About five years ago, OEM executives described buying components in places like Southeast Asia as ‘low-cost country’ sourcing. A few years later, they started calling it the more cheerful ‘best-cost country’ sourcing. I always thought of this change as a PR cleanse – an obfuscation of the short and clear word that makes corporate communications executives wince: cheap.
While I still believe this, the evolution of global purchasing appears to have continued beyond semantics. Few executives talk about ‘LCC’ or ‘BCC’ anymore. Rather, ’ global platforms have refined the way sourcing decisions are made. An OEM that builds vehicles across the same platform in, say, Thailand, Brazil and Russia, w ill single-source many parts and ship them to the other regions.
Of course, those sourcing decisions are hardly divorced from the ‘best’ cost suppliers – or even cheapest, dare I say – but neither are they separated from a region’s scalability and specialisation, whether that be diesel engines in Europe or electronics in Japan. Just as the outbound chain is only as good as its ability to meet the demands of the consumer, so too must the inbound supply chain seamlessly connect the best suppliers.
While those demands aren’t new, making these connections now requires a truly global design. In 2012, GM shipped about 700,000 TEUs by container – a volume that has doubled in just a few years (see p24). A source close to Renault Nissan told me that the carmakers move around 500,000 TEUs per year. Although I have no figures, Toyota and Volkswagen are likely to be similar.
These are not supply chains that can be managed idly – they require much engineering, planning and visibility, not only to control costs but to avoid disruptions, obsolescence or quality issues. Do providers currently offer the right level of service and attention? GM’s Christine Krathwohl makes it clear that improvements in this area will be a major focus in the coming years.
On a sad note, just before going to print we learned of the death of Ryder’s Jim Moore. A 25-year industry veteran, Jim was known for his analytical skills, energy and devotion to the automotive supply chain sector. As recently as the end of September, although very ill, he spoke, as he had done so many times, at our conference in Detroit in a presentation calling for more innovation in logistics. It was a difficult but inspiring performance. He will be sorely missed.
Christopher Ludwig, Editor
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