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COMMENTS * USA - Auto supply chain crisis raises questions of viability
John Wormold of Autopolis: "the automotive business model is broken"
UK -Transport Intelligence (UK) -17 Nov 2006: -- The automotive sector retains a magnetic attraction for so many in logistics, yet the crisis in its supply chain is beginning to raise questions about the viability of the whole industry... This month saw yet more major suppliers either withdrawing or reduce their exposure to the automotive sector... In truth whole swathes of the components' sector has quietly – or not so quietly - exited from the business of making cars. This spells long term problems for the sector as it is the suppliers who provide the R&D to improve product... The underlying problem is certainly one of over-capacity. However some suggest that there is also a fundamental problem that any logistician would recognise - product lines are too broad... Constant product up-dates, constant re-design of production lines and the vicious competition in the new car market means that margins are too thin and break-even points are too high. If sales under-shoot projections by even 5% it plunges the product into loss... It is these sorts of economics that results in the vehicle manufacturers becoming fixated by short-term cost. They simply cannot afford to look to even the medium term as they desperately try to keep their heads above water from one year to the next... As John Wormold of the consultancy Autopolis and author of 'Time For A Model Change' comments, "it starts with the vehicle manufacturers not understanding their own economics. They don't understand what the proliferation of product type is doing to their costs"... Of course there are exceptions... It is also worth noting that Toyota has the most coherent logistics conception with its emphasis on simplicity and stability. Unsurprisingly it is the most profitable of the vehicle manufacturers... Fundamentally the present structure of the car industry is non-viable and this is making the logistics service providers in the sector also non-viable...
posted by Unknown @ 9:04 AM
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