Vehicle assemblers can
easily replace local suppliers with cheaper imports
AUTOMOTIVE COMPONENT suppliers in the Eastern Cape and elsewhere in the country will succeed or fail through the efficiency of their logistics, as well as the quality of their products and services.
The supply chains of assemblers are increasingly targeted by improvement strategies, says Grant Minnie of the Port Elizabeth Technikon's department of Industrial Engineering.
What is needed is a new vision for local component suppliers that will enable them to maximise value-adding in the supply chains of assemblers and create new opportunities of global supply, says a report on the Eastern Cape motor industry prepared by Minnie and Ernst van Biljon, head of department, purchasing, logistics and economics.
Suppliers that lag behind will no longer be kept on board by assemblers, warns the report.
Mercedes-Benz has publicly warned its local suppliers to upgrade their technology and systems to world standards or face replacement with overseas suppliers.
The abolition of local content protection means that assemblers can easily replace local products with cheaper imports.
The report warns that, despite the economic injection into the region provided by export contracts for Volkswagen and the Samcor engine plant in Port Elizabeth, local component suppliers could lose out.
Even though market creation initiatives and bigger export contracts will provide an important injection into the local economy, this may be offset by the loss of businesses that may have their contracts severed by the assemblers, warns the report.
It is estimated that Delta, Volkswagen and Mercedes-Benz are the primary customers for as many as 120 smaller companies in the Eastern Cape.
If we want to be global players we must abide by and accept the protocols by which international competitiveness is governed, says the report.
What needs to be clearly defined is where the real economic value-adding opportunities exist within the supply chain.
One-third of total value-added cost lies with the assembler, whilst two-thirds of the total supply chain costs lie with the component suppliers.
Only when our local component and related manufacturers deliver (on an enduring basis) certified goods and services of international aplomb, can we truly begin the economic inauguration of the Eastern Cape on a more immutable foundation, says the report.
The Port Elizabeth Technikon has set up a support infrastructure for the Automotive cluster, known as PETCAR (Port Elizabeth Technikon Centre for Automotive Research).
This initiative's primary objective is to assist the assemblers' and their SME supply chains in their quest for World class recognition and certification, says Minnie.
By Ed Richardson
