Motor industry will challenge logistics industry in years ahead

9 Jun 2000 - By Staff reporter

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E-commerce will
shake the supply chain, writes Ed Richardson

Ed Richardson

LOGISTICS AND transport will play an increasingly vital role in the manufacture of motor vehicles if the findings of Europe-based strategy consulting firm Roland Berger & Partners are correct.
The report - based on interviews with top executives in the industry world-wide - predicts that by
2010 there may be just
eight independent OEMs (Original Equipment Manufacturers) or OEM groups - down from 16 today.
The resulting purchasing hubs, in turn, will create opportunities for a smaller number of increasingly dominant suppliers.
OEMs expect that by 2010, 95% of their Tier-1 suppliers will be global, while the Tier-1 suppliers themselves anticipate that only about 75% of their ranks will be global players.
The share of value-added content contributed by OEMs to every vehicle will steadily decline to little more than 25% by 2010, with suppliers picking up the difference.
This means that more and more of the manufacture and assembly will take place outside the automotive factory gates.
The challenge to the transport and logistics industries will be to ensure that components are delivered just in time to destinations around the world, and to integrate their own operations into those of the suppliers and OEMs.
Tier-1 - dubbed Tier 0.5 - suppliers will become a part of the most critical steps of car development and production. While increasingly taking over this responsibility, they will need to sharpen their capabilities to
manage a wider and more complex base of lower-tier suppliers.
By 2010, there will be three to five top suppliers for each module or system, down from seven or eight today.
This level of consolidation already exists in seat, brake and safety systems.
Meanwhile, the number of modules and/or systems per vehicle will shrink to about ten, from 18-20 today. To remain key players in tomorrow's game, Tier One suppliers will seek to add new capabilities that complement their current strengths.
E-commerce will shake the supply chain: suppliers need to act rapidly to be winners in this game.
All OEMs are moving rapidly toward Internet-based platforms for their supplier relationships and are implementing different models to carry out this strategy.
Although the effect is now visible in the reduction of purchasing prices, the potential mid-term impact extends to new ways of designing products and fostering new business models.
Suppliers, including those in the transport sector, have a short window of opportunity to act proactively and take advantage of - rather than be caught off guard by - the B2B wave, states the report.
Supplier firms will be forced to sharpen their focus in key areas including customer relations, innovation, cost, integration, global delivery, and management of cooperative ventures and merger/acquisition activities.