High logistics costs favour local suppliers

High logistics costs and duties
give local auto component
suppliers the edge over imports,
according to Nissan SA senior
general manager of purchasing,
Dave Cameron.
Speaking at a media round
table recently, Cameron said:
“In financial year 2007, we
spent a total of approximately
R2.2-billion, of which
R1-billion was on parts, the
same amount on services,
support and capital, and
R200 million on materials.”
About 40% of the spend
was allocated to its 120 local
suppliers around the country.
“If we are able to increase
the local content to an average
60%, then we are effectively
upping our allocation for local
business by R500 million,” he
said.
For the freight industry, this
would represent a swing away
from international shipping to
local transport. With supplier
parks being set up alongside
plants like Volkswagen in
Uitenhage, there are further
savings on logistics – at the
cost of service providers.
Imports of high-value
components are, however,
likely to continue.
Full localisation, although
both “feasible and preferable,”
is currently “unlikely, given the
cost-effectiveness of importing,
rather than manufacturing
locally, large volumes of
engines and transmissions”.
In terms of quality, cost and
delivery (QCD) Cameron says
that South African suppliers
have demonstrated their
capability. The challenge for
suppliers is to remain globally
competitive, referring to the
threat from low cost countries
(LCCs) like Indonesia, Taiwan
and Thailand.
“If we can compare
favourably to a factory gate
price in Thailand, Indonesia
or Japan then we know we
can proceed with the sourcing
of parts from a locally based
supplier.
“It’s not a question of
hoping to survive, but of
putting appropriate plans in
place to ensure immediate
survival as well as a state of
readiness as and when the
turnaround happens,” says
Cameron, currently on a
three-year secondment from
Nissan Europe.