor costs, and global competition, among others—but the industry landscape has evolved, and the ripples of the shift can be felt throughout supply chains.
That was the message at supply chain management vendor i2 Technologies' Automotive Industry Day in October. Says Sanjiv Sidhu, i2 founder and chairman, of the changing competitive landscape: "It used to be that big fish ate small fish. Now fast fish eat slow fish."
Sidhu cites supply chain challenges such as model-option proliferation; excess capacity; and increasing supply chain length, complexity, and variability—all of which can be addressed by better demand management and more rapid response to changing conditions. He says most automotive supply chains are still regional—reflecting past realities—but need to become global in scope.
Kevin Mixer, automotive research director at Boston-based AMR Research, points to some of the structural changes the industry is experiencing. For one, OEMs are more dependent on suppliers than ever. In 2000, 65 percent of the value added to an automobile came from suppliers, not the OEM; by 2015, it will be 76 percent.
Mike Dager, operations planning manager at Findlay, Ohio-based Cooper Tire, says the company moved—in partnership with i2—from a "disconnected, reactionary, history-based" supply chain to an integrated, pull-based system that "lets the right hand know what the left hand is doing." The project has improved planning, productivity, and efficiency.
AMR projects that in 2006, 23 percent of automotive IT expenditures will be on supply chain management, and 39 percent on manufacturing operations—particularly lean practices.
