Interesting Read - Supplier Consolidation

vineethvazhayil · 18th May 2014, 19:51

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

Quote:

Big suppliers now have the capability between them to build 85 per cent of a car’s internal systems – leaving little more than the engine as the carmaker’s 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?

Gannu_1 · 18th May 2014, 20:04

/OT

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!

Jeroen · 18th May 2014, 21:01

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.

Jeroen

srishiva · 18th May 2014, 22:03

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.

18th May 2014, 20:04	#2
Gannu_1 Team-BHP Support Join Date: Apr 2013 Location: Madras Posts: 7,174 Thanked: 20,220 Times	Re: Interesting Read - Supplier Consolidation /OT 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!
	(1) Thanks

18th May 2014, 21:01	#3
Jeroen Distinguished - BHPian Join Date: Oct 2012 Location: Delhi Posts: 8,104 Thanked: 50,909 Times View My Garage	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. Jeroen
	(2) Thanks

18th May 2014, 22:03	#4
srishiva Senior - BHPian Join Date: Nov 2006 Location: Bengaluru Posts: 4,375 Thanked: 2,256 Times	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.
	(1) Thanks