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Old 18th May 2014, 19:51   #1
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Default Interesting Read - Supplier Consolidation

I found this interesting article on financial times - the number of major large suppliers of automotive components is 10 - the number of auto makers who sell a million cars a year is 16. Talk about consolidation! Bosch believes their components are in almost every car that is sold in the world - irrespective of price, specifications etc.

Read on - Age of mega supplier heralds danger for carmakers (Registration Required)

As per the article, the suppliers are the dominant force. They are more profitable than the automakers. Quoting from the article

Big suppliers now have the capability between them to build 85 per cent of a carís internal systems Ė leaving little more than the engine as the carmakerís sole domain. It has made the role of a car brand more that of an assembler, rather than a true manufacturer.
Would love to know the views of people who work in the industry - on the automaker side as well as the suppliers. What do you guys think?
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Old 18th May 2014, 20:04   #2
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Default Re: Interesting Read - Supplier Consolidation


Bypass the site registration (such a pain!) by going to the FT link through Google:

Big suppliers now have the capability between them - Google Search

Works at my end. Please check!
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Old 18th May 2014, 21:01   #3
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Default Re: Interesting Read - Supplier Consolidation

Very interesting article, thanks for sharing.

It suggests that this trend of the supplier having a better financial position than the car manufacturers is not a good thing. It is certainly remarkable as it sort of does away with traditional thinking about where the margins sit in a supply chain.

It suggest the manufacturers might want to rethink this, primarily from a financial bargaining point of view, but also maybe R&D point of view. Maybe its time for the car manufacturers to look at it in a completely different way. Maybe they should be relying even more on their supplier and concentrate their efforts on branding, marketing and customer care. i.e. outsource even more. Leave technology development to highly specialized parties.

There are other industries and companies who went that way and found it to be very profitable and a true long term viable business model. I can't really judge, but from what I see/know about car manufacturing procurement it is in essence very classic. Basically provide a specification and get a few parties to quote and beat the price down (and the specs up!). Everybody is calling each other partner, but the question remains if it is a true partnership in the sense where risks, commitments, investment are really shared.

The USA car industry procurement is actually used by us as a classic case on how procurements deals with its vendors. We use some of it in our sales training. Based on this article. its remarkable to see how ineffective it appears to have been. You think you get low prices, but that still remains to be seen.

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Old 18th May 2014, 22:03   #4
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Default Re: Interesting Read - Supplier Consolidation

The car design is still the car manufacturer's domain and the specification makes a lot of difference. Its not as simple as an assembler's job. With same suppliers, good car companies make a lot better cars.
If its about the monopoly of the suppliers, thats a different issue. Companies like Bosch would be spending a lot on their own R&D and their pitching in with their components with differentiation cant be helped.
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