Consolidation opening up supply opportunities
A series of large-scale mergers and acquisitions of Tier suppliers is leading to a gradual restructuring of the global automotive industry hierarchy according to emergency logistics specialist, Evolution Time Critical.
It claims that rather than continue existing supply patterns, an opportunity exists for vehicle manufacturers to review and streamline supply chain operations. Improvements in operational efficiency, supply chain visibility and the level of in-built contingency can be achieved by maximising the opportunity provided by tightened supply chain control.
‘The acquisitions and mergers of Tier suppliers has the effect of consolidating the supply chain, which provides OEMs and their suppliers with a greater operational visibility and, therefore, enhanced control over the flow of parts, quality and lead-times,’ explained Evolution Time Critical managing director, Brad Brennan. ‘Larger suppliers become more powerful as they increase in size and potentially broaden their vehicle manufacturer client base, and a new opportunity is created for smaller suppliers subjected to buy-outs. Such companies will fall under the external control of larger, often multinational, companies that have the experience and necessary expertise to tighten supply chain activities in an attempt to optimise processes: it can benefit the supply chain, and all the companies who operate within it.’
Vehicle manufacturers and OEMs work towards optimising production processes, and improved supply chain visibility helps provide tighter control over activities to help deliver this aspiration. ‘Supply chain consolidation is able to improve the flow of information between OEMs and suppliers, which is an enormous benefit for vehicle manufacturers, who are able to focus supplier business, align lead times and schedules in an effort to streamline and protect supply processes,’ continued Brad, with reference to the increased level of interaction, communication and understanding afforded to a parent-company and its supplier partners.
The potential for greater understanding and transparency, which is made possible by consolidating the automotive supply chain, also provides an opportunity to further develop proactive contingency plans that can safeguard operations. ‘Industry consolidation has the potential to inspire the formation of ‘mega-suppliers’, which rather than supply OEMs with individual components can formulate the delivery of a more efficient package that reduces the number of supply chain links,’ concluded Brennan.